Questions and Answers
Q: What is a Life Settlement?A life settlement is the sale of a life insurance policy to a third party. The owner of a life insurance policy sells the policy for a cash payment that is less than the full amount of the death benefit – but for an amount that is higher than the cash surrender value. The buyer becomes the new owner and/or beneficiary of the life insurance policy, pays all future premiums and collects the full amount of the death benefit when the insured dies.Life insurance is an “assignable asset.” Just like your home or other assets, it can be given away, transferred to new ownership, or sold to anyone the policyholder chooses.
Q. Who qualifies for a Life Settlement?The primary target audience for Merlin Capital Group Inc., is an insured who is 70 years of age or older, is in compromised health, and has also owned the life insurance policy, with a face value of $200,000 or more, for not less than 2 years. Merlin Capital Group Inc., regardless of your current situation, will assess any submitted case for marketability.
Q: What would motivate a policyholder to sell their life policy?While Merlin Capital Group Inc., believes that not everybody may be a candidate for a life settlement, there are many situations when it can be a prudent financial decision. Examples of such situations might involve the following scenarios:
Q: How does the process work?
Q: What types of policies qualify for a life settlement?
Q: What general criteria are used to determine the value of a life settlement?There are many factors that are evaluated to determine the amount of a life settlement offer. Some of those factors include:
Q: What are the tax implications for the Seller?On May 1, 2009, the Internal Revenue Service (IRS) gave taxpayers guidance by issuing two revenue rulings to clarify the tax treatment relating to the surrender, sale and purchase of certain life insurance policies.Revenue Ruling 2009-13 concerns the seller’s tax liability when he/she sells an insurance policy.Revenue Ruling 2009-14 addresses the tax consequences on the buyer of a life insurance policy that is part of a life settlement.A copy of the revenue rulings may be located on the Internet at the Internal Revenue Service, United State Department of the Treasury web site www.irs.gov. Internal Revenue Bulletin: 2009-21.
Q: Is there a fiduciary obligation for professional advisors to discuss life settlements with their senior clients?We believe insurance professionals, CPA’S, registered reps, estate planning attorneys and financial advisors should make their clients aware of the life settlement option. Recent court decisions in this area point in that direction (Larry Grill, et al V. Lincoln National Life Insurance Co.)
To answer all your questions about life settlements and how a life settlement can be a valuable option for you, please call us today 760-560-8290.