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For any senior in or entering retirement, it’s important that they are aware of all of their financial options, from investments, to retirement withdrawal strategies, and even all existing assets that they might still hold. While some retirees might have heard about life settlements, we are always surprised to hear that many don’t fully understand what they are and how they can work to help seniors making financial decisions in retirement. We wanted to share some scenarios in which we’ve seen life settlements become a very important benefit for some individuals.
Ms. Perkins
Ms. Perkins was an 80-year-old widow who maintained a universal life insurance policy owned by an irrevocable life insurance trust (ILIT) worth $1.7 million. Due to changes in estate tax laws, Ms. Perkins no longer needed the policy. She decided that instead of paying the premiums on the policy, she would rather use that money to help fund college tuition for her 3 grandchildren.
She discussed her situation and desires with her trustee, who suggested the possibility of selling her policy in a life settlement. Instead of simply surrendering the policy and losing out of the equity she was putting into the policy through premium payments, Ms. Perkins retained the services of a life settlement expert and was able to sell the policy for $275,000. That sum of money allowed her to fund her grandchildren’s college tuitions while still saving on premium payments.
Mr. Johnson
With a $1 million term life policy nearing the end of its 20-year term, 74-year-old Mr. Johnson faced a tough decision to either allow the policy to expire or convert it into a permanent universal life policy and continue making payments. His trusted advisor, however, offered up a different option: converting the policy and selling it in a life settlement.
After consulting a life settlement expert, Mr. Johnson determined that selling the policy in order to receive a large sum of money that he otherwise would have let go by surrendering it was absolutely the best option. He was able to obtain $150,000 by selling his policy, which he then used to purchase long-term care insurance coverage.
Mr. Brown
Mr. Brown purchased a $1.5 million universal life policy to be used to fund his children’s college and to pay off the balance of his home in case he was to pass away unexpectedly. At 76-years-old, Mr. Brown’s children had graduated from college and his home mortgage was paid off, which eliminated the need to keep the policy and continue making premium payments on it.
Mrs. Brown insisted that he keep some portion of life insurance to his name, so when speaking with his financial advisor, the option of selling a portion of his life insurance policy through a life settlement came up. Mr. Brown was able to sell $1.25 million of his policy for $125,000 in cash, keeping $250,000 to his name. He had received a large sum of money by selling and no longer was responsible for making premium payments on that large portion of the policy.
There are many scenarios in which life settlements have worked to benefit senior life insurance policy owners as they no longer have a need or want for their policies. Instead of surrendering the policies and receiving a very small amount in the policy’s surrender value, they were able to obtain large amounts of money that they were able to put towards other financial goals and needs.
If you’re interested in how a life settlement can benefit you, feel free to contact our life settlement experts today!
