Q: What is a Life Settlement?
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.

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.

Q. Who qualifies for a Life Settlement?
The primary target audience for Advanced Settlements, Inc. is an insured who is 70 years of age or older, has a life expectancy of less than 12 years, and has owned a life insurance policy with a face value of $250,000 or more for not less than 2 years.

Q: Does Advanced Settlements specialize in certain types of Life Settlement cases?
Yes. Advanced Settlements specializes in cases involving high-net worth individuals 70 years of age or older with life policies of at least $250,000 or more.

Q: What are examples of changing life circumstances that would motivate a policyholder to sell the life policy?
Advanced Settlements believes that Life Settlements are not appropriate for everyone, but in many situations it can be a prudent financial decision. Examples of such situations might involve the following scenarios:

• Family dynamics or financial circumstances have changed, and the policy is obsolete or no longer needed for its original purpose.
• The policyholder determines that he/she can purchase a better-performing policy with today’s more affordable premiums (due to a change in the mortality tables indicating seniors are living longer.)
• Policyholder can no longer afford the high premiums, and wishes to use the life settlement proceeds toward replacement coverage that will lower or eliminate premiums.
• The beneficiary for whom the policy was purchased is deceased.
• The policyholder wishes to remove a policy from an estate due to a reduction in size of the projected tax liability.
• The sale of the policy would allow the policyholder to replace an individual policy with a survivorship policy or long term care insurance.
• A key-man policy is no longer needed due to retirement or change in business structure
• Policy owner wishes to provide cash gifts to family members
• To provide funds for charitable giving
• To purchase or invest in another business
• To fund protracted litigation or attorneys fees

Q: How does the process work?
1. An application, authorization and disclosure form is completed
2. Attending physician statements (APS’s) and in-force illustrations are obtained
3. An offer is negotiated using multiple Funding Institutions
4. The offer is submitted for acceptance
5. Once accepted, a contract is sent out for signatures
6. Immediately upon receipt from the owner of documents to effect the transfer of the insurance policy, the life settlement provider shall pay the proceeds of the settlement to an escrow or trust account managed by a trustee or escrow agent in a bank approved by the Commissioner, pending acknowledgement of the transfer by the issuer of the policy. The trustee or escrow agent shall be required to transfer the proceeds due to the owner immediately upon receipt of acknowledgement of the transfer from the insurer in compliance with applicable state law.

Q: What types of policies qualify for a life settlement?
• Universal Life
• Term Life (if convertible)
• Whole Life
• Variable Universal Life
• Survivorship (any type)

Q: What general criteria is 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:

• The gender, age and medical condition of the policy holder
• The size of the policy; cash value; loans; ownership structure, etc.
• Premium costs
• Life expectancy
• Cash surrender value

Q: What are the specific parameters used by Advanced Settlements, Inc. in determining a life settlement?
• Clients age 70+
• $250,000 minimum face amount
• Life expectancy of 12 years or less (due to age, health or a combination or the two)
• Low cash surrender value (below 30%)
• Minimum loans (below 30%)
• Low premiums (below 4%)
• Ownership can be through an individual, a corporation or a trust

Q: What are the tax implications for the Seller?
Although the following information is not intended to substitute for the advice of a tax expert or CPA, generally, the tax structure is as follows:

• Zero tax on the basis amount of the policy. (The basis represents premiums paid into the policy.)
• Ordinary income tax on earnings above the basis. (The combination of the basis and earnings is known as the cash surrender value.)
• Capital gains tax on the amount in excess of the cash surrender value.

* this is the general opinion, the IRS has not provided firm guidance, and amended returns may be required.

Q: Is there a fiduciary obligation for professional advisors to discuss life settlements with their senior clients?
We believe insurance professionals, CPAs, registered reps, estate planning attorneys and financial advisors should be aware of the life settlement option. Although a life settlement may not be the best solution for every senior, there are cases where it is a prudent decision. In such instances, the professional advisor will want to have done their due diligence on the life settlement marketplace and be capable to articulating the advantages to the senior client, along with any tax implications.

Q: One of the questions that we are often asked by producers and partners is, “how do our funders protect the identity of clients whose policies they have purchased?”
Under the privacy and information security requirements required by the Gramm-Leach-Bliley Act, all investment advisers, broker dealers and certain financial institutions must adopt policies and practices protecting the privacy of nonpublic personal information which such firms collect from their clients. Provider and broker firms have adopted privacy and information security procedures and must inform employees of the firm of the importance of maintaining the privacy of a client's information. These provider firms must furnish client's with initial and annual privacy notices. In addition, if the firm shares nonpublic client information with third parties, (e.g. auditors, accountants, consultants, etc.) then it is necessary to enter into an agreement that provides (or include in any existing contract) that such third party will only use the information to perform the services for which they have been hired and will not reveal the information to any other parties. As a part of our due diligence, we request from our funders a copy of their most recent privacy policy and notice of informational practices. If these funders turn around and sell the policy, the privacy requirements from advanced may not apply to the second transactions.

Q: When is a life settlement not the best option?
Life settlements are not recommended for everyone. It is critically important to consult with a financial planner about other aspects of life settlements as well. The number of bidders for a policy may be limited and the proceeds from sales of similar policies may vary and may be subject to claims of creditors. Recieving the proceeds may affect eligibility for government benefits and entitlements. Before the sale, the insured should consider the continued need for coverage, the affect on estate plans, availability of insurance, cost of comparable coverage, and tax implications. In addition, there may be high fees associated with a life settlement sale. The amount received for the sale of the policy may be more or less than what others might receive for the sale of a similar policy.