Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Life settlement’

In Medicaid Planning, Don’t Surrender Life Insurance—Trade It for LTC Instead

Posted by William Byrnes on July 23, 2013


Your clients who are nearing retirement age might often wonder why they bother maintaining the life insurance policies they have funded for years. With children grown, the need to provide for beneficiaries in the event of an untimely death has already been eliminated. Further, these policies are considered assets that can have a significant impact when determining Medicaid eligibility.

Despite this, recent proposals in several states can give older clients a reason to maintain their policies and provide peace of mind in Medicaid planning. Under these proposals, ownership of a life insurance policy can actually help clients in long-term care planning as more state Medicaid offices embrace the use of life settlements in conjunction with Medicaid coverage.

The Proposals

read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/06/03/in-medicaid-planning-dont-surrender-life-insurance

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Life Partners Holdings Hit with Class-Action Lawsuit

Posted by William Byrnes on April 2, 2011


Life Partners Holdings, Inc. investors have filed a class-action lawsuit against the Waco Texas based life settlement provider, alleging that its directors and officers violated securities laws. The lawsuit comes a month after an announcement was made that the publically-traded company is the subject of an SEC investigation into the life expectancies the company uses to value the life insurance policies it sells to its customers.  Life Partners is accused of misleading its customers—investors in life insurance policy—about the life expectancies of insureds on the policies it sells, with insureds outliving the life settlement company’s life expectancy estimates 90% of the time.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life settlements in Advisor’s Journal, see Life Settlement Provider Accused of Falsifying Life Span Reports (CC 11-23)Life Settlements Funds Performance Fees under Scrutiny (CC 10-116)Should the Basis of a Life Contract be Adjusted by Mortality Charges? Rev. Rul. 2009-13 Says Yes in Context of Life Settlements; Certain Amounts over Adjusted Basis Treated as Capital Gains (CC 09-19).

For in-depth analysis of life settlements, see Advisor’s Main Library: A—Life Settlements—Introduction.

 

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Life Settlement Provider Accused of Falsifying Life Span Reports

Posted by William Byrnes on March 10, 2011


One of the U.S.’s oldest life settlement companies, publically traded Life Partners Holdings, Inc., is being investigated by the SEC for falsifying life span reports used to sell the company’s life settlement products.  Falsified life spans can leave investors on the hook for additional premiums over the insureds’ remaining years when insureds outlive the firm’s life-span estimates.

The question for Life Partners Holdings shareholders and customers is whether the Life Partners investigation will go the way of Mutual Benefits Corp, a life settlement company that sold fractional interests in life insurance policies. Mutual Benefits was the subject of a similar SEC investigation concerning falsified life expectancies that ultimately led to the company’s collapse.  Could Life Partners be next?

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

 

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NCOIL Adopts Model Act Requiring Insurers to Inform Consumers of Settlement Options

Posted by William Byrnes on December 15, 2010


In a contentious move, the National Conference of Insurance Legislators (NCOIL) executive committee voted unanimously to adopt the Life Insurance Consumer Disclosure Model Act, (Model Act), which requires life insurance carriers to notify policy owners of settlement options when the policy owner is considering surrendering the policy or when the policy is set to lapse.

The life settlement industry is giddy over the Model Act—which should boost their business. But the insurance industry outlook on the Act is not so rosy—settlement essentially ensures that policies will not lapse before death benefits are paid and that many policy owners will choose settlement over carrier options like accelerated death benefits and policy surrender. Not all policy owners have a right to disclosure about settlements under the Model Act.  The disclosure requirement applies only where the insured is sixty years old or older or “is known by the insurer to be terminally ill or chronically ill” and … read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance settlement options in Advisor’s Journal, see Don’t Overlook Beneficiary Designations and Settlement Options (CC 09-28)

We invite your questions and comments by posting them or by calling the Panel of Experts.

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Life Settlements Market Ideal for Re-Expansion

Posted by William Byrnes on October 21, 2010


Why is this Topic Important to Wealth Managers?  Discusses the general market conditions of life settlements.  Also provides reasons why some policy holders may consider selling their interests.   

As discussed earlier this week, a traditional life-settlement transaction consists of an third party purchasing an unknown individual’s life insurance policy for consideration.  The purchaser continues to pay the premiums until a death benefit is collected, the contract is sold to another individual or business, or is surrendered. 

The Wall Street Journal attributes the creation of the industry “back to the 1980s, when [terminally ill] patients sold their policies to raise cash for medical treatments.”   The Journal also notes, the “market boomed earlier this decade, as hedge funds eager for offbeat alternative investments piled in.”  

Since the decline in overall macroeconomic market conditions, “the total face value of policies purchased in the secondary market fell to $7 billion in 2009 from $13 billion in 2008”.  “Prices for policies, meanwhile, fell to an average of 13% of the death benefit in 2009 from 21% in 2006.”   Nevertheless, industry experts are expecting a rise again in total market figures by the end of 2010.  It is not surprising given the SEC’s new enforcement efforts discussed below. 

For the remainder of the article see AdvisorFYI.

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Recent STOLI Case Is a Big Win for Insurers

Posted by William Byrnes on October 3, 2010


An insurer recently won a major victory when the U.S. District Court for Delaware voided a life insurance policy that was purchased as part of a STOLI transaction. The case—Principal Life Insurance Co. v. Lawrence Rucker 2007 Insurance Trust—is significant because the court voided the policy for lack of an insurable interest based on the finding of insured’s intent to sell, even though the insured had not identified a particular purchaser for the policy at the time it was issued.

For the complete analysis of this development by our Experts Robert Bloink and William Byrnes, please read the article via your AdvisorFX subscription atRecent STOLI Case Is a Big Win for Insurers

For in-depth analysis of STOLIs, see Advisor’s Main Library Section 19.6 Life Settlements B—The Life Settlement Industry: Stranger-Originated Life Insurance (STOLI).

For in-depth analysis of the topic of insurable interest, see Advisor’s Main Library Section 20 Beneficiaries And Settlement Options B—Insurable Interest: New York Insurance Department Invalidates STOLI Scheme For Lack of Insurable Interest

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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