Unaffordable Premium Leads to Charitable Donation and Loan Payoff

John owned two insurance policies that were funded by a loan within an irrevocable trust. The policies were funded with premiums in the first few years of the policies being issued and were initially projected to last past life expectancy.

After a policy review, it was discovered the policies would require significantly increased premiums to keep in force moving forward.

John: Age 81 (Insured)

• Valmark Securities, Inc. (Valmark): Valmark and its registered representatives act as brokers on the transaction and will receive a fee from the purchaser. Valmark supervises all life settlements like a security transaction.
• Life Settlement Providers: Valmark markets policies only to Life Settlement Providers. Life Settlement Providers are generally responsible for maintaining the policy after sale and receive their funding from institutional buyers. Valmark reviews Life Settlement Providers periodically to affirm that their funding sources are institutional buyers, carry errors and omissions insurance, and are licensed in the state of sale.
• Institutional Buyers: Institutional buyers include qualified institutions, accredited investors, hedge funds, pension funds, and other qualifying investors. Investors bundle policies to ease any concerns with strangers having access to view millions of death benefits on an individual.
• In a life settlement agreement, the current life insurance policy owner transfers the ownership and beneficiary designations to a third party, who receives the death proceeds at the passing of the insured. As a result, this buyer has a financial interest in the seller’s death.
• A policy owner should consider the continued need for coverage, and, if the policy owner plans to replace the existing policy with another policy, the policy owner should consider the availability, adequacy, and cost of comparable coverage.
• Policy owners considering the need for cash should consider other less costly alternatives to a life settlement.
• When an individual decides to sell their policy, they must provide complete access to their medical history, and other personal information, that may affect their life expectancy. This information is requested during the initial application for a life settlement.
• After the completion of the sale, there may be an ongoing obligation to disclose similar and additional information to the buyer or servicing agent at a later date.
• A life settlement may affect the insured’s ability to obtain insurance in the future and the seller’s eligibility for certain public assistance programs, such as Medicaid, and there may be tax consequences.
• Individuals should discuss the taxation of the proceeds received from a life settlement with their tax advisor.
• A life settlement transaction may require an extended period of time to complete. Due to complexity of the transaction, fees and costs incurred with the life settlement transaction may be substantially higher than other securities.
• Once the policy is transferred, the policy owner has no control over subsequent transfers.
• Each client’s experience varies, and there is no guarantee that a life settlement will generate an offer greater than the current cash surrender value. In such cases, the client can always surrender their policy to the carrier if the coverage is no longer needed.
• Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Advisory Services Offered through Marcum Wealth, a SEC registered Investment Advisor. Marcum Wealth and Marcum Insurance Services are separate from Valmark Securities, Inc.
• Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Important Disclosure Information

Marcum Insurance Services, LLC is an affiliated insurance agency of Marcum Wealth, LLC. Marcum Wealth, LLC may recommend the services of certain affiliated and related entities, including Marcum, LLP and Marcum Insurance Services, LLC, which presents a conflict of interest in that the recommendation could be made on the basis of fees to be collected by such affiliated or related entity.

Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Advisory Services Offered through Marcum Wealth, a SEC registered Investment Advisor. Marcum Wealth and Marcum Insurance Services are separate from Valmark Securities, Inc.

The information presented here is for educational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation, or needs of individual investors. Client names have been changed to protect confidentiality. The case study is for illustrative purposes only. Individual results may vary.

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy or any non-investment related services, will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.

Marcum is neither a law firm, nor a certified public accounting firm, and no portion of its services should be construed as legal or accounting advice. Moreover, you should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Marcum.