The Internal Revenue Service in 2009 released guidance clarifying the tax treatment for the proceeds of life settlements, and it's not as generous as that for a cash surrender.
In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones, called re-remics (re-securitization of real estate mortgage investment conduits).
Hedge funds that have acquired life settlements, for example, are keen to buy and sell policies more easily, so they can cash out both on investments that are losing money and on ones that are profitable.
A&O contracted out the bonding of the investments to Provident Capital Indemnity, a company based in Costa Rica that in 2006 received an order from the Texas Department of Insurance to cease and desist bonding life settlements for engaging in the unauthorized business of insuring risks in Texas.
Whether to opt for a life settlement "depends on how much cash value do you have as a percentage of the death benefit," said Michael Brink, a principal at Pelagos Advisors, a life insurance and life settlement advisory firm in Atlanta.
Keeping the policy in force required that the man pay annual premiums of $35,000, so he went shopping for a life settlement.
If you do opt for a life settlement, he should represent you in negotiations and haggle over commissions and other costs on your behalf.
Life settlements generally involve long-standing "permanent" universal life and variable universal life insurance.
In early 2008, the firm published criteria for ways to securitize a life settlements portfolio so that the risks were minimized.
While not for everyone, financial tactics such as reverse mortgages and life settlements can provide cash for retirement.
