Life Settlements & Attorneys

Due to the unique involvement attorneys have with their clients' financial decisions it is imperative they fully understand the life settlement opportunity. Relevant case law can be found as far back as 1911 in the Supreme Court case of Grigsby v. Russell.

Family law, bankruptcy & estate planning are areas of law that are directly impacted by life settlements. Attorneys in these fields can use knowledge of life settlements to assist their clients in making the best legal and financial decisions.

Life settlements and estate planning.

Life settlements can be used for a variety of reasons in estate planning. They inherently provide flexibility in the estate planning process and allow estates to leverage the value of a life insurance policy. An awareness of life settlements in the range of financial options will ultimately provide for the best estate planning possible.

  • Value of estate has changed and insurance coverage is no longer inline with needs
  • Settlements used to purchase other investments or more appropriate life insurance coverage
  • Proceeds can be used to more effectively distribute estate to heirs
  • Life settlement can be used to immediately fund charitable donations while client is still alive

Family law and life settlements.

Life settlements offer a means to effectively distribute property for the highest value possible.

  • Change in heirs during divorce can make life insurance unneccesary
  • 2nd to die policies are eligible for life insurance settlements
  • Life settlements are on average 800% more than the cash surrender value**

Bankruptcy and life settlements.

Life Settlements can be an untapped resource for money when clients need access to funds quickly.

  • Bankruptcy - liquidation of assets
  • Debt reduction

The legal environment for life settlements

As life settlements utilization in estate planning, family law and bankruptcies increases, attorneys involved in these areas of practice should become familiar with their application. The ability to meet their client's changing needs through a life settlement will result in the best fulfillment of an attorney's role as legal and financial advisor. Since life insurance settlements removes the life insurance benefit from the original beneficiary's estate, attorneys should evaluate the tax, estate and probate considerations resulting from the transaction.

Due diligence is appropriate not only relating to life settlements as an option for their client's asset, but also on the life settlement brokers and providers themselves. Regulations and laws pertaining to life settlements vary from state to state. In some instances the regulatory environment is quite stringent, while in others the industry is left to police itself. Life settlement providers and brokers should be fully compliant and adhere the strictest regulatory standards possible.

**GAO - Report to the Special Committee on Aging, U.S. Senate July 2010