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Due to the unique involvement attorneys have with their client’s financial decisions, it is imperative they fully understand the Life Settlement opportunity.
Family law, bankruptcy, and 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.
Estate Planning and Life Settlements
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. Examples:
- Value of estate has changed and insurance coverage is no longer inline with needs
- Funds needed to purchase other investments or more appropriate life insurance coverage
- Proceeds can be used to more effectively distribute estate to heirs
- Desire to immediately fund charitable donations while client is still alive
*See “Estate Planners” section for additional information.
Family Law and Life Settlements
Life Settlements offer means to effectively distribute property for the highest value possible. Examples:
- Divorce and distribution of property
- Change in heirs during divorce can make life insurance unnecessary
- Second-to-die, or survivorship, policies are eligible for Life Settlements
Bankruptcy Law and Life Settlements
Life Settlements can be an untapped resource for money when clients need access to funds quickly. Examples:
- Bankruptcy (liquidation of assets)
- Debt reduction
The Legal Environment for Life Settlements
As Life Settlements are becoming more widely used in estate planning, family law, and bankruptcies, 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 a legal and financial advisor. Because Life Settlements remove 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(s) 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 must be fully compliant and adhere the strict regulatory standards.