Financial Advisors: Do Your Clients Have Hidden Assets?
5 months ago

Financial Advisors: Do Your Clients Have Hidden Assets?

Many American seniors are financially unprepared for retirement. Not being prepared for retirement can lead to stress and a wide range of problems. A financial advisor always plays a vital role in helping seniors prepare for life after work. Still, not all of these professionals are familiar with the value of a life settlement. Understanding the benefits of a life settlement is vital in helping seniors make financial decisions in their best interests.

How a Life Settlement Benefits Seniors

A life settlement is often a viable option for seniors with a costly life insurance policy that is no longer needed. While an individual can surrender the policy to avoid paying monthly premiums, it's often a significant missed opportunity. Selling a life insurance policy can help seniors gain additional funds for retirement or pay medical bills. Getting a life insurance policy appraisal is essential, as it can often be anywhere between four to eight times the cash surrender value. Receiving this large payment is especially beneficial for seniors looking for hidden assets to help them prepare for retirement.

Why Financial Advisors Need to Learn More About Life Settlements

Many financial advisors aren't familiar with the life settlement process. However, a life settlement can lead to a significant increase in available cash for a client. A financial advisor that refuses to discuss this as a viable alternative could be guilty of violating their fiduciary duty. One person even sued their financial advisor for financial abuse of an elder and fraudulent concealment in a 2014 lawsuit, as the case eventually resulted in a settlement outside of court.

Ultimately, learning about life settlements is critical for financial advisors to avoid this situation while also allowing seniors to receive a large sum of cash. According to a survey from WealthManagement, nearly 40% of financial advisors were not familiar with life settlements, and only 11% of these advisors had recommended it as an option for their clients. Professional financial services need to spend much more time researching life settlements to ensure they can offer their senior clients a full range of options.

Common Misconceptions Regarding Life Settlements

The life settlement industry does have a few misconceptions. For example, some financial advisors feel that life settlements aren't regulated. However, the exact opposite is true, as the life settlement industry is highly regulated to meet detailed guidelines for transferring the ownership of a policy. Another common misconception is that a life settlement complicates taxes, but it's important to remember that only the amount over the cost basis from the settlement is taxable.

A financial advisor also doesn't have to be an expert about life settlements or the life insurance policy appraisal process. You can even refer your senior client to a specialty broker if you feel uncomfortable about these topics. The primary key for professional financial services is to understand enough about life settlements to discuss this option as another alternative for gaining immediate cash. Numerous calculators are available online to help you estimate the value of a life settlement for your senior client.

The Cash Value of Life Insurance

Cash-value life insurance is another option for seniors. This type of life insurance is permanent, as it provides an investment opportunity by earning interest, and it's possible to borrow against or withdraw during an emergency. However, not all life insurance offers cash value, as cash value life insurance typically costs more than term life insurance. Financial advisors need to discuss the different benefits of cash value life insurance to determine if it's a right fit for a client.

Other Things to Keep in Mind

A few different things can impact the value of a life settlement. While offering the policy directly to a buyer can expedite the sales process, you won't likely get the entire amount due to the lack of competition. A financial services professional needs to conduct an auction to get the best value for the client. It would be best to remember that not everyone is eligible for a life settlement. For example, a client that's too young might make it impossible for an investor to buy a policy. Too expensive premiums can also make it a challenge to sell a life insurance policy.

Closing Thoughts

While life settlements aren't always the best option, they can be a source of hidden assets for many senior clients. Letting a life insurance policy lapse is a major mistake, as financial services professional needs to help their clients avoid making such a costly error. A financial advisor's job is to work on behalf of their client by discussing their different options to help them get the most money possible if they are eligible for a life settlement.

Company Information

PolicyAppraisal.com

1820 Peachtree Road N.W., Suite #2001a
Atlanta, GA 30309

Contact details

Contact us!