Examples

Example #1

Age: 84	Cash Surrender Value: $317,416
Sex: Female	Settlement Received: $700,000
	Before	After
Policy Type	Last To Die, Husband deceased	Universal Life
Face Amount	$1,825,000	$1,825,000
Annual Cost	$115,000	$65,000
A joint insured's husband was deceased. Due to declining interest rates, the trust/policyowner was unable to cash flow future premiums without dissipating trust assets. Because of adverse gift tax consequences, the surviving insured (grantor) was unable to make the annual gifts needed to help the trustee preserve the trust assets. The settlement proceeds allowed the trustee to obtain lower costing individual coverage and fund future premiums through trust earnings alone, without further gifts from the surviving insured (grantor). The surviving insured (grantor) avoided costly gift taxes and the existing trust assets were fully preserved.

Example #2

Age: 77	Cash Surrender Value: $66,070
Sex: Male	Settlement Received: $1,000,000
Policy Type	Universal Life
Face Amount	$2,250,000
Annual Cost	$44,000
The majority shareholder of a closely held company retired and had no further need for personal life insurance. The settlement proceeds were used to increase his diversified portfolio of stocks and bonds.

Example #3

Ages: 83/80	Cash Surrender Value: $48,873
Sex: Male/Female	Settlement Received: $800,000
	Before	After
Policy Type	Last To Die, Both Living	Last To Die, Both Living
Face Amount	$3,000,000	$3,000,000
Annual Cost	$73,708	$37,316
Co-trustees and grantors were all dissatisfied with the high cost and limited guarantees of an existing last to die policy. Settlement proceeds were used to purchase a new policy from the same insurance company. The new policy offered better guarantees for a lower out of pocket cost.

Example #4

Age: 77	Cash Surrender Value: $108,154
Sex: Male	Settlement Received: $140,000
	Before	After
Policy Type	Universal Life	Universal Life
Face Amount	$1,500,000	$1,500,000
Annual Cost	$29,028	$27,000
A company was unhappy with the non-guaranteed performance of an existing buy-sell policy covering their CEO. A new, lower-costing policy with improved guarantees was acquired and the company kept the settlement proceeds to take advantage of an immediate business opportunity.

Example #5

Age: 88	Cash Surrender Value: $93,198
Sex: Male	Settlement Received: $260,000
	Before	After
Policy Type	Universal Life	Universal Life
Face Amount	$1,000,000	$1,000,000
Annual Cost	$82,000	$35,808
A healthy, full-time CEO of a thriving company was interested in reducing his gifting outlay for the life insurance an irrevocable trust had purchased to help offset his anticipated estate taxes. The trustee used the settlement proceeds purchase a single premium immediate annuity which offset the cost of a new replacement policy. As a result, the insured grantor's annual gifting outlay was reduced by over 56%.

Example #6

Age: 82	Cash Surrender Value: $33,322
Sex: Female	Settlement Received: $165,125
	Before	After
Policy Type	Variable Life	Universal Life
Face Amount	$825,000	$825,000
Annual Cost	$40,000	$36,457
A trustee was dissatisfied with the roller coaster performance of a variable life policy purchased to offset estate taxes. A new, more stable fixed rate policy was acquired at a lower premium. The new policy also offered better guarantees. The settlement proceeds were retained by the trust to fully offset premiums for the next 4 ½ years.

Example #7

Age: 77	Cash Surrender Value: $0
Sex: Male	Settlement Received: $335,000
Policy Type	Universal Life
Face Amount	$1,500,000
Annual Cost	$38,004
A co-stockholder retired after his company was sold. The existing buy-sell policy was made available to him for personal coverage. Since the cost of maintaining the policy was prohibitive, he sold it instead policy and invested the proceeds to supplement his retirement income.

Example #8

Age: 77	Cash Surrender Value: $91,000
Sex: Female	Settlement Received: $1,800,000
	Before	After
Policy Type	Last To Die, Husband deceased	Universal Life
Face Amount	$6,000,000	$2,000,000
Annual Cost	$284,000	$0 (PAID-UP)
A 77 year old widow was forced to borrow from the cash value of her policy after her husband's death left her with no significant income source. Since her decreasing estate had reduced her insurance need, she sold the policy and used a portion of the proceeds to purchase a paid-up policy for the amount of coverage she actually needed. The balance of the settlement proceeds were invested in an age-rated immediate annuity to provide a GUARANTEED annual income of $180,000 for life. In short, her insurance needs were fully satisfied and she went from paying $284,000 per year for life to receiving $180,000 per year for life.

Example #9

Age: 78/65	Cash Surrender Value: $500,000
Sex: Male/Female	Settlement Received: $2,000,000
	Before	After
Policy Type	Last To Die	Last To Die
Face Amount	$6,000,000	$10,000,000
Annual Cost	$260,000	$15,000
A wealthy couple's estate had increased considerably, leaving their existing policy insufficient for covering anticipated taxes. They used their settlement proceeds to obtain a larger policy at fraction of their previous cost.

Example #10

Age: 83	Cash Surrender Value: $224,000
Sex: Female	Settlement Received: $2,200,000
Policy Type	Universal Life
Face Amount	$5,000,000
Annual Cost	$250,000
The trustee for an 83 year old widow sold an existing policy and used the proceeds to purchase assets from her estate at a deep discount, thereby eliminating potential estate taxes and the need for life insurance.

Example #11

Age: 71	Cash Surrender Value: $0
Sex: Male	Settlement Received: $2,000,000 In Paid Up Coverage
	Before	After
Policy Type	Term Life	Paid Up Death Benefit
Face Amount	$12,000,000	$2,000,000
Annual Cost	$252,000	$0
A 71 year old retiring CEO had no further need for the $12,000,000 in key man term policies his company carried on his life. A special settlement technique was utilized whereby the CEO received a GUARANTEED paid up death benefit to cover estate taxes instead of the usual cash payment for the unneeded policies.

Example #12

Age: 78	Cash Surrender Value: $581,000
Sex: Female	Settlement Received: $2,500,000 In Paid Up Coverage
	Before	After
Policy Type	Universal Life	Universal Life
Face Amount	$13,000,000	$27,000,000
Annual Cost	$675,000	$675,000
The estate was under-insured and the trustee was looking for a cost effective way to increase the existing $13,000,000 life insurance death benefit. The settlement proceeds were used to purchase a new policy with over twice the death benefit at no increase in cost.

Example #13

Age: 83	Cash Surrender Value: $156,000
Sex: Female	Settlement Received: $1,581,000
Policy Type	Universal Life
Face Amount	$3,100,000
Annual Cost	$170,400
Due to decreasing estate values and poor performance of trust owned life insurance the trustee determined that exercising a life settlement to eliminate the grantor's premium burden was the best course of action. A settlement of over ten times the cash value allowed the trustee and grantor to take advantage of investment and gifting strategies that were previously unavailable.

Example #14

Age: 69	Cash Surrender Value: $0
Sex: Male	Settlement Received: $400,000
Policy Type	Term Life
Face Amount	$3,000,000
Annual Cost	Term: $92,000 and doubling every five years Conversion: $81,000 for life
After years of affordable level rates ($27,000 per year) the insured was facing skyrocketing term premiums or conversion to a costly universal life plan. Instead of letting the policy lapse and getting nothing, he sold it for $400,000 and invested the proceeds.

Policy Settlement

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