Irvine, CA, January 27, 2020 -- TRC Financial, an independent insurance brokerage firm, recently negotiated and closed a life settlement transaction for a $10,000,000 life insurance policy on behalf of a high net worth (HNW) client.
The client acquired the life insurance coverage in 1995, at the age of 55, with the intent to use the death benefit proceeds to fund a portion of the federal estate tax and to also provide liquidity to equalize inheritance to heirs. To this end, the coverage was funded outside the estate and owned within an ILIT (Irrevocable Life Insurance Trust).
This year, at age 79, the client completed a review of his estate plan and no longer needed the life insurance coverage. The circumstances that had changed included: 1) through a series of estate planning techniques, the client had successfully transferred assets outside of his taxable estate; 2) 2017 HR 1 (“Trump Tax Cut”) increased the size of the available estate exemption sheltering more assets from estate tax; 3) ongoing life insurance premiums were going to put a burden on cash flow for current lifestyle needs; and finally, 4) his heirs already had “enough” wealth transferred to them.
With this is mind, TRC Financial was tasked with “selling” the life insurance policy to an institutional life settlement buyer. TRC Financial began by gathering the client’s medical records and ordering independent life expectancy reports. TRC also contacted the insurance carrier and ordered updated premium projections (inforce life insurance policy illustrations). With life expectancy estimates and premium cash flow projections, TRC Financial reached out to the institutional life settlement market in order to secure formal bids. After a 3-week bidding process, a final offer of $2.7 million was accepted by TRC Financial on behalf of the client. Over the next 3 weeks, TRC Financial facilitated all of the closing documents and the client received the life settlement proceeds.
“It is really important to create a competitive structure whereby multiple institutional buyers can compete for the highest offer,” said TRC Financial Principal, Darren Gallaway. “Not doing so, can result in much lower outcomes.”
For assistance with evaluating if you qualify to sell your life insurance policy, please contact us or visit our Life Settlement Services page to schedule a call. For a brief overview about the taxation of a life settlement, see our post “Life Settlement Taxation Clarified by the New Tax Law.”
About TRC Financial
TRC Financial is an independent firm that delivers a reliable and unbiased approach to acquiring and managing life and disability insurance portfolios and innovative benefit plans. Our focus centers around proprietary plan design, product placement, and administration for life insurance, life settlements, disability insurance, executive benefit plans, and private placement insurance investment accounts. We are the oldest and most established firm of its type in Southern California.