Life Settlement Investments – Life settlement investments provide portfolio diversification through an emerging asset class uniquely poised to remain independent of the economic turbulence often found in traditional capital markets. International institutional investors, pension plans, individual accredited investors, insurance companies and banks have long recognized and value the alternative investment of senior life settlement investments.
We all hear the constant mantra of “diversification” from financial professionals and the business press. Most investors, however, (as well as their advisors) consider diversification within their portfolio to be a variety of holdings in different traditional financial instruments whose returns and risks are still in some way tied to the financial markets and the overall health of the domestic or global economy. Whether invested in stocks, bonds, variable annuities, or real estate, most investors have taken huge hits to their portfolios during the past year – even if they thought they were adequately diversified. Many investors have found that, in one way or another, all of their investments were linked to the condition of the economy through interest rates, the stock market, or even through the health and viability of well known Wall Street investment banks.
In these uncertain times, many investors have simply turned to holding cash or other classic “safe” investments such as CD’s, money market accounts, or U.S. Government securities. While these investment options also aren’t truly diversified from market conditions, they do at least offer a modicum of safety. Of course, the downside is that they usually offer paltry rates of return. While these types of safe investments are occasionally advertised with rates as high as 3% or 4%, this is all too often an introductory rate that will eventually decrease once the initial honeymoon period is over. It is more common to find rates in the 1% to 2% range, or even lower for U.S. Treasuries. Thus, the price of “playing it safe” is a low rate of return that may not even keep pace with inflation.
So where does this leave the investor that wants true diversification while still retaining the potential for a reasonable rate of return? There is an investment option with these characteristics that a growing number of investors are taking advantage of: life settlements. A life settlement is simply the purchase of an existing life insurance policy insuring the life of an elderly person at a discount to its face value. The purchaser obtains legal and beneficial ownership of the policy, including the premium obligation to keep the policy in force, and holds it until its maturity. Upon the policy’s maturity, the purchaser receives the payout of the benefits of the policy as their return on investment.
The life settlement industry in the United States has existed for nearly two decades; the concept however, of life insurance policies as an asset that may be assigned for value has a much older history and is well established in U.S. law. A life settlement transaction allows life insurance policy holders who no longer want or need their life insurance coverage to take advantage of the inherent value of the policy by selling it, rather than simply letting it lapse. Conversely, the purchaser benefits by investing in an asset that has an inherent, stated value, does not rely on future market conditions for appreciation, provides the opportunity for superior returns without a parity of risk, and is not directly correlated to business cycles, commodity prices or the performance of the financial markets. In short, life settlements provide true diversification for your investment portfolio.
The primary factors affecting the rate of return in a life settlement transaction are the discount at which the policy is purchased, the premium payments necessary to keep the policy in force, and the time until maturity. Since the maturity of a life insurance policy depends upon the passing of the insured, this is the factor with the most uncertainty in a life settlement transaction. The sooner the policy matures, the higher the purchasers’ annualized rate of return. Conversely, the later the policy matures, the lower the purchasers’ annualized rate of return, both because of the time value of money and the need to pay premiums to keep the policy in force. While there is certainly the potential for a higher or lower rate of return, historically investors can expect to receive double digit returns by investing in a number of life settlements.
Of course, just as with any investment, life settlements have their own set of risks. Life settlements are considered an illiquid investment. They are a growth instrument, not an income producing investment and should only be purchased with funds with which you do not need access. Policies may be purchased with maturity dates from 2-4 years and up to 5-7 years. Since the life expectancy for the insured cannot be determined with certainty, life settlements do not have a known holding period or date of maturity. If the insured exceeds their life expectancy, the investor will be responsible for their portion of the policy premium in order to keep the policy in force. This risk can be greatly alleviated by only purchasing a fractional interest in a number of different life insurance policies that are all issued by highly rated, legal reserve life insurance companies. While these and other risks do exist, these risks are not directly tied to market or economic conditions making life settlements a great way to truly diversify your investment portfolio.
401K Mutual Fund Analysis: Buy Hold and Pray is over!
Take control of your mutual funds. Learn a simple and easy way to manage your own funds with our Mutual Fund Watch program. The insight Mutual Fund Analyzer will help you evaluate the performance of all of your mutual fund choices and help you choose which funds to invest in. The Apex Market Signals will help you easily determine if the market is going up or down:
- Easy to use searchable database of all 22,000+ mutual funds;
- Shows the past 5 year’s buy and hold performance for each fund;
- Uses a proprietary indicator to produce bull and bear signals;
- Signals are emailed to subscribers;
- Video tutorials to teach you how to learn to control your own account; and
- 5 years of back tested results for each fund.
Life Insurance Review: Your life insurance policy is out of date!
If you have purchased a permanent life insurance more than 2 years ago, it is probably expensive and under performing. The economic recession has caused the life insurance industry to undergo a competitive shift towards better performing policies. This is great news for clients and agents:
- Lower cost of insurance;
- Higher Caps;
- Higher Participation Rates;
- More leniency on current health conditions; and
- More creative ways to access cash values.
All the above reasons necessitate all agents to review their clients’ policies to get them into better performing vehicles.
Innovative Tax Strategies- Congress has given the wealth some great tax breaks – you can use them too!
You are paying more than the IRS requires you to pay! Your current CPA does not normally deal with the strategies the wealthy employ and, therefore, can’t get them to work for you. Our strategies:
- Are completely disclosed to the IRS, we hide nothing;
- Are contained in current IRS code;
- Are being used by thousands, but should be used by hundreds of thousands;
- Are available to you now; and
- Will permanently lower you tax liabilities legally.
We will do a no cost and no obligation evaluation of your taxes. We will guarantee how much we can save you. Also, will keep you away from “red flagging” yourself to the IRS.
Life Settlement Exchange-The only market to resale fractionalized life settlements in the world!
Life Settlement Exchange (LSX) provides a market for investors to sell their fractionalized life settlements (FLS). We think all FLS should be held until maturity, however, sometimes investors need liquidity. One of the few weakness of FLS is liquidity, but LSX can find you a buyer for a price.
LSX is also the only entity that can give you a valid market value appraisal of you FLS portfolio. This will benefit you if you need to do an IRA Roth conversion.Roth Conversion Strategies-Life Settlements are your friend if you want to convert you IRA to a Roth!
A properly structured life settlement strategy is very beneficial to individuals who want to convert their traditional IRAs to Roth IRAs. Done correctly, your life settlement portfolio will save you taxes and help your account grow to amounts you may not have thought possible.
