The items necessary for a policy review are an inforce ledger (solving for level premium, level death benefit and $100 cash value at age 100), a signed HIPAA release, and the last 2-5 years of medical records. The agent or broker representing the Policy owner furnishes these items to Madison Brokerage.
Assume two weeks to gather the necessary documentation, depending on the cooperation of the physicians. Once all medical records are obtained Madison Brokerage will order a Life Expectancy (LE) report, which can take about two weeks to process. The LE, along with the documents from the policyholder is then submitted to the buyers. Each individual buyer reviews the case submission on its own merits and determines if they wish to bid. This process typically takes an additional two weeks. Once a buyer makes a bid, it is communicated to the agent who reviews it with the client. If the bid is accepted, the closing documents are prepared and sent to the seller’s representative to obtain signatures. Completed documents are then returned to the funder to complete the change of ownership paperwork. This portion of the process typically takes two to three weeks to complete. Once the carrier completes the change of ownership the funder is able to fund the sale. At this point the seller has a 15-day recession period during which the transaction can be cancelled. All monies would be returned to the funder with all ownership and beneficial rights returning to their original position. The entire process can take between six to twelve weeks.
Yes. Although each buyer has it’s own purchase criteria, Madison Brokerage works with the entire community of buyers to market all types of policies; term life, whole life, universal life and even group insurance.
There are two criteria that determine the overall tax treatment of a settlement. It is generally accepted that if the life expectancy of the insured is less than 24 months, the proceeds are treated as a death benefit and pass tax-free to the seller. If the life expectancy of the insured is greater than 24 months, then the return of premium is returned tax free, from that point, any cash value is taxed as ordinary income. Any excess funds are taxed at capital gains rates. These are the generally accepted rules concerning settlements and should not be construed as legal, tax or financial advise. Madison Brokerage Corp is not authorized to provide tax advice. A tax professional should be consulted regarding any potential tax consequences.
Each situation is different and buyers continue to refine their purchase criteria making it difficult to establish an accurate number for prospective sellers. The parameters for each sale include the policy’s age, face amount, premium, whether there is cash value or outstanding loans, the issuing carrier, and the health of the insured. All criteria is treated equally, no assumptions can be made without all of the necessary information. Madison Brokerage Corp. handles transactions in all price ranges.
Yes. Madison Brokerage, through its Percent Placement program, can work with the buying community to find a buyer for a portion of a policy. The beneficial rights for the balance of the policy would stay intact.
Yes, some states have passed Life Settlement and/or Viatical Settlement legislation regulating how business is transacted in their state. The National Association of Insurance Commissioners, representing all 50 states has passed a model act that is under consideration in all states. Generally, a life insurance license is all that is required to facilitate a life settlement. Some states have enacted legislation to specifically regulate Viatical Settlements. Madison Brokerage will work with you to address any potential licensing requirements.
Madison Brokerage serves as a partner to independent agents, Certified Financial Planners, wealth managers, Fee Only Planners, CPAs and attorneys.
