Why
Certified Public Accountants need to know about Life Settlements:
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“CPAs
can help both individual and corporate clients or employers
sell the right to collect on these otherwise dormant
assets in the aftermarket."
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Journal
of Accountancy, 2001 |
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The growing life settlement market is a great
opportunity for CPAs who are serving both affluent seniors
as well as corporate clients. It is very important that as
a CPA you have an understanding of the life settlements and
their potential applications.
Life Settlements for High Net Worth Seniors:
As a CPA, you should be able to assist your clients in understanding
the value of all the assets in their portfolio. If your
senior clients maintain insurance policies that they no
longer need, can afford, or are in danger of lapsing in
the future, you can assist them in appraising the true
value of that policy in the secondary market. This new
understanding of the real value of this asset may have
substantial impact on their financial situation.
Life Settlements can also provide the solution to other financial
planning objectives:
Some of these would include allowing your client
flexibility for other investments, freeing cash for emergencies
or anything
else they might see fit to use it for, providing the ability
for charitable giving, and providing someone the finances
required for
long term
care.
Business Applications for Life Settlements:
You also will want to be aware of the
business applications for Life Settlements. Most business
owners own life insurance
policies to protect for the loss of key employees, fund buy-sell
agreements, fund executive benefit plans, and/or secure loans.
However, when these needs no longer exist due to retirement,
change of ownership, or other factors, what happens to the
policies? Unfortunately, many times these policies are surrendered
or allowed to lapse because they are no longer needed and
considered to have little or no value. This is especially
true when term insurance is used for these purposes. As
a CPA advising businesses, you can help them discover that
this asset may actually have real value in the secondary
market.
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