Charities / Foundations

l.i.f.e. Long Relationships

Since its start in the 1990’s, the secondary market for life insurance has experienced spectacular growth, emerging as a powerful financial instrument that may be of significant value to charitable organizations.

The Settlement Market

In its simplest terms, a Life Settlement is the sale of a life insurance policy to a qualified funding source for a payment that is greater than the policy’s cash surrender value but less than the policy’s death benefit. The funding source that acquires the policy also assumes the responsibility for any future premiums.

Ashar Group, LLC is a team of licensed financial professionals who are equipped to handle all facets of the settlement process, working on behalf of the policyowner and their financial advisors to obtain the highest market value for that policy.

To be considered for a Life Settlement, Ashar has the following qualification requirements:

  • Individuals 65 years of age or older
  • A life insurance policy from $250,000 to $100 million
  • Change in circumstances since the policy was issued
  • Life expectancy from 25 months to 20 years
  • Policy must be beyond the 2-year contestability period

There are two additional requirements for charities. The insured (or donor of the policy) must consent to the charity seeking a Life Settlement. In addition, the insured must also consent to a review of the relevant medical records. This process does not require a medical exam and the results are kept strictly confidential.

Ashar Group, LLC has its own in-house medical team led by a board certified physician who is a Fellow of the American College of Physicians. The main objective of this review is not to determine life expectancies, but rather to provide recommendations on the case feasibility from a health underwriting perspective.

The Benefits of Life Settlement to a Charity

  • Provides an immediate financial return greater than the policy’s cash surrender value (but less than the policy’s death benefit)
  • Eliminates the expense of annual premiums
  • Eliminates annual review of the policy as well as the additional bookkeeping
  • Increases the pool of donors available to charitable organizations

The Benefits of Life Settlement to a Donor

If the donated policy is sold through the secondary market, it provides two major benefits to the donor.

First, the donor enjoys the tax deduction on the donation. Often, this tax savings can be used to buy replacement coverage for the donor at today’s more favorable rates.

Second, the donor can enjoy seeing their donation put to positive use by their favorite charity while still living.

Planning for the Future

As the market for Life Settlements continues to expand, charities may wish to revise their guidelines for accepting life insurance policies as gifts. Changes they may wish to consider include:

  • Stating a preference for receiving the proceeds of a Life Settlement over receiving the actual policy itself
  • Informing a prospective donor that the charity may seek a Life Settlement on the donated policy at some time in the future
  • Obtaining prior consent to seek a life settlement from the donor at the time of the donation