The question was: I am considering a 1035 exchange for a 72-year-old client who has a $1 million universal life policy that is not performing well based on current expectations. His health has not changed much since the original policy was issued 5 years ago so should I be considering a life settlement as an alternative to a 1035 exchange? If so, what are the pros and cons of the two options?
The answer is: The short answer is yes. You should always evaluate the life settlement option. Part of the role of an experienced advisor is to investigate prudent options to solve their client’s needs. An important part of this investigation is policy appraisal. Appraising the policy for its fair market value provides the client with more information to use in making an educated decision on what to do with the policy. If the appraisal determines that the policy’s market value is greater than its cash surrender value, then a life settlement may be an appropriate option.
Here are a few considerations regarding the life settlement option: