Life settlements are financial transactions in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser then becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments after the policy acquisition.

Life settlements are typically offered to high net worth policy owners, aged 65 or older, by financial advisors or accountants. The option is perfect for those who are possess duplicate policies or an unneeded policy as it allows them to convert it into much needed cash while avoiding any future premium payment responsibilities. The strategy is especially effective for term life insurance policies that are set to expire anyway – this option may provide you with “free” money.

Do all life insurance policies allow this? Well, a supreme court ruling (Grigsby v. Russell) established a policy owner’s right to transfer an insurance policy. The argument was that since life insurance possessed all the ordinary characteristics of property, it should be considered an asset that a policy owner can transfer without limitation. The process became streamlined in 2001 when the National Association of Insurance Commissioners (NAIC) released the Viatical Settlements Model Act, which defined guidelines for avoiding fraud and ensuring sound business practices.

In general, you should consider life settlements if: Your policy is no longer needed; investment projections have not materialized; premiums are too expensive; medical or longterm care is required; charitable or family giving is desired; employment status changes; bankruptcy; and any other instance where it may be advisable. It is important to consult a financial advisor before making any decisions.

Reverse mortgages are becoming increasingly popular in the United States. The U.S. Department of Housing and Urban Development (HUD) created one of the first federally-insured reverse mortgage programs that can help seniors achieve greater financial security. However, those considering reverse mortgages should be careful to make sure they act prudently.

1. What is a reverse mortgage? A reverse mortgage is a special type of home loan that lets a homeowner convert some or all of the equity in their home into cash. Unlike traditional home equity loans, this money does not need to be repaid until the borrow no longer uses the home as their principal residence. Most often, this occurs when the homeowner passes away.
   
2. How do I qualify for a HUD reverse mortgage? The HUD Federal Housing Administration requires that borrowers are 62 years of age or older, own their home outright (or have a low mortgage balance), and must live in the home. Those interested in obtaining a reverse mortgage must also contact a HUD-approved counselor for a brief consultation. Call 1-800-569-4287.
   
3. What types of homes are eligible for a reverse mortgage? Single family dwellings and two-to-four unit properties that you own and occupy are automatically eligible for reverse mortgages. Moreover, some townhouses, detached homes, condominium units, and manufactured homes are also eligible.
   
4. Can the lender take the home away if the loan is outlived? No, you do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.
   
5. How are payments sent? There are five options for receiving reverse mortgage payments: (1) equal monthly payments, (2) unscheduled payments via a line of credit, and (3) a combination of scheduled monthly payments and a line of credit.