Life insurance is often integrated into business and estate planning to protect against risk, fund succession, or provide liquidity at death. Over time, however, business structures change, ownership transitions occur, and estate plans evolve. When that happens, existing life insurance policies may no longer serve their original purpose.
In these situations, a life settlement may offer an alternative to surrendering or maintaining coverage that is no longer strategically aligned — allowing policies to be evaluated as financial assets rather than sunk costs.
Key person policies are commonly used to protect against the loss of a critical executive or partner. If that individual retires, sells their interest, or the business model changes, the policy may no longer be necessary.
Rather than surrendering the policy, a life settlement may unlock market value and provide liquidity to the business.
Life insurance is frequently used to fund buy-sell agreements. After a business is sold, merged, or restructured, these policies may become redundant.
In these cases, a life settlement can help:
Policies used in non-qualified benefit structures such as SERPs or deferred compensation arrangements may outlive their usefulness once executives retire or agreements are restructured.
A settlement review can determine whether retaining the policy still aligns with corporate objectives.
Irrevocable Life Insurance Trusts (ILITs) are designed to hold life insurance outside the taxable estate. However, changes in estate tax exposure, asset growth, or family dynamics can reduce the need for coverage.
Trustees have a fiduciary obligation to evaluate whether continuing to fund a policy is in the best interest of beneficiaries. A life settlement may provide an alternative source of value.
Life insurance is often purchased to provide liquidity for estate taxes or asset equalization. If estate planning goals shift — due to legislative changes or asset repositioning — a policy may no longer be essential.
Settlement proceeds may be used to:
In some cases, beneficiaries may prefer immediate liquidity over a future death benefit — particularly when they are financially independent or have different planning priorities.
Evaluating settlement options helps trustees fulfill their duty of care and informed decision-making responsibilities.
Life settlements in these contexts typically involve permanent policies such as:
Policies with larger face amounts and ongoing premium obligations are often the most suitable candidates for market review.
Life settlement proceeds in business and estate contexts may involve complex tax treatment, including:
Trust ownership, corporate ownership, and partnership structures all influence taxation and reporting requirements. Coordination with CPAs and legal counsel is essential.
Living Equity Group does not provide tax or legal advice.
In business and estate planning, decisions around life insurance are rarely binary. Options may include:
An objective review ensures decisions are based on current facts — not legacy assumptions.
Living Equity Group works alongside advisors, trustees, and business owners to evaluate life insurance policies within broader planning frameworks.
Our role includes:
We focus on clarity, transparency, and alignment with long-term planning goals.
A policy review may be warranted when:
In many cases, proactive review prevents unnecessary premium outlays or missed value.
Life insurance plays a critical role in business and estate planning — but when circumstances change, so should the strategy. A life settlement may provide an opportunity to unlock value, simplify planning, and reallocate resources more effectively.
Not sure whether an existing policy still fits your business or estate plan?
We can help review the policy and evaluate whether a life settlement or alternative strategy makes sense.
→ Request a Policy Review
