It’s no secret that CPAs are called upon to perform a range of work for clients. While the tax work is still there, the profession has evolved to include areas like data analytics, risk management or even behavioral economics. The profession is more than simply a service provider; CPAs are trusted partners in decision-making.

And a growing area where people are turning to CPAs for guidance is life insurance settlements, the process of selling an existing life insurance policy to a third party for an immediate lump-sum payment.

In this Q&A with Lisa Rehburg, president of Rehburg Life Insurance Settlements, learn about what life insurance settlements are; their benefits and challenges; and factors to consider and questions to ask when helping clients.

Q: How long have life insurance settlements been evolving?

A: This has been legal since 1911. In a Supreme Court decision in Grigsby vs Russell Justice Oliver Wendell Holmes deemed life insurance policies as an asset that one owns; as an asset, it can be transferred to anyone at any time. The market was fairly quiet and unregulated for decades, and in the 1990s, the Life Insurance Settlements Association was formed to work with government agencies, specifically insurance commissioners, the National Association of Insurance Commissioners and National Congress of Insurance Legislators. Today, as an industry, life settlements brokers and buyers are highly regulated by departments of insurance across the country.

Q: When did you see this as a new benefit for your insurance clients?

A: I was in corporate for a long time and had been working with insurance agents, financial advisers and advisers in general for my career. I realized that more than two million seniors a year will close their life insurance policies and more than $100 billion in benefits are lost by lapsing or surrendering policies. Perhaps they can't afford premiums, or they need to repurpose the policy. This option can help a huge number of people in a new way as the money received from selling a policy can be used for anything, including being a resource for clients that are recovering after the devastating fires in Los Angeles.

Q: I imagine there is amazing demand as the aging senior population is growing.

A: Correct! This is a needed opportunity. For me, it's all about helping advisers and their clients. I'm passionate about letting people know that this is an option. If the situation is right, this can be a wonderful solution. Instead of walking away with little or nothing from their policies, they can be helped dramatically.

Q: You mentioned that most people are older who consider this option. Are there other consideration when someone younger has a policy?

A: I always tell people to buy life insurance because they need it. We work with seniors, not always but typically, because buyers of these policies will pay premiums and become beneficiaries. They're not looking to wait 30 or 40 years. Bluntly, they're looking for people with 10 to 15 years life expectancy or less, sometimes 20 years. For a young couple in their 20s or 30s, we're not a consideration yet. If you're buying a term policy, know when the conversion option is ending. What's the conversion deadline? There's always a deadline as to when you can do that and it's convertible without health statements. If something does happen, let's say someone does get sick, they may want to convert that policy to a permanent policy, or a portion of it to continue to give their family protection past the level term period. So, it’s key to be aware of conversion deadlines on term policies.

Q: How has the market changed?

A: Media ads are raising visibility and public awareness for our market. People are living longer, having freer lives. Times have changed. The vast majority of our clients are not selling their policies to pay for medical bills. We work with clients that have much longer life expectancies now, which is great for them and their families.

Q: Does it take another level of sensitivity on the part of insurance agents, CPAs or lawyers? Who can help? Who's the most logical one for these conversations?

A: Many times, clients aren't having these conversations with anybody. But it’s certainly an area where financial planners, insurance agents, trust attorney and CPAs can step in and have those conversations with clients.

For CPAs especially, when they're looking at their client’s financial picture, questions may come up: Does this insurance policy need to be here? What happens if it's a business owner who is retiring from their business or selling their business? Do they need the key person policy anymore? If the answer is no, an option to letting those policies go may be to sell it with the client receiving the cash influx. And as I mentioned earlier, the funds a client receives can be used for anything—from medical costs to a bucket-list trip to college tuition for their kids, or to simple increase their retirement funds.

Final note: There are many factors for CPAs and their clients to consider when discussing life insurance settlements and additional research from the tax perspective may be required. More information is also available through FINRA.