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In order for Magna or the Trustee’s staff to provide information about your account to an advisor, (i) you must fill out and sign the “Network Resources Access Form; and (ii) your advisor must fill out and sign the “Confidentiality and Non-Disclosure Form.” Completed forms should be sent to Magna at firstname.lastname@example.org. Copies of the forms are located on the “Resources” page.
A TOD Beneficiary Designation is a form of registration for a security that allows the owner of the security to designate a beneficiary who will receive the security on the owner’s death. We have created a form of TOD beneficiary designation for the securities issued under the Plan, i.e., the Continual Fractional Interests, Position Holder Trust Interests, the New IRA Notes and IRA Partnership Interests (the “Plan Securities”).
Any individual investor who holds his or her Plan Securities entirely in his or her name as separate property can designate one or more TOD beneficiaries. Additionally, an individual investor who holds his or her Plan Securities in a non-survivorship multi-party account (tenants in common or husband and wife community property) can designate one or more TOD beneficiaries for their proportional share in the Plan Securities (for example, two co-owners each have a one-half (1/2) share). Also, two or more joint tenancy owners of Plan Securities with rights of survivorship can designate one or more TOD beneficiaries, and, if the surviving joint tenant(s) do not execute a new Beneficiary Designation form after the death of the first joint tenant, this TOD Beneficiary Designation will take effect after the death of the last joint owner to die. The TOD Beneficiary Designation does not apply to Plan Securities held in IRAs. IRAs have their own process for designating beneficiaries.
An investor can designate as a beneficiary one or more individuals or a trust. Alternate beneficiaries cannot be named. If one of your designated beneficiaries dies before you do and you want to revise your designation, you will need to complete a new Beneficiary Designation form.
No. Due to the processing required, Life Partners Position Holder Trust (“PHT”) can accept only one Beneficiary Designation per investor or per group of joint tenants.
You are not required to designate a beneficiary for your Plan Securities. If you should change your mind and decide later that you want to designate a beneficiary, you can contact Magna Servicing for a form, and forms are available on PHT Trustee’s website at lpi.pht.com and Magna Servicing’s website at www.magnaservicing.com.
Yes, a trust can be designated a beneficiary as long as it is an express or written trust and considered a legal trust under the laws of the state under which it was formed. If a trust designated as beneficiary is no longer valid or is not in existence at the time of your death, then the designation will be considered void. If you decide to designate a trust as your TOD beneficiary, then you will need to send Magna Servicing a copy of an affidavit, memorandum or certificate of trust, or a copy of your trust agreement with your Beneficiary Designation form.
A TOD beneficiary can be designated by the investor at any time by completing the applicable form. A TOD Beneficiary Designation can be updated and/or changed at any time by submitting a new form. You may also revoke your TOD Beneficiary Designation at any time by submitting a signed notarized Beneficiary Designation form with the notation “None”, “N/A” or “No Beneficiary” or similar language written across the beneficiary designation section. The most recent TOD Beneficiary Designation will be the only active beneficiary designation regarding your Plan Securities.
To determine what form you use, you will need to know how your Plan Securities are owned. A list of the ownership types and applicable forms is set forth in the table below. If you have any questions about how your Plan Securities are owned, you should contact Magna Servicing.
Beneficiary Designation Form
Individual Separate Property Form
Tenants in Common or Husband and Wife Community Property
Individual (Non-Survivorship) Multi-Party Form
Joint Tenants with Right of Survivorship
Joint Tenancy with Right of Survivorship Form
To assist your beneficiaries in claiming your Plan Securities, you may want to consider providing copies of your Beneficiary Designation Registration Agreement, completed Beneficiary Designation form and FAQ’s to at least one of your beneficiaries, and/or to keep a copy of the Agreement and form with your other estate planning or business documents. It is also important that you keep your beneficiary designation information and contact information up-to-date and to notify the PHT of any changes in your personal information including marital status.
The PHT TOD Securities Beneficiary Designation is governed by the terms and provisions of the Beneficiary Designation Registration Agreement, the applicable Beneficiary Designation form, and these FAQ’s (collectively referred to as the “Registration Agreement”); and the laws of the State of Texas, excluding any choice of law provision and Texas community property laws applicable to married individuals (unless you are or were subject to such laws by reason of being a Texas resident)
Magna Servicing handles the servicing of all the Plan Securities for the PHT Trustee, and should be contacted directly if you have questions or need more information. You can contact Magna Servicing by phone at 1-800-368-5569, by email at email@example.com, or by mail at Magna Servicing, P.O. Box 23226, Waco, Texas 76702.
P.O. Box 23226
Waco, Texas 76702
DO NOT EMAIL YOUR COMPLETED FORM. The Beneficiary Designation form contains personal identifying information that should NOT be sent over the internet unless you are using a secure email service.
Option 1 – Continuing Fractional Holder
The investor will receive a Continuing Fractional Holder Certificate equal to 95% of the original position and PHT units equivalent to 5% of the original position.
To be eligible for this election, all PPDA owed on the position must have been paid by December 1, 2016 and all Catch-Up must have been paid by March 9, 2017.
Option 1 – Continuing IRA Holder (receive a New IRA Note)
The investor will receive a New IRA Note with a principal amount equal to 32% of the expected net death benefit of the position with a term of 15 years bearing interest at 3% annually; and IRA Partnership Units equivalent to 5% of the original position.
The Bankruptcy Trustee and the Creditors’ Committee discussed these options in detail in the plan disclosure documents. In addition, they summarized the options in PowerPoints used in investor meetings and posted on the Bankruptcy Trustee’s website. An example of one of these PowerPoints is available on the Plan Documents page.
Option 2 – Pool (receive IRA Partnership units)
The investor will receive IRA Partnership Units equivalent to 100% of the original position. Units will be allocated at 1 unit per $1 of expected death benefit.
Option 3 – Rescission (receive an interest in the Creditors’ Trust)
Option 4 – Continuing Fraction Holder (requires transferring the investment out of the IRA)
Upon the transfer of the position out of the IRA, the investor will become a Continuing Fractional Holder (Cash Option 1) with respect to that position.
The transfer must be completed by May 15, 2017 and the investor must request the transfer by May 5, 2017.
The Bankruptcy Trustee and the Creditors’ Committee discussed these options in detail in the plan disclosure documents. In addition, they summarized the options in PowerPoints used in investor meetings and posted on the Bankruptcy Trustee’s website. An example of one of these PowerPoints is available [here] and on the Plan Documents page.
No. The elections on the ballot were final on the Election Deadline in August 2016.
Magna Servicing, LLC
P.O. Box 23226
Waco, TX 76702
Please note that the PHT Trustee will only correct elections; he will not allow investors to change their elections. If LPI or Epiq made a mistake so that an investor’s election was not properly counted, then the Trustee will agree to correct the election. Usually this means that (i) the investor did not receive a ballot when he or she should have received a ballot, (ii) Epiq did not count a ballot that it received or (iii) Epiq miscounted a ballot. The PHT Trustee will not agree to “correct” an election based on the investor’s desire to change his or her election for whatever reason or the investor’s claim the he or she made a mistake on his or her ballot.
Why? The Court approved both the materials used to solicit votes from investors (including the election of options) and the results of the election. Accordingly, the Court found that the investors had sufficient information and received a sufficient explanation to understand their votes in favor of or against the Plan as well as the election of options under the Plan. The PHT Trustee will not and cannot second guess the Court’s rulings. In addition, time has passed and the PHT has taken actions based on the election. The election is complete and cannot be revisited.
The Confirmation Order requires that anyone with a dispute against the PHT use the Dispute Resolution Process contained in the PHT Trust Agreement. While you should consult the PHT Trust Agreement for the details, the Dispute Resolution Process can be summarized as follows:
- The investor must give written notice of the dispute to the Trustee describing the basis for the dispute and providing copies of any documents or other evidence supporting the investor’s position.
- The Trustee will contact the investor to discuss the dispute and to attempt to resolve it. At that time, he will provide a copy of the Dispute Resolution Process to the investor.
- If the investor and the Trustee are unable to agree within 45 days after the Trustee provides a copy of the Dispute Resolution Process to the investor, the investor can request that the dispute be submitted to a non-binding mediation conducted by an independent mediator or the Trust Board.
- If the investor and the Trustee are unable to settle the dispute at mediation, then the investor may ask the Bankruptcy Court to resolve the dispute.
- The investor must bear his or her own costs in pursuing the dispute including attorney’s fees and the investor’s share of any mediation fees.
- The Dispute Resolution Process is § 4.6 on page 13 of the PHT Trust Agreement. A copy of the PHT Trust Agreement is on the Plan Documents page.
Magna Servicing, LLC
P.O. Box 23226
Waco, TX 76702
Please clearly state that you are providing written notice of a dispute so that Magna can forward your letter to the PHT Trustee.
The PHT, on the other hand, can only bill holders for policy premiums once a year. At that time, the PHT collects money from the holders to pay premiums for the following year. Although it is required to collect premiums annually, the PHT does not pay premiums to the insurance company just once a year. For most policies, the PHT pays premiums to the insurance company every three months. This is the standard practice in the life settlement industry, allowing more control over the payment of premiums and limiting the loss of value that occurs when an insured dies. If an insured dies right after a premium is paid, the insurance company keeps the premium. Paying premiums quarterly reduces these losses to no more than three months’ worth of premiums.
Because the PHT is required to hold and use money paid by holders over the course of several months, not all of the money that is shown in a holder’s escrow can be used to pay future premiums. For example, in December 2017, the PHT will bill annual premiums for policies with a May payment anniversary. This bill is for premiums to be paid in May 2018, August 2018, November 2018, and January 2019. All or some portion of the money in a holder’s escrow account on December 2017 when the bill was sent is needed to pay the January 2018 premium payment and, thus, is not available to pay the December 2017 bill. The escrow balance an investor sees at any given time represents both (i) funds needed to pay premiums but not yet sent to the insurance company, and (ii) unencumbered funds that can be applied to the bill. The timeline linked herein may be helpful
Billing and Premiums
The PHT Trustee’s current plan is to divide the policies into twelve roughly equal groups and to bill a different group each month. In this manner, the premium payments required of Continuing Holders will be more evenly spread throughout the year easing the cash flow burden on the Holders and the administrative cost to the PHT.
As with the premium calls invoiced in December, the PHT will allow investors to use available escrow balances to pay future premiums.
Please understand that the premiums shown on the Policy Detail Summary Reports are merely estimates that can change at any time. In addition, the actual amount paid to the insurer (and billed to you) may be different than what was estimated.
The portfolio consists of a number of different types of policies, including universal life, group life and annual renewable term life. The reliability of premium estimates vary among the types of policies with estimates for universal life being the most reliable and those for annual renewable term being the least reliable. Most of the viatical policies are group or annual renewable term. Most of the life settlement policies are universal life.
Premium estimates for universal life policies will change over time (or actual premiums can vary from estimates) based on re-optimizations that take into account the availability of cash value in the policies and the insured’s life expectancy. In addition, the PHT may also take advantage of policy features such as no-lapse guarantees, which while beneficial in the long run may require more premiums in the short run. Also, insurance companies have been increasing the cost of insurance rates for a number of policies. Although, special interest groups are fighting these cost increases, we are still required to pay the increased cost of insurance.
Group policy premiums are largely unpredictable because they are based on unpredictable circumstances including, that employers frequently change insurers, which results in changing premium obligations; the premium obligations and coverage may increase or decrease due to the insureds age and salary; and, the policy may be converted from a group policy to an individual policy which will increase the premium cost.
Annual Renewable Term
Annual renewable term premiums are paid every year on the basis of a one-year contract, which means that the premiums will rise over time as the insured person ages. Premiums on these types of policies are subject to large changes and are unpredictable.
The PHT is continuing to optimize premiums to take into account new information about the insureds and the cost of insurance. When the PHT changes the estimated premium stream for a policy, the Policy Detail Summary Report will automatically update. Thus, you should periodically check the Reports for your positions.
Best practices in the industry, which the PHT has adopted, call for optimized premiums to be reviewed when an annual statement is obtained or to be re-optimized when a grace notice is received. In this manner, all policies are regularly reviewed and premiums paid at an appropriate level. Please understand, however, that premium optimization does not mean that premium payments will be always be reduced. In some cases, premium payments will go up.
Sale of Positions
All transfers are subject to the Plan’s restrictions. There are, however, certain transfers that can be made relatively easily and without providing an opinion of counsel. For example, the Plan generally allows transfers where the investor retains ownership or control over the investment, such as distributions from IRAs, rollovers to different IRAs or contribution of the investment to a family trust or family partnership. In addition, the Plan securities can be transferred in cases of the death or divorce of the investor. To make estate planning easier, the PHT has published beneficiary designation forms that will enable an investor to designate the person or persons to receive his or her securities upon death. You can find copies of these forms on the Resources page.
Neither the Trustee nor Magna can value any of the Plan securities, including the New IRA Notes or the IRA Partnership interests for you. You should consult with a tax or investment professional to determine how you should value your interests. We can, however, direct you to some information that may be helpful.
First, as part of the Plan, the Court valued each investor’s claim at the amount shown for that May 2015. Investors traded their claims for the IRA Partnership units and the New IRA Notes. You can find a copy of Schedule F on the Plan Documents page.
Second, the PHT and IRA Partnership recently completed their registration as public companies. Our registration statement (called a Form 10) contains financial statements that provide a current value for the PHT’s assets as well as the total number of units in the PHT. Because an IRA Partnership unit is roughly equivalent to a PHT unit, you can calculate the value of an IRA Partnership unit using this information (Net Assets/Total # of Units).
Third, the 2016 K-1 that was recently issued to you for the IRA Partnership shows the book value of your interest in the IRA Partnership as of December 9, 2016 and December 31, 2016.
On the Forms page, we have included links to vendors who are available to assist you in valuing your interests. We are not recommending any of these vendors but have merely made their information available to you as a courtesy.
On the Forms page, we have included links to IRA custodians who will accept the New IRA Notes and IRA Partnership units. We are not recommending any of these custodians but have merely made their information available to you as a courtesy.
Moreover, a Continuing Fractional Interest is an investment in life insurance. The PHT has taken the position that the Internal Revenue Code and tax regulations do not permit IRA funds to be invested in life insurance. In that regard, the PHT Trustee notes that the IRS posted a FAQ on its website confirming that IRAs may not invest in life insurance. A copy is available here.
Accordingly, the PHT Trustee, as the registrar of these securities, will not recognize any attempt to contribute a Continuing Fractional interest to an IRA.
Because of the delay in completing and auditing our financial statements due to the court-ordered reconciliation process, the PHT was unable to complete its 2016 tax returns by April 15. Accordingly, we filed for an extension until September 15. We hope to have the 2017 tax returns completed in time for next tax season.
We cannot provide you with tax, financial, or legal advice. For a more detailed discussion of the Plan’s tax consequences, you should refer to Article XXVI of the Disclosure Statement, dated June 22, 2016, which is available on the Plan Documents page. We encourage you to review the tax documents you received and the Disclosure Statement with your tax advisor.
The percentage interest in the IRA Partnership shown in Section J is calculated by dividing the total number of units that the investor (or its IRA) owns in the Partnership by the total number of outstanding Partnership Units.
The amount of capital shown in Section L is the value of the investor’s share (based on the percentage interest shown in Section J) of the assets that the Partnership contributed to the Position Holder Trust. The change reflects the gain or loss in value from December 9, 2016 to December 31, 2016. Section L does NOT reflect the investor’s tax basis or the amount that the investor invested in LPI.
Investors whose IRA Partnership units are held in their IRAs should send a copy of the K-1 to their IRA Custodians. We are preparing a data feed for all of the Custodians as well.
If you re-valued your position and took a distribution from your IRA, the PHT has no records indicating your basis on that distribution from your IRA. If you took a tax loss or otherwise depreciated the position(s), the PHT has no information as to those adjustments either. In short, your current basis is unique to you, your personal facts and circumstances, and your prior tax positions. You (and your advisors) should review your financial and tax records to determine your current basis.
You can also look at Schedule F filed in the bankruptcy for an estimate of the costs incurred on each position as of LPI’s petition date. In Schedule F, the Bankruptcy Trustee attempted to calculate the amount paid (purchase price plus premiums) on each position as of May 19, 2015, the date that LPI filed for bankruptcy. You should, however, pay particular attention to the introductory notes to Schedule F which indicate that the Bankruptcy Trustee estimated many of the amounts shown on the Schedule. You can obtain a copy of Schedule F on Epiq’s website for the LPI case (http://dm.epiq11.com/#/case/lifepartners/info)
We will distribute maturities to Continuing Fractional Holders (CFH) beginning on the second Monday of the month following the date that the PHT receives payment from the insurance company. Accordingly, the PHT began distributing insurance proceeds received in August during the week of September 11, 2017. On average, we are collecting on claims within 58 days of learning of the maturity.
The PHT can make distributions to the PHT unit holders and to the IRA Partnership (for distribution to its members) only if two conditions are met: (1) the PHT has paid oﬀ the $55 million Exit Facility; and (2) there is excess cash available after the PHT Trustee has paid the trust’s expenses and reserved suﬃcient funds to pay the premiums owed by the PHT on its interests in policies, to pay the premiums owed by defaulting Continuing Fractional Holders, to fund its ongoing operations and to pay for any unanticipated contingencies.
At this point, the PHT Trustee does not know whether the PHT will have suﬃcient funds available to make a distribution in 2017.
The New IRA Notes have a 15-year term. This means that the principal balance of the note will be due in full by December 2031. The PHT can pay some or all of the principal sooner, however. It is too soon to determine whether the PHT can or even should do so. In the meantime, the PHT will pay annual interest of 3% on the outstanding principal in December of each year. Thus, noteholders should expect an interest payment in December 2017 and each following December during the term of the note.
Face – the face amount of the policy actually paid by the insurer less the 5% contribution to the PHT.
Add’l Face – the death benefit of some policies is made up of the face amount plus a supplemental amount (usually a policy rider). This supplemental amount is shown as “Add’l Face” on the checks.
Face plus Add’l Face equals the death benefit paid by the insurer less the 5% contribution to the PHT.
Interest – this is interest paid by the insurance company on the death benefit.
PremRfnd – these are premiums paid to the insurer that the insurer refunded usually because the premiums were received after the date the insured died.
Escrow – this is the amount of escrow remaining on deposit with the PHT for the policy. A negative amount indicates money that the continuing holder owes the PHT.
Service Fee – this is the 2.65% fee paid to Magna.
Please note that an item will appear on the check stub only if there is an entry for that item. For example, if the insurer did not refund premiums, then the “PremRfnd” line will not appear on the check stub.
In general, the statements divide each investor’s holdings into two sections: IRA Holdings and Individual Holdings.
IRA Holdings – this section includes holdings of IRA Partnership units and New IRA Notes. It identifies the IRA custodian and the IRA account number for each IRA held by the investor. If the investor holds an IRA Partnership Unit or a New IRA Note outside of his or her IRA, those investments will be listed as IRA Holdings but the IRA custodian will be identified as “distributed from IRA.”
New IRA Notes – these notes were issued in exchange for the old IRA notes to investors who elected IRA Option 1. The principal amount of the note equals 32% of the face value (or expected death benefit) of the old IRA note. The note bears interest at an annual rate of 3%. The interest shown on the statement is the interest that accrued from December 9, 2016 through August 15, 2017. The PHT will pay interest annually in December.
IRA Partnership units – these units were issued to investors who contributed their old IRA notes to the IRA Partnership. Investors who elected IRA Option 2 received 1 unit for every $1 of the face value (or expected death benefit) of their old IRA note. In addition, investors who elected IRA Option 1 also received IRA Partnership units as the Plan required that 5% of their positions be contributed to the IRA Part-nership at a rate of 1 unit for $1 in face value.
Individual Holdings – this section includes holdings of Position Holder Trust units and Continuing Fractional Holders interests.
Continuing Fractional Holder interests – these interests were issued to cash investors who elected Cash Option 1 and to IRA holders who elected IRA Option 4. The face amount of the interests represents 95% of the face amount of the investor’s original interests as the Plan requires that CFH holders contribute 5% to the PHT.
The escrow balance shown is the amount that is held in escrow for each position. Please note that the entirety of the escrow balance may not be available to apply to future premium calls as a portion of the balance is needed to pay current premiums.
PHT units – these units were issued to investors who contributed their positions to the PHT. Investors who elected Cash Option 2 received 1 unit for every $1 of the face value (or expected death benefit) of their original position. In addition, investors who elected Cash Option 1 or IRA Option 4 also received PHT units as the Plan required that 5% of their positions be contributed to PHT at a rate of 1 unit for $1 in face value.
In addition to showing the investor’s holdings, the statement also shows the amount of Catch-Up payments that are owed on each position. Note that certain Continuing Fractional Holder positions owe Catch-Up because the PHT applied a “de minimus” standard when deeming positions to have been contributed to the PHT for the failure to pay Catch-Up. In other words, the PHT did not contribute positions in which only a small amount (e.g., $1) was owed as Catch-Up.