General

The Trustee looks forward to hearing your questions and concerns. You can contact the Trustee at trustee@lpi-pht.com or at 214-698-7893. You may also contact customer service at Magna Servicing.

Please click here to be redirected to the Creditors Trust’s website.

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 custsrv@magnaservicing.com. Copies of the forms are located on the “Resources” page. 

Beneficiary Designations

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”).

The designation of a TOD beneficiary has no effect on the ownership of the Plan Securities until the investor’s death. The investor maintains complete control of the Plan Securities during his or her lifetime, and a named TOD beneficiary does not have the right to share in any distributions from the Plan Securities while the investor is living.

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.

You must designate at least one individual beneficiary, and can designate up to a total of five individual beneficiaries. If you want to name a trust as beneficiary instead of individuals, only one trust can be named.

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.

The PHT Trustee cannot advise you on whether a TOD Beneficiary Designation is or is not appropriate for you. If you have any questions regarding the Beneficiary Designation, Registration Agreement, applicable Beneficiary Designation form or these FAQ’s (collectively referred to as the “Registration Agreement”), you should seek the advice of your attorney or estate planning advisor before designating a TOD beneficiary.

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.

A transfer to your heirs through a TOD Beneficiary Designation does not require an opinion of counsel. Any other applicable transfer restrictions under the Plan must still be satisfied. There are, however, very few (if any) circumstances in which a transfer through a TOD Beneficiary Designation would not be allowed. Leaving your Plan Securities to your relatives is allowed by the Plan.

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.

Ownership Type

 

Beneficiary Designation Form

Separate Property

 

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

If an individual investor with separate property ownership has a valid TOD Beneficiary Designation at their death, then their Plan Securities will be transferred after the investor’s death and the ownership will pass outside of probate. If an individual investor holds the Plan Securities in a non-survivorship multi-party account (tenants in common or husband and wife community property), then the investor’s proportional share will be transferred after the investor’s death outside of probate, but the remaining share(s) will remain in the name of the surviving co-owner(s) (for example, two co-owners each have a one-half (1/2) share). For joint tenancy with right of survivorship accounts, at the death of the last to die of the joint tenants, the ownership of the Plan Securities will pass outside of probate. No matter what type of ownership you have, if all of your designated beneficiaries have died before you, or a trust is named that is no longer valid or in existence, your share of the Plan Securities would become part of your estate.
Yes, you may designate a beneficiary for the Plan Securities if you are married and hold the Plan Securities in your individual name as separate property or if you and your spouse hold the account in joint tenancy with right of survivorship. If you are married and hold the Plan Securities with your spouse in a non-survivorship multi-party account (tenants in common or husband and wife community property) you may designate a beneficiary for your proportional share in the Plan Securities, and your spouse may designate a beneficiary for their share as well (for example, two co-owners each have a one-half (1/2) share). If, however, you and your wife are subject to community property laws there are additional requirements that need to be met and those are discussed in more detail in FAQs below.
If you have lived in, currently live in or if you move to a community property state before your death (including Alaska, Arizona, California, Idaho, Louisiana, Michigan, Nevada, New Mexico, Texas, Washington and Wisconsin), and are married, then you would likely be subject to community property laws. If you have any questions about whether you are subject to community property laws, you should seek the advice of your attorney or estate planning advisor.
If you are subject to community property laws and hold your Plan Securities as your separate property, you must designate your spouse as the sole joint owner of your Plan Securities with a right of survivorship with you OR the sole designated beneficiary OR your spouse must execute the Spousal Waiver form attached to the Beneficiary Designation Individual form and it must remain in effect until your death. If you are subject to community property laws and hold your Plan Securities in joint tenancy with right of survivorship with your spouse, you and your spouse can designate a beneficiary or beneficiaries to receive your Securities at the death of the last spouse to die, but you must both execute a Spousal Acknowledgement and Community Property Survivorship Agreement attached to the Beneficiary Designation Joint Tenancy with Right of Survivorship form and it must remain in effect until your death. If you do not meet these requirements, the TOD feature for your Plan Securities will be considered void.
Any spousal consent may be revoked by the investor’s spouse by signing and delivering to PHT a Revocation of Spousal Consent form provided by PHT prior to the death of the investor. Any Spousal Community Property Survivorship Agreement can be revoked in a writing signed by both spouses or by a written agreement signed by one spouse and delivered to the other spouse and the PHT trustee. A Spousal Consent and a Spousal Community Property Agreement are also revoked upon the filing of a petition for divorce by either spouse. If either the Spousal Waiver or Survivorship Agreement are revoked, the TOD feature for your Plan Securities will be considered void.
If your spouse is designated as a TOD beneficiary for the Plan Securities held in your sole ownership, and then the sole investor and spouse get divorced, the beneficiary designation provision for the ex-spouse is considered revoked and the investor’s ex-spouse will be treated as if he or she predeceased the investor. This revocation can be changed if the sole investor re-names the ex-spouse as beneficiary after the divorce, or if the ex-spouse can provide documentation, like a divorce decree, that indicates the ex-spouse should still be named as beneficiary
If a beneficiary is a minor or otherwise under a legal disability at the time of your death or the death of the last to die of joint owners, PHT will require that the transfer be taken in the form of an existing custodial account established for such beneficiary under a Uniform Transfer to Minors Act or similar act, or to a guardian, conservator, or other legal representative appointed for such beneficiary. If there is no existing custodial account of such beneficiary, nor a court-appointed custodian or guardian, then the beneficiary designation will be considered void.
The beneficiaries designated for the Plan Securities will need to contact Magna Servicing and provide proof of your death by submitting a copy of your death certificate. If there are multiple beneficiaries, one or more of whom are also deceased, then the other beneficiaries claiming the deceased beneficiary’s share will have to provide proof of the deceased beneficiary’s death as well. Each beneficiary will also have to provide any other documentation that may be required by PHT to re-register the Plan Securities, including a completed IRS Form W-9 and photo identification. If any beneficiary fails to claim their share of the Plan Securities and submit all of the required documentation within one year of the investor’s date of death, that beneficiary’s designation will be considered void and their share distributed to the claiming beneficiaries in equal shares. If there are no other claiming beneficiaries, then the Plan Securities will become part of your estate and be subject to any probate or estate laws that may be applicable in your state of residence.

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.

If there are other living beneficiaries, they will get the deceased beneficiary’s share, in equal shares. If there are no other living beneficiaries at the date of death of the investor, then the Plan Securities will become part of your estate and be subject to any probate or estate laws that may be applicable in your state of residence. If there are multiple joint tenancy with right of survivorship investors, and there are no living beneficiaries, then the Plan Securities will become part of the estate of the last surviving joint tenant. If a designated beneficiary does not live for at least one-hundred-twenty hours (120) hours or five (5) days after your death, then PHT will treat that beneficiary as if they predeceased you.
Any contingent owner or beneficiary designations contained in Life Partners’ account documents are no longer effective. Under LPI’s plan of reorganization, all claims by investors were exchanged for securities issued by PHT (i.e., the Continual Fractional Interests, Position Holder Trust Interests, the New IRA Notes and IRA Partnership Interests). Nothing related to the old agreements between LPI and its investors survived, including any beneficiary or contingent owner designations.

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 custsrv@magnaservicing.com, or by mail at Magna Servicing, P.O. Box 23226, Waco, Texas 76702.

Your completed, executed and notarized Beneficiary Designation form and Spousal Waiver or Spousal Acknowledgement and Community Property Survivorship Agreement, if applicable, can be faxed to Magna Servicing at 254-751-1025, or mailed to Magna Servicing at the below address:

Magna Servicing
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.

Elections

Cash

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.

IRA

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.

You will need to file an Election Dispute with the Trustee. After your dispute is filed, the Trustee or his counsel will contact you in order to resolve your issue.
To file a dispute, please send a letter to the Trustee explaining your issue and enclosing any documents that support your position. Disputes should be sent to the Trustee at the following address:

Magna Servicing, LLC
P.O. Box 23226
Waco, TX 76702

The PHT Trustee will consider whatever information you provide to him as well as the information provided by Epiq and the information contained in LPI’s records.

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.

Dispute Process

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.
To file a dispute, please send a letter to the PHT Trustee explaining your issue and enclosing any documents that support your position. Disputes should be sent to the Trustee at the following address:

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.

Escrow Balances

Because the Plan requires a different method of billing than LPI used previously, the PHT must handle escrow balances differently than LPI had in the past. In the past, LPI had billed for premium payments as they were made. When a payment needed to be made, the LPI determined whether a position holder had sufficient money in escrow to pay its share of the payment. If so, LPI would use the escrowed money to pay the position holder’s share of the premium and reduce the escrow balance. If there was not enough money on escrow, LPI would bill the holder for its share of the premiums.

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

Yes. The PHT will refund payments made where the escrow balance was sufficient to pay the entire invoice. We will not make partial refunds (i.e., there was escrow money to cover only part of the amount due)

Billing and Premiums

On April 6, 2017, the Court modified the Plan of Reorganization to change the schedule for billing premium calls. The PHT Trustee is no longer limited to billing only in June or December. Instead, he has the flexibility to design a billing schedule that meets the needs of the PHT and the investors. However, he still must bill each policy only once per year.

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.

Continuing Fractional Holders can download Policy Detail Summary Reports on each policy in which they hold an interest. These reports show the quarterly premium payments that the PHT anticipates will be paid on the policy for the next ten years. Multiplying your percentage interest in the policy by the anticipated premium payments will provide an estimate of the future premium costs.
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 premiums billed are based on the most recent optimizations or the most recent cost of insurance required by the insurance company to keep the policies in force. As a result, they may differ from earlier estimates.
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.
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 Policies
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.

It is and that process is ongoing as outlined in the Plan.

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.

No. If a policy has sufficient cash value to cover cost of insurance for the policy year, premium invoices will not be sent.

Sale of Positions

The Plan and its supporting documents – the Position Holder Trust Agreement, the IRA Holders Partnership Company Agreement, and the New IRA Note documents – provide very strict limits on the resale of the securities created by the Plan. These restrictions are required by federal securities and tax laws. In short, the investments held by the investors are securities and can transferred only in accordance with federal and state securities laws – just like the original LPI investments that the Texas Supreme Court held to be securities. In addition, the PHT’s and IRA Holders Partnership’s exemption from the requirements of the federal Investment Company Act depend in part on maintaining and enforcing strict limits on the transfer of securities. Similarly, the PHT’s tax status depends upon maintaining and enforcing these limits. As set forth in the Plan and its supporting documents, sales of interests will require an opinion of counsel from the buyer or seller that is acceptable to the PHT Trustee. Because of these requirements, you should consult with your attorney before you attempt to sell your investment and have your attorney contact the PHT Trustee before you attempt to sell your investment.
No. The Plan forbids the PHT from supporting any sort of trading activity.

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.

IRAS

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.

The units are not priced. Typically, the price of a security is set by trading in the market. The IRA Partnership units do not trade and, thus, have no price.
Yes. A rollover from an IRA to another IRA in your name at another custodian is allowed by the Plan. The IRA custodians will provide you with the necessary documents for the rollover. You should be aware, however, that not all custodians will accept the New IRA Notes or the IRA Partnership units because they do not trade on an exchange.
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.
No. The Plan does not allow Continuing Fractional Interests to be held in IRAs. Section 3.07(d)(iii)(4) of the Plan provides that an Option 4 election is an election to “Distribute the IRA Note to the individual tax payer who owns the IRA and exchange it for a Fractional Interest registered in the name of the individual taxpayer, with respect to which the individual will be deemed to have made a Continuing Holder Election.”

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.

Taxes

The Position Holder Trust issued grantor trust statements. These statements show the investor’s share of the Trust’s income and deductible expenses. Most of the statements will simply state “No taxable income” as the Trust had no taxable income and the investor’s share of the Trust’s deductible expenses was less than $1. Investors with larger shares in the Trust will receive statements identifying deductible expenses.
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 IRA Partnership issued K-1s to its members. The K-1 shows the investor’s share of the Partnership’s income and deductible expenses. There are two areas of the K-1 that require some explanation.
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.
Per the Plan, the distributions that you received in 2016 are bankruptcy distributions. Accordingly, you received a 1099-MISC, in lieu of the 1099-R that you might have otherwise received. The 1099-MISC reports the payment amount remitted to you; it does not report your “taxable income.” Your bankruptcy claim associated with this distribution arose out of your matured positions. Your basis associated with the corresponding matured position(s) may be applied to reduce your taxable income. You should speak to your tax advisor about your distribution, your basis in that distribution, the 1099-MISC, and your associated tax obligations
Though the general rule is that life insurance proceeds paid to a beneficiary due to the death of the insured are not includable in gross income; that is not the case for life settlements. See Rev. Rul. 2009-14. If you purchased your interest in the policy (i.e., paid cash or other valuable consideration), then the proceeds’ exclusion from gross income is limited to the sum of: (i) the consideration you paid, (ii) additional premiums you paid, and (iii) certain other amounts. There are some exceptions to this rule. Generally, you report the taxable amount based on the type of income document you receive, such as a Form 1099-INT, a Form 1099-R or a 1099-MISC. For additional information, See IRS Publication 525, Taxable and Nontaxable Income. Moreover, any interest you receive is taxable and you should report it as interest received. See Topic 403 for more information about interest.
Unfortunately, the PHT is not in a position to advise you regarding your basis. In addition to the amount that you paid to Life Partners to acquire your position and fulfill your premium obligations; you may have capitalized additional allowable expenses such as attorney’s fees, advisor fees, and ancillary investment expenses. Moreover, the exchange of your bankruptcy claims for the securities issued under the Plan in December 2016 was a taxable event on which you may have had a tax gain or loss. Those who elected IRA Option 4 and distributed positions in order to convert then to Continuing Fractional Holder Certificates may have revalued the positions in order to minimize the tax consequences of the distribution. All of these facts affect the basis in your positions and your ultimate taxable gain when the position matures.

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 have posted copies of the Plan, the Disclosure Statement, the Confirmation Order and other documents related to the Plan. If you need additional plan documents, please contact the Trustee

Distributions

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.

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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.

The stub that is located below the check contains a series of items whose total is the amount of the check. The items are:

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.

Statements

Temporary passwords are case sensitive. If you “copy and paste” the password from the pdf of the statement, be sure that you did not accidentally copy a space in front of the password.
We have account changes that have not been completed. We have been on hold for many requested Account Changes and therefore, they are not reflected on the statement.

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.

The accrued interest is reported as of the date on your statement and is calculated at a rate of 3% of the principal balance annually.
Your custodian has received a report detailing the information pertaining to your IRA Account.
You will need to contact your IRA custodian. Your custodian will send the RMD information to Magna Servicing when it makes the distribution.

Cash Accounts

The projected payout calculation is: Face Amount multiplied by Percent Owned (%). The Face Amount may be lower than expected because of the 5% contribution to the PHT.
Per the Plan of Reorganization, 5% has been contributed to the Position Holder Trust in exchange for PHT units.
Premium payments to the insurance carrier were paid and it is possible that you were not billed or you were under billed for the annual amount due.
It will be reflected on the next annual invoice to be billed for that specific policy.