VIATICAL/LIFE SETTLEMENT ISSUES

A transaction that traces its roots perhaps a 100 years of more, a “viatical" settlement is a term of art that historically referred to the sale of a life insurance policy, insuring the life of a terminally ill person, to an often unrelated third party or parties. It is a sad fact of life but, from an actuarial standpoint, a life insurance policy increases in value the closer the insured is to death. The concept of buying an interest in a life insurance policy has spread to other similar financial products such as policies issued on the life of a senior (“life or senior settlements”) and to fixed annuities (“annuity settlements”).
 
Regulation of these transactions varies significantly from state to state. In addition, the taxation aspects for both the insured and the secondary purchaser of the policy is either not understood by the parties or intentionally not disclosed by those who share in large commissions generated by the transactions. In Florida, you do not need to be represented by anyone other than an attorney in order to sell your life insurance policy or purchase an interest in one. If I am the attorney you select to assist you in the transaction, you will get better value and pay less for it. Further, I have experience in maintaining in good standing life insurance policies when the issuing insurance company seeks to lapse coverage it knows has been sold in a secondary transaction. 

One of the more disturbing trends in the market today is what is referred to as  "STranger Owned (or Originated) Life Insurance ("STOLI") transactions whereby a senior is encouraged to take out a policy that is intended to be sold after the policy becomes "incontestible." This too is a term of art and shouldn't be confused with the notion that once a policy becomes "incontestible" it is valid and enforceable according to its terms. Such a policy may in fact be effectively worthless if it was procured without an "insurable interest." On December 19, 2005 The Office of General Counsel for the State of New York Insurance Department issued an opinion that the purchase of a life insurance policy that was intended to be sold at the time it is initially procured does not possess an "insurable interest." Policies that do not contain an "insurable interest" when procured are "void" and not "voidable." If you are somehow involved in such a transaction, I suggest that you immediately seek legal assistance.   

I have developed specific strategies to deal with these situations and, inasmuch as a description of them is limited to those investors I chose as clients, no further discussion can occur here. I invite any potential client to personally call me for a free consultation to discuss their particular circumstance. their particular circumstance