Does anyone know anything apout VIATICAL or LIFE SETTLEMENT programs???

Question

One of my relatives is a 75 year old retired MD and has

been approached by a group that says if he will take out

a 10milllion dollar life insurance policy on himself that they

will loan him the money to make the first 2 premium payments

and at the end of the 2nd year sell the insurance policy for

a profit and he will make 1.5 million dollars.

this just sounds too good to be true but the company says

that another retired doctor has already purchased his policy

and he gave them my relative's name and that he was in

good health which he is.

this solicitation came in the form of a phone call following

an invitation to a meeting that promises a lot of fine wine and

heavy appetizers.

The words VIATICAL and LIFE SETTLEMENT are not

thought of favorably by the legal profession and most

secretary of states and attorney generals offices.

does anyone have experience in this area and what

advice do you have.??

Answer 1

I believe you answered your own question in the fourth paragraph. There are times when a viatical settlement is a good thing but most of those companies are borderline scam artists.

Answer 2

#1 No one can tell the future value of anything with certainty.  It might be possible that he could sell the policy for enough to cover the cost of the loan plus $1.5m, but it also might not work.  Someone looking after his best interests will give him that disclosure.

#2 He needs to assign collateral of some sort for the first two years and after he sells the policy, someone else will own a $10m policy on him, eating into the amount of other insurance he could apply for to cover legitimate purposes.

#3 Buying life insurance with the intent of selling goes against the societal reasons for having insurance.  Very few reputable insurance carriers are still doing this because of the ethical problems when the intended owner has no insurable interest on the insured.

If he wants to make a quick buck while he's alive, this might be a decent way to do it.  Something tells me that if he could be insured for an extra $10m, having an extra $1.5m of taxable income isn't a huge deal (Generally would be considered taxable unless an independent doctor certifies his death within 2 years of the time he sells the policy.  Consult a tax professional for specific advice).

If he's really interested in maximizing his estate for charitable, family, or tax purposes, there might be better ways to do this without strong ethical conflicts.  You can contact me through Y!A.

Answer 3

My advice is "do not drink the wine".  It would be best not to be drunk when making important financial decisions.

Answer 4

There's been a great deal of fraud related to viatical programs. Check with the state's attorney general in the state where your relative resides--to see whether this company is suspect. Although there are times when it is beneficial for an insurance policy owner to sell his insurance policy while still alive, the deal your relative has been offered does sound suspicious. For starters, a ten million dollar policy on a 75 year old is fiendishly expensive.The underwriting insurance company will want to know why he needs that kind of coverage, so late in life.

Any program your relative contemplates should be reviewed

by his business lawyer, or certified public accountant.

ps- there is a great deal of information about senate/congressional bills, fraud, and even suspicious deaths associated to viaticals. Just google the subject, and you will see what I mean.