Call To See How I Can Help You 781-433-8665

Blog

Betting on Death — Part Two

Posted by Sasha Golden | Feb 18, 2013 | 0 Comments

My last post discussed one form of betting on your death – “stranger oriented life insurance” (“STOLI”) –a practice which is illegal in Massachusetts. However, another variation of betting on your death – life settlements – is trending towards legitimacy. Unlike STOLI, which involves third party solicitation of a person to purchase then “flip” a life insurance policy, the life settlement industry focuses on persuading people who already own life insurance policies to sell their policies. Though heavily regulated, life settlements are legal in most states, including Massachusetts.

In a life settlement, a life insurance policy holder can sell rights to the payout of his insurance policy in exchange for a lump sum. Since the buyer also agrees to take on the cost of premiums upon a sale, how much a buyer is willing to pay for the policy depends in part on the cold reality of how soon the buyer thinks the seller is likely to die. In order to value a life insurance policy, prospective buyer companies do actuarial research and request medical examinations of policyholders to try to determine whether the policy holder's life expectancy will likely to be short enough to make the deal worth it. Owners of life insurance policies may be able to “shop” the policy among potential buyers various and entertain multiple offers from interested investors.

Proponents of life settlements argue that allowing people to sell their life insurance policies gives them another opportunity to lead financially comfortable and self-sufficient lives. This opportunity is especially powerful since prospective sellers of life settlements are often elderly or infirm individuals who see the sale of their policy as one of the only means available to them of generating significant funds in a short amount of time. Critics of the industry counter that a life settlement reduces the value of the assets that would otherwise be passed onto loved ones after the insured's death – funds which may be needed by the survivor. Further, life settlements subvert the traditional model of the insurance industry. While traditional insurers benefit from having their policy holders living and paying their premiums as long as possible, companies buying policies perversely benefit from an earlier death of the original policy holder. There can also be significant tax consequences for the insured which must be carefully considered.

Ultimately, the decision to sell a life insurance policy to a third party is a highly personal decision and one that may be replete with significant legal and tax consequences. Speak with a trusted elder law attorney, accountant or financial adviser before moving forward with such a sale.

About the Author

Sasha Golden

Alexandra “Sasha” Golden received her undergraduate and law degrees from Boston College, and has been practicing law in Massachusetts since 1994. Attorney Golden is a long-standing member of the Massachusetts chapter of the National Academy of Elder Law Attorneys (NAELA) and of the Probate and So...

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Contact Golden Law Center Today

Golden Law Center is committed to answering your questions about elder law and estate planning issues in Massachusettes.

I'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment.

Golden Law Center
(781) 465-6078 (fax)
Mon: 09:00am - 05:00pm
Tue: 09:00am - 05:00pm
Wed: 09:00am - 05:00pm
Thu: 09:00am - 05:00pm
Fri: 09:00am - 02:00pm

Disclaimer: The materials appearing on this website are provided for informational use only and are in no way intended to constitute legal advice or the opinions of this law firm or any of its attorneys. You should never hire an attorney without first meeting with the lawyer, reviewing her qualifications, and carefully reading the fee agreement. The use of the material on this website does not create an attorney-client relationship, and you should not rely upon the information provided here without seeking the advice of an attorney. We also cannot guarantee that the materials appearing on this website are not guaranteed to be correct, complete, or up-to-date since the law is always changing.

This website must be labeled “advertising” according to the rules of professional responsibility established by the Massachusetts Supreme Judicial Court. This website may not meet the applicable laws or ethical rules in other states. Golden Law Center does not wish to represent persons living in those states who seek our representation as a result of viewing this website.

Links that may appear on this site are intended to provide additional sources of information and are not to be construed as being endorsements by the Golden Law Center or indications of affiliation. We do not imply that we are legally authorized to use any trade name, registered trademark, symbol, logo, or seal that may be reflected in any of these links.

Menu