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VIATICAL SETTLEMENTS: THE OVERLOOKED BENEFIT By: Stephen M. Watson, Esq. Did you know that there is a huge source of funding that is often overlooked by attorneys, financial planners, and CPA's? That's right, there is a source of funding so new that many professionals are not aware of its existence. And yet, the large companies bringing this new source of funding are quickly turning the business into a multi-billion dollar industry. What is this source funding? It's your life insurance policy. Large, multi-billion dollar corporations are getting involved in what have come to be known as "Viatical Settlements." What are Viatical Settlements? Essentially, it is the buying and selling of life insurance policies. Studies have found that there are many instances in which individuals and corporations have large life insurance policies that they simply do not want or need anymore. Here is a small sampling of policies that fall into these categories: 1. Policies on which the beneficiary has predeceased the policy owner (example: husband's policy where the wife beneficiary has predeceased him). 2. Business "Key-Man" policies where the insured executive has retired. 3. Business policies (such as "Key-Man" policies and Buy/Sell Agreement policies) where the business has dissolved, merged with another company, or entered into bankruptcy proceedings. 4. Policies mired in divorce proceedings. 5. Policies on which the premiums have become too expensive. In the past, the policyholders in each of these situations simply canceled the policies and took the cash surrender value, to the extent there was any. But now, policies in these situations can very likely be sold for more than their cash value, and even better, the company that buys the policy takes over the liability of making the policy premium payments. And there are no restrictions on how the policy sellers in these situations use their newfound funds. They can use them for estate planning purposes (such as meeting gift giving objectives or other estate reducing objectives), or they take a dream vacation. The use is limited only by the individual's imagination. If the insured is terminally or chronically ill, the proceeds would be received free of federal taxation. For those who are not terminally or chronically ill, the proceeds would be entitled to the generally lower capital gains rate. What's the catch? There is no real catch, but the companies buying these policies are looking for insureds with life expectancies of generally fifteen years or less. That means that it will be unlikely for a healthy thirty year old to sell a policy. But for others, it does open the possibilities considerably. Most retirees would qualify for consideration, and those with health complications such as Cancer, heart or lung conditions, Alzheimer's, Parkinson's, etc., would be possible applicants. There is no cost to request a no obligation quote for a policy (or portion of a policy), and the process is quick and confidential. Policyholders are often surprised by how much they can receive. Viatical Settlements are very versatile. Any kind of life insurance policy can be sold: term, whole life, universal, employer provided and split-dollar policies, to name a few. Stephen M. Watson, President of Viatical Settlement Professionals, Inc., is an attorney and licensed Viatical Settlement Broker. He is a graduate of The University of Virginia, and Washington & Lee University School of Law. |
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