James, 1997, Viatical Settlements
: Perspectives of Investors, Regulators, and Insureds, Journal of the American Society of CLU & ChFC, 51(2): 54-67.
Basics of viatical settlements
. Retrieved December 15, 2009, from http://www.apla.org/programs/benefits/viatical.html.
For examples of courts classifying viatical settlements
as investment contracts (i.e., securities), see SEC v.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established guidelines that make the proceeds from a viatical settlement
federal income tax free.
Dignity Viatical Settlement
Partners, L.P., Massachusetts, March 24, 1999.
(5) If the insured actually lives months, years, or decades longer than expected, the accelerated benefits or viatical settlement
continue to be excluded from income.
A good analogy in attempting to understand the parties to a viatical settlement
transaction is a real estate closing.
For example, American Benefits Services, a viatical settlement
company, promoted viatical investments by promising a return 42 percent greater than the amount invested, to be received on the death of the viator.
Senior Life Benefits and viatical settlements
were introduced to the membership a year ago.
raise regulatory concerns under the insurance laws.(8) The initial sale of life insurance policies by terminally ill policyholders, known as viators,(9) to viatical settlement
companies is subject to varying amounts of regulation at the state level, typically by a state's insurance department.(10) As a result of the differences in the states' regulations, the sale of otherwise identical policies in different states may lead to different financial outcomes for viators living in different states.
In the first possible event, the insured irrevocably assigns his life insurance policy to a Viatical settlement
company in consideration of a payment of an accelerated death benefit by the company (not the company that issued the policy).
In the past, viatical settlement
payments were subject to Federal income taxes.