Viatical Settlements: Life Insurance as a Liquid Asset for the Seriously III

Sutherland, William P.; Drivanos, Patricia C.
May 1999
Journal of Financial Planning;May99, Vol. 12 Issue 5, p74
Academic Journal
This article discusses the significance of viatical settlements. Even for persons with moderate to high net worth, coping with serious illness almost always diminishes assets. A viatical settlement provides a way to raise needed cash when other options are undesirable or exhausted. It also can provide a means to protect earning assets through the sale of a non-earning asset, namely, a life insurance policy. A viatical settlement is the outright sale of a life insurance policy to a third party for an agreed-upon percentage of tbe face value of the policy. Viatical settlements offer a financial option to any client facing a terminal illness who needs funds to cope with extraordinary costs. Even for clients with significant net worth, converting an asset to cash often triggers a taxable event. In many cases, a viatical settlement provides a tax-free alternative to fill that cash need, perhaps, at the same time, protecting the principal and earnings potential of a portfolio or real estate asset. As always, the viatical option must he considered in the context of a thorough review of the client's asset resources and as part of a financial strategy based on rigorous cost/benefit analysis, including tax consequences. Still, for clients at any age or life stage, knowledge of viatical options should be part of their fundamental financial perspective.


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