Viaticals

[Aviator]

I have a client who, back in 1996 began investing in a Viatical Insurance program. Over time this viatical investment program began running into financial difficulties. The client, as well as others in the program wound up paying the insurance premiums to cover the cost of the insurance policies purchased by the program. Finally, the company that was running the program went into bankruptcy and the remaining assets sold at auction. Ultimately, a class action law suit was filed and the "investors" received a settlement that, in my client's case was a mere pittance of his total investment of approximately $20,000. He is currently looking at his back records to see if there was any agreement signed that "guaranteed" a return on his investment. His interest quite naturally is whether he has any remedy through the IRS for the loss. So far, what I have been able to determine in research is that these viaticals were often fraught with financial dangers an example of which included the payment of insurance premiums to keep the investment "alive" as evidenced by what happened to this client. Has anyone on this board had any experience with these issues?

Would welcome comments, please.

Aviator

[JohnH]

Nothing specific

Just a comment about advice I passed along to some clients who were looking into investing in the Viatical Settlement industry a few years ago, especially when the settlements being offered were paltry. In a general sense, deliberately tying an investment to someone else's bad fortune is not the best way to earn a profit. And trusting one's money to people who think that's a good idea is also hghly risky. Seems like your client found out the hard way.

Maybe someone else will offer on-point advice, but off the top of my head it seems to be the investment became a long-term capital loss once the settlement was received.

[DaveO]

I have a couple of clients

That lost their shirts with a group called Lifetime Capital. Pretty much the same story as what you describe. One got about $.20 on the dollar back and the other got nothing. These were both in IRA accounts so we could make no use of the loss. If your clients had their investment in a taxable account I can't see why they couldn't claim the loss of the initial investment plus the payments to keep the policies in force.

[joanmcq]

I dont' know if it was the same group here that ran a Viatical Investment as a Ponzi scheme. Investors got some of their money back because there were actual policies that were owned by the company. The problem was that they oversold, and misrepresented how ill the people were.

[Aviator]

Viaticals

Thank you, joanmcq; DaveO; and JohnH for replying to my inquiry.

I was reasonably certain that I was not the only one who had encountered this investment program from a client because it has been around since at least the 1990's. My next step is to see what records the client can produce that will help his cause.

Aviator