Viatical settlements?

wodkaAugust 19, 2008

Can anyone give me the pro's and con's of selling one's life insurance policy (viatical settlement)? We have a relative who is terminally ill with stage 4 lung cancer and has serious financial problems. She is divorced, her sons are grown, all in their late 30's. One is disabled, lives at home with her, but has a job. Her house has been refinanced several times and her mortgage note is over $1,000/month.

I'm just doing research on options on making her last days easier and less stressful and came across this option. Thank you, in advance, for your advice.

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Does she have an idea how much more life may be available to her?

I think that it would depend somewhat on what percentage of the full amount of the insurance that the purchasing agent was willing to offer.

Also, what alternatives does she have?

Could she use the insurance policy as collateral for a loan ... probably not at a bank, but possibly at a credit union, especially if she has done business there earlier.

For example, if she expects to have possibly two years yet to live, unless the potential purchaser were willing to provide within about 15% of the value of the policy (including not only face value, but including other built-up credits, as well), she would be better off to borrow from a lender, at possibly 6%, meaning that after a couple of years, the costs would be something slightly more than 12%.

If the purchaser were only willing to offer, e.g. 80% of the value, she'd be better off using the policy as collateral for a loan, if she can find a willing lender.

Would some family member, or someone who knows the situation, and has sufficient available funds, be willing to advance much/most of the value now, with the right to the benefit being turned over to him/her?

Just some ideas that may be helpful/worthy of consideration.

ole joyful

    Bookmark   August 20, 2008 at 5:30AM
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ole joyful, thanks for your response. This is what makes it so complicated. She has struggled financially for years, after her husband left her for the babysitter (no lie!) with 3 young boys to raise - at the time, they were like 9, 10 and 11 years of age. Her ex has been no support at all, especially as a father figure. We have all helped her in the past, especially my parents, who were there for her whenever she needed them. Our father passed away two years ago and my mother moved, bought a new house, now has her own mortgage and life to be accountable for. She is not able to offer support to anyone except herself right now.

My sister's middle son, who is disabled and lives at home with her, is presently making the house note, as she is on short-term disability, which will turn into long-term in October, if she lives that long. Her initial diagnosis of life expectancy was 1 - 2 years, but she has gone downhill very fast. Although disabled, he has a job, which is good, but the mortgage has been refinanced so many times, it's over $1,000/month. His thinking is that they need to refinance again, to lower the note. Her youngest son quit his job to be her caregiver; the oldest lives out of state and is in construction work, has several jobs going at a time to make ends meet. In addition, my sister filed bankruptcy several years ago, but it doesn't appear that it has helped much.

The worst thing is that she was only diagnosed about a month ago, so all of this is happening so fast. As it stands, as far as we know, she cannot even afford to be buried right now, so I've been researching direct cremation. None of this has been discussed yet with any of the family, which it really needs to be. My husband and I lost everything we owned, including our home in Katrina. We built a new home, but it took everything we had and then some to do it. We could help some, but not enough to make a difference, I'm sorry to say. It's just an awful situation, any way you look at it.

    Bookmark   August 20, 2008 at 9:07AM
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Chemocurl zn5b/6a Indiana

I'm so sorry to hear of your sister's health, along with the added concerns it has brought forth.

Does anyone have Power of Attorney over her affairs? Would talking to the Mortgage Co be an option, and maybe even letting the house go back under the circumstances? It sounds like there is probably not much, if any, equity that would be lost. Getting behind on the mortgage is only going to make matters worse in dealing with the lender.

If she were to pass, would her disabled son be able to and want to try and keep the house by himself? Might it be best to try and find him a place now that he could better afford, or even rent for a bit?

Her youngest son quit his job to be her caregiver
Has he since gone back to work, or is his life on hold until it is known if and when she might be back home and need his care?

I wish everyone well. It all seems very bleak at the moment I'm sure, and there does not seem to be any easy answers.

I guess one 'could' start to see just how much could be gotten out of selling the life insurance policy....and just go from there. If it will ease some of her stress and concerns now, it may well be worth it.


    Bookmark   August 20, 2008 at 10:12AM
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Sue, thank you for answering. No, no one has power of attorney, that I know of. That is the frustrating part, and my husband and friends keep telling me to stay out of it, that I can't fix it. But it's driving me nuts that no one is addressing these issues. Granted, it's all happened so quickly, but that is why, to me, it seems urgent that someone should be addressing these things. When she got so sick Sunday night and had to be readmitted to the hospital, where she is now, I thought, what if she had died that night? No one would know where to begin to find the essential papers, etc.

Her youngest son is still with her. He's doing the cleaning, cooking, driving her to treatment, so right now, it is his plan to stay with her until the end. He has a learning disability, so his job was pretty much minimum wage to begin with. His learning disability also rules him out as far as handling financial affairs or helping get her affairs in order. I was even asking around to see if he could be reimbursed by the government as her caregiver, but it seems doubtful.

I have to leave it in God's hands. I am a control freak, and the hardest thing for me to ask is "Thy will be done." Thank you for listening.

    Bookmark   August 20, 2008 at 11:20AM
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Chemocurl zn5b/6a Indiana

That is the frustrating part, and my husband and friends keep telling me to stay out of it, that I can't fix it.
I understand where you are coming from and your wanting to try and help. In the end, a lot of responsibility may fall on you, as there may be no one else who will be willing and able to sort through and take care of anything that needs taken care of. It sounds like friends and family feel like you should just be able to bury your head in the sand and not worry about it all.

Could you start by talking to your sister about getting POA (financial), so that you can try and help out. That alone may ease her mind, knowing that you will take care of the financial things as best you can. Without it though, you can't even discuss the situation with her lender....or anything.

It sounds like your other sister can be of little or no help, given her situation, other than moral support.

Without financial POA, there is nothing much you can do due to the Privacy Act.

Keep in touch...You and your loved ones will be in my thoughts and prayers.


    Bookmark   August 20, 2008 at 12:17PM
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Thank you so much, Sue, again for all of your suggestions. We are going up on Friday so perhaps we can discuss the issue of POA then. At least that will be a start.

    Bookmark   August 20, 2008 at 2:38PM
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What a difficult situation to be in.

Now is not a good time to be thinking of selling a home, in most markets, due to the recent reductions in value.

Do you hav any idea how much the current face value of the insurance may be? Are there extra benefits, e.g. accrued "divideds", as well?

Or of how much a possible viatical settlement might be offered?

Would that be from the insurance company, itself?

I hope that you can get a few things lined up on Friday.

Do they live near you?

I offer my good thoughts and prayers for her and her family ... and for you and yours, as well.

How unfortunate that you have had your own issues to deal with, recently.

Life sure doesn't seem fair, at times.

ole joyful

    Bookmark   August 21, 2008 at 5:19AM
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ole joyful,

Thank you for your prayers. They are much needed and appreciated.

My sister lives about 3 hours away from us, which is not far. We will be going up tomorrow. Right now she is expecting to be released from the hospital tomorrow. Today they were putting in a port for future chemo treatment. She has blood clots in her arms, so it scares me for them to be doing this now. In my mind, it seems like they would want to adress the clots first and then worry about the port. Again, here I go, thinking I need to control the situation......

We don't know anything about anything, as far as her insurance, etc. I'm hoping we can address it, if she'll let us, this weekend. One of her friends, who was her supervisor at work, has been an angel, visiting, bringing food, helping with taking her to treatment. I'm hoping that we can talk to her and see if she can help us help my sister get her affairs in order.

We are going to have to keep an eye on the weather, at the same time. Even though I'm hoping the tropical storm Fay will have died down by Sunday, it's possible that we'll experience the heavy rain either while up there or on our way home.

You're so right, life sure doesn't seem fair, at times, so it's best to enjoy the good times while we have them.


    Bookmark   August 21, 2008 at 11:09AM
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Hi again Wodka,

I'm wondering how things have been going with your sister.

I hope that she has stabilized and has improved somewhat.

Have you been able to come up with some more information about her financial situation ... but don't want to pry.

Again, good wishes and prayers for her and her family - and you and yours.

ole joyful

    Bookmark   September 18, 2008 at 7:45PM
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Hi Wodka,
I too have been thinking about you.

    Bookmark   September 23, 2008 at 6:05AM
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ole joyful and peggy,

Thank you both for asking about my sister. She is still with us, has finished her first round of radiation and will be completing her first round of chemo within the next week or so. Then they will run scans and see how much or if the treatments have worked.

Unfortunately, none of us have been able to talk to her about the financial situation. She is a very strong-willed, private person, even now, as sick as she is. I have talked a little bit to one of her sons, and he seemed appreciative and said he would check into things, and then I never heard anything else.

When we tell her about different people asking about her and wanting to know what they can do, she just says "tell them to send money." (Which turns people off, even if it's the truth.)

So, there it is. Not pretty, but the truth. So, I just pray for guidance and miracles.

    Bookmark   September 24, 2008 at 9:38AM
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Hi again wodka,

I am sorry to hear your news - I imagine that it's substantially distressing to you.

Good wishes to all of you ... and prayers for your sister.

ole joyful

    Bookmark   September 25, 2008 at 7:30PM
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I actually have some, hopefully, good news to report. Our nephew, (my sister's son who is quadraplegic and lives with her) took our advice. He spoke with his executive director at work who set him up with a financial person, who offered several options. The best one, the one that he is taking, is to buy my sister's house. His banker is looking into taking advantage of any savings, such as his being disabled and also a first-time homebuyer. His mortgage payments will be much lower than what they are now. He has been paying the mortgage ever since my sister was diagnosed, so this will help tremendously.

While he would have preferred to find and buy his own house, this is the best short-term solution. It keeps the roof over his head and his mother's. It places the house in his name, so creditors can't take it from him when she passes away. He has good credit and has not co-signed anything with his mother's name. (God bless her, she just never could manage financial matters very well.)

We talked a long time yesterday. He has had so much on his shoulders (his other two brothers have not been much help, especially financially.) We are very proud of the way he is handling the situation. What would be a perfect world would be if my sister could beat this cancer and get her life straightened out. But for now, this is pretty good news and will ease some of their stress caused by financial difficulties.

    Bookmark   September 26, 2008 at 9:20AM
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Hello again wodka,

I am pleased that you were able to talk with your nephew, and that things are working out in a way that is rather pleasing to you.

I hope that it turns out to have been the best way to go.

Sending good wishes and some prayers to your sister and family.

((((((Wodka, sister and nephews))))))

ole joyful

    Bookmark   September 27, 2008 at 10:56PM
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