Viatical Settlement Disclosure Document Part A Form. This is a Alaska form and can be use in Blue Sky Secretary Of State.
Tags: Viatical Settlement Disclosure Document Part A, 08-114a, Alaska Secretary Of State, Blue Sky
THIS DISCLOSURE IS MANDATED BY THE STATE OF ALASKA TO BE PROVIDED TO AN INVESTOR BEFORE A SALE IS CONSUMMATED Viatical Settlement Disclosure Document Part A READ IMMEDIATELY UPON RECEIPT AND BEFORE YOU PURCHASE We are offering to sell you an investment called a viatical settlement contract. A viatical settlement contract is an agreement for the purchase of the death benefit of a life insurance policy. Most usually, the policy insures the life of an individual who has been diagnosed with a life expectancy of short duration because of illness. Other policies can be viaticated as well. The individual who owns a life insurance policy that is being sold is called the viator. Often, the viator and the insured are the same. When the insured dies the investor receives a specific dollar amount that will be greater than the amount paid for the contract. Some companies sell entire policies to investors, and others sell partial interests in policies. If you purchase a partial interest, the remaining interests in the policy will be sold to other investors. INVESTING IN A VIATICAL SETTLEMENT CONTRACT IS RISKY. BE AWARE THAT THIS TYPE OF INVESTMENT MAY INVOLVE RISKS IN ADDITION TO THOSE EXPLAINED BELOW. RISKS The rate of return on your investment cannot be calculated before the insured dies. The longer the insured lives, the lower the annual rate of return on your investment will be. No one can accurately predict the actual life expectancy of an insured. Some factors that may affect the accuracy of a prediction are: Ø The experience and qualifications of the medical personnel making the life expectancy prediction if the insured has a terminal illness. Ø The nature of the insured's illness and future breakthrough treatments and cures. Ø If the insured has AIDS, the definition of AIDS used by the viatical company. Ø The insured's age, occupation, and other factors which can affect longevity if the insured is not terminally ill. You may have to pay money in addition to your initial investment. The insurance company will cancel the policy in which you have invested if periodic premium payments are not made to keep the policy in force. The insurance company will not pay the death benefit if the policy is not in force. Some of the money you invest probably will be set aside to pay premiums. However, if the insured lives longer than expected, you may be required to pay additional 08-114A (4/00) Page 1 American LegalNet, Inc. www.FormsWorkFlow.com premiums to keep the policy in force. Being a beneficiary of a policy and not also an owner carries special risks. A person who buys life insurance is the owner of the policy and decides who the beneficiaries of the policy will be that is, who will receive the death benefit when the owner dies. When the policy is sold as a viatical settlement contract, investors become the new beneficiaries and therefore are entitled to receive the death benefit when the owner (usually the insured) dies. The new owner of the policy may be either the investors themselves or the viatical company. Only an owner of a policy, not a beneficiary, has the right to make premium payments directly to the insurance company so that the policy will remain in force. If the funds that have been set aside to pay premiums run out, you will be dependent on the viatical company to collect additional premium money from investors and to pay premiums promptly. If that company goes out of business or otherwise fails to collect premiums from investors, you may not be able to pay the premiums yourself if you are only a beneficiary. Term insurance policies carry special risks. A term policy is issued for a specific time period. The insurance company will not pay the death benefit if the insured outlives that time period. If you purchase a term policy, you will be dependent on the viatical company to renew the policy when the term expires. Contestable policies carry special risks. The insurance company may "contest" a policy for a two-year period after its issuance if the company finds a reason to cancel the policy. The insurance company will not pay the death benefit if: the insured dies within the contestability period, and the insurance company has a reason to cancel the policy. One example of a reason that an insurance company might cancel a policy is that the insured did not truthfully answer a question on the policy application. The policy may also be cancelled if the insured commits suicide within the two-year contestability period. Group policies carry special risks. A group policy insures the members of a specific group of people, usually the employees of an employer. The biggest risk for someone who invests in a group policy is that the policy can be terminated by the employer or the insurance company. 08-114A (3/00) Page 2 American LegalNet, Inc. www.FormsWorkFlow.com Although the policy will contain a provision allowing your interest to be converted to an individual policy, there may be limits or restrictions on the right to convert. Also, the insurance company may charge additional premiums once the policy is converted. Investing IRA money in a viatical settlement contract carries special risks. Internal Revenue Code section 408(a)(3) requires that "no part of trust [IRA] funds will be invested in life insurance contracts." This means that the Internal Revenue Service may not allow you the tax benefits of an IRA if you invest in a viatical settlement contract. Even if such an investment is allowed, you should carefully consider your age, the life expectancy of the insured, and the difficulty in predicting life expectancy before investing IRA funds in a viatical settlement contract. Since death benefits are not paid until the insured dies, you may encounter a problem taking annual distributions from your IRA that are mandatory beginning at age 70½. If the funds are not available to take the mandatory distribution, you will be penalized by the IRS. An investment in a viatical settlement contract is not a liquid investment. The death benefit on a viatical settlement contract will not be paid until the insured dies, and there is no established secondary market for viatical settlement contracts. This means that you will probably not be able to sell your contract in an emergency to raise money for your immediate needs. Check any promises of guarantees carefully. The viatical company from which you purchase your viatical settlement contract may provide a performance or fidelity bond, or anot