Stranger-originated life insurance (STOLI) policies have emerged in large numbers over the last decade and now comprise a growing segment of the insurance market. In a typical STOLI arrangement, speculators collaborate with an individual to obtain a life insurance policy in the name of that individual, and then sell some or all of the death benefit payable upon the death of the insured to stranger investors. To maximize the expected rate of return, STOLI speculators often target individuals who are elderly, and material information concerning the proposed insured often is inflated or otherwise misrepresented to qualify for the most valuable policies with the highest death benefits at the lowest premiums.
The speculators usually will pay for the insured’s related costs, such as application fees and premiums, and may even pay the insured some compensation upon issuance of the policy. To conceal the nature of such policies, the insured individual often will designate either the policyholder or beneficiary of the proceeds, or both, to be a shell third-party entity such as a trust, and then transfer the beneficiary interest to a STOLI entity after obtaining the policy.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
