Unit Seventeen

Viatical Sales

"Life Settlements" - involves an individual with a terminal illness Viatical settlements are generally used by those with a terminal illness and a life expectancy of 2 years or less. It is the sale of a life insurance policy, almost always whole life or another form of permanent insurance - rarely a term insurance policy. Seller receives a price more than the cash value but less than the face value

Priorities Regarding DPPs

1) Potential for economic gain 2) Tax write-offs 3) Liquidity and marketability A program's economic viability is the first priority in the assessment of DPPs. The IRS considers programs designed solely to generate tax benefits abusive. Because there is a very limited secondary market for DPPs, liquidity and marketability should be a low priority.

Structured Products

A synthetic investment instrument that has been created to meet a specific need that cannot be met by a standardized financial instrument Created as a tool to meet the issuer's debt financing needs when they will result in a lower cost than a standardized financial instrument available in the market place

Viatical vs. Life Settlement

Although the terms are frequently used synonymously, historically, viatical settlements differed from life settlements in that the seller of the viatical policy was someone who was terminally ill Viatical settlements came of age during the AIDs crisis of the 1980s. They provide cash in exchange for the sale of a life insurance policy to those who were racking up substantial medical bills and had a short (generally less than 2 years) life expectancy. As medical advances changed the "death sentence" for an AIDS diagnosis (and many cancers as well), the life settlement became the more popular option when the policy owner was healthy but had reached an age (generally at least 70), and the need for life insurance was not as important as having the cash for personal use.

Indicative Value

Applicable to ETNs The calculated value, called the indicative value or closing indicative value for ETNs, is calculated and published at the end of each day by the ETN issuer.

Private equity investment in real estate refers to:

Direct ownership of real estate properties

Motivation for Structured Products

Improve market completeness What does that mean? Structured products are created to meet a specific need for which there is nothing available in the current market. Creating this structured product is said to be "completing the market."

Deductions Against Ordinary Income

There are circumstances under which as much as $25,000 in losses from active real estate investing can be deducted against ordinary income. Those conditions are likely to be far more complex than the exam will delve, but it can be important to know that this is possible. Passive real estate losses can only be deducted against passive income.