Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Stranger-originated life insurance’

New York Court of Appeals Issues Decision on STOLI Arrangement

Posted by William Byrnes on January 8, 2011


The Court of Appeals of New York—the state’s highest court— issued a decision as to whether New York’s insurable interest law was violated when an insured purchased a life insurance policy and immediately assigned the policy to a third party who did not have an insurable interest in the insured’s life.

The case involves an attorney who purchased $56.2 million in insurance coverage on his own life at the prompting of a STOLI promoter.  The policies were held by life insurance trusts that initially named the attorney’s adult children as beneficiaries of the trust, but the children immediately assigned their interests in the trusts to third party investors.  Investors paid all premiums.

When the attorney died, his wife refused to provide his death certificate to the investors.  She then sued the insurance companies and investors in federal district court, alleging that, because the policies were issued in violation of New York’s insurable interest law, policy proceeds should be paid to her instead of the investors.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them or by calling the Panel of Experts.

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Recent STOLI Case Is a Big Win for Insurers

Posted by William Byrnes on October 3, 2010


An insurer recently won a major victory when the U.S. District Court for Delaware voided a life insurance policy that was purchased as part of a STOLI transaction. The case—Principal Life Insurance Co. v. Lawrence Rucker 2007 Insurance Trust—is significant because the court voided the policy for lack of an insurable interest based on the finding of insured’s intent to sell, even though the insured had not identified a particular purchaser for the policy at the time it was issued.

For the complete analysis of this development by our Experts Robert Bloink and William Byrnes, please read the article via your AdvisorFX subscription atRecent STOLI Case Is a Big Win for Insurers

For in-depth analysis of STOLIs, see Advisor’s Main Library Section 19.6 Life Settlements B—The Life Settlement Industry: Stranger-Originated Life Insurance (STOLI).

For in-depth analysis of the topic of insurable interest, see Advisor’s Main Library Section 20 Beneficiaries And Settlement Options B—Insurable Interest: New York Insurance Department Invalidates STOLI Scheme For Lack of Insurable Interest

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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