The word "viatical" comes
from Latin via, meaning "road" or "way."
A viatical settlement involves the sale of life insurance
to make the road for the seller a better one. It's good news
for policy holders with a terminal illness, who could receive
a lump sum equal to a substantial percentage of a policy's
An entire industry has
grown out of this concept. A couple of wonderful, very recent
developments -- legal and medical -- will affect many of our
A Little Background
About HIV and AIDS
Just five years ago, the viatical settlements
industry was in its infancy. Then, many viators had to take whatever
they were offered, sometimes a very low percentage of their policy's
When brokers like Individual Benefits began to offer
their services, the business of viatical settlements changed from
a buyer's to a seller's market, putting the power where it belonged,
into the hands of the viator. Since then the offers have become
much more attractive, and viators' settlements have increased substantially.
In the meantime, thanks partly to the efforts of
the Viatical Association of America and concerned members like Individual
Benefits, new legislation is being enacted to regulate the viatical
In December of 1993, the Viatical Settlement
Model Regulation Act was developed by the National Association of
Insurance Commissioners (NAIC). These guidelines for the viatical
settlement industry will assist state regulators nationwide to protect
viators. The NAIC model law establishes guidelines for fair payment
to policyholders and mandates that viatical settlement companies
make full disclosures to consumers.
"Justice is truth in action."
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News, Lower Taxes
Congress has just passed legislation to eliminate
federal income tax on the proceeds of viatical settlements and accelerated
death benefits. President Clinton has signed the bill, which will
go into effect January 1, 1997.
Settlements which close after that date will qualify,
given two stipulations. First, the viator must be certified as terminally
ill -- that is, have a life expectancy of 24 months or less at the
time of the transaction. Second, If a viator's resident state requires
providers to be licensed, only transactions by licensed viatical
settlement companies will be tax free. This makes it even more important
to work only with licensed or registered companies.
Approximately 20 states have now enacted or are considering
regulatory legislation as well as tax-free treatment of viatical
Even in states like California and New York,
which have made viatical settlements tax-free, you may still owe
capital gains taxes on the difference between the payment you receive
and the amount you've paid in premiums. Your attorney, financial
planner, and/or cpa can bring you up to date on current legislation.
" I am the person. Nothing human is
alien to me."
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About HIV and AIDS
While people with cancer and other incurable
conditions benefit from viatical settlements, the majority of our
clients are dealing with AIDS, a disease that has become the greatest
puzzle of the 20th century. That's why Individual Benefits is so
happy to report that a few of the pieces may finally have fallen
into place. Effective treatment could be within reach for those
in the early stages of AIDS.
Early testing for HIV may prove critical to extended
life expectancy for those who have contracted the virus.
A remarkable breakthrough in AIDS treatment was announced
recently by researchers from the Aaron Diamond AIDS Research Center
in NY. It's called "triple combination therapy," and so
far, it bids fair to reverse the course of HIV. Teaming three new
protease inhibitor drugs with established drugs like AZT seems to
purge the blood of virus. By blasting the infection at the start
this therapy holds out the first real hope acknowledged by the medical
Nine newly HIV-infected patients appeared aviremic
-- without detectable virus -- for as long as 300 days. "We
simply cannot find evidence of viral replication," said Dr.
Martin Markowiz, lead investigator in the study. "Active viral
replication has been turned off." The immune systems of the
patients appeared to be normalizing.
It's not touted as a cure. Rather, "control"
is the key word for the researchers, who hope they have forced the
circulating virus into a remission of sorts -- the way chemotherapy
acts on cancer to suppress the disease.
Three protease inhibitors have already been approved
and two more are under development. Researchers also introduced
another new batch of arms to the arsenal: integrase inhibitors,
which target a different HIV enzyme.
Experts like Jerome Groopman of Harvard believe that,
over the next decade, those with HIV will gain 10 to 15 years of
quality life with antiviral treatment.
The documented cures of infants with AIDS may cause
some to wonder if this new treatment might be able to overwhelm
the HIV virus in people who have been recently exposed. The answer
will have to wait on further research. "We must find out if
it's possible to have [all the virus] burned out," said Dr.
David Ho of the Aaron Diamond Research Center.
This September, when their first patient completes
a year of treatment, Markowitz and Ho will determine whether the
virus has taken refuge in the lymph system, a sanctuary from the
protease inhibitors. The results will hold the answers for which
everyone is waiting: can the treatment eliminate the virus?
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