Advocacy Update: December 10, 2007
Reps. Neal, English Ask Treasury to Warn Seniors about Adverse Tax Consequences of STOLI
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Gary Sanders
703-770-8192
In a letter dated November 16, 2007 two members of the House Ways and Means Committee have asked the Treasury Department to notify elderly taxpayers of the potential tax consequences of participating in STOLI transactions. In the letter Reps. Richard Neal (D-MA) and Phil English (R-PA) stated that “STOLI transactions take advantage of the secondary market in life insurance settlements at the expense of elderly Americans who are left with an unexpected tax liability”, and asked Treasury to warn seniors “of the adverse tax consequences of investing in a product that is in fact ‘to good to be true’”.
Emphasizing that their concerns are not intended to inhibit the legitimate life settlement market, Neal and English noted that state legislators, regulators and industry groups have questioned whether STOLI violates traditional principles of insurable interest, and they compared STOLI policies to “wager policies” that are considered to be against public policy.