When he died at the ripe old age of 81, Empire State attorney Arthur Kramer left behind a sizeable estate, including over $50 million of life insurance purchased in the waning years of his life. The twist?
"Investors, not relatives, would collect upon the death of the prominent attorney"
Now, we've covered this subject before, but it bears repeating: there are good and sufficient reasons to sell (or buy, depending on one's perspective) an in-force life insurance policy. But there are dangers here, as well, some of which may play a part in how this story is ultimately resolved.
For one thing, it appears that, in New York, death certificates aren't a matter of public record, and thus not available to the average citizen (or, specifically, the investors who bought Mr K's policies). Without such a document, the insurance company won't release the funds (i.e. pay off), depriving these investors of their return. And the carrier is not only within its rights to do so, but really has no choice, legally. Absent that document (or acceptable proxy, if any), there's no way for the insurer to confirm that the deceased is actually, you know, deceased.
In this case, the poor widow, seeing those dollars flowing away from her purse, simply refused to release a copy of the certificate to the investors. And again, she's well within her rights to do so: after all, she wasn't a party to the sales contract, and thus has no obligation to abide by it.
Ms Kramer is also the executor of the estate; in New York (among some other states), the executor can actually sue the investors to recoup at least some of the proceeds, which she's done. Of course, that's currently a moot point, inasmuch as there has actually been no payout. The bigger issue is this:
"Her late husband, she alleged, had arranged deals with investors that skirted a state "insurable interest" law, which says people can't procure life insurance on someone they aren't close to."
This is a gross misstatement of how "insurable interest" really works. She may have a more tenable claim in her assertion that "state law prohibit(s) taking out a policy on your own life and immediately transferring the rights to an investor, never intending the policy as protection for your loved ones." Now that's a court-worthy question.
And it's a big-picture one, as well:
"From 2004 to 2008, tens of thousands of older people sought to make some fast cash by taking out multimillion-dollar policies on their own lives and flipping these to brokers, who resold them to investors like hedge funds and investment banks."
That's potentially thousands of policies that may end up in legal limbo while the extant cases wend their way through the judicial system. But it seems to me that the answer is really simple: if, as has been the case for hundreds of years, life insurance is property, then one has the right to buy and sell it based on market forces.
I have a feeling that it won't be that simple, though.
Lagniappe: While I admire The Widow Kramer's tenacity, I can't help but think that she made the wrong play here: that death certificate is worth $56 million to "the investors;" surely the two parties could have come to some mutually beneficial - and private - agreement.
[Hat Tip: Bob Vineyard]
"Investors, not relatives, would collect upon the death of the prominent attorney"
Now, we've covered this subject before, but it bears repeating: there are good and sufficient reasons to sell (or buy, depending on one's perspective) an in-force life insurance policy. But there are dangers here, as well, some of which may play a part in how this story is ultimately resolved.
For one thing, it appears that, in New York, death certificates aren't a matter of public record, and thus not available to the average citizen (or, specifically, the investors who bought Mr K's policies). Without such a document, the insurance company won't release the funds (i.e. pay off), depriving these investors of their return. And the carrier is not only within its rights to do so, but really has no choice, legally. Absent that document (or acceptable proxy, if any), there's no way for the insurer to confirm that the deceased is actually, you know, deceased.
In this case, the poor widow, seeing those dollars flowing away from her purse, simply refused to release a copy of the certificate to the investors. And again, she's well within her rights to do so: after all, she wasn't a party to the sales contract, and thus has no obligation to abide by it.
Ms Kramer is also the executor of the estate; in New York (among some other states), the executor can actually sue the investors to recoup at least some of the proceeds, which she's done. Of course, that's currently a moot point, inasmuch as there has actually been no payout. The bigger issue is this:
"Her late husband, she alleged, had arranged deals with investors that skirted a state "insurable interest" law, which says people can't procure life insurance on someone they aren't close to."
This is a gross misstatement of how "insurable interest" really works. She may have a more tenable claim in her assertion that "state law prohibit(s) taking out a policy on your own life and immediately transferring the rights to an investor, never intending the policy as protection for your loved ones." Now that's a court-worthy question.
And it's a big-picture one, as well:
"From 2004 to 2008, tens of thousands of older people sought to make some fast cash by taking out multimillion-dollar policies on their own lives and flipping these to brokers, who resold them to investors like hedge funds and investment banks."
That's potentially thousands of policies that may end up in legal limbo while the extant cases wend their way through the judicial system. But it seems to me that the answer is really simple: if, as has been the case for hundreds of years, life insurance is property, then one has the right to buy and sell it based on market forces.
I have a feeling that it won't be that simple, though.
Lagniappe: While I admire The Widow Kramer's tenacity, I can't help but think that she made the wrong play here: that death certificate is worth $56 million to "the investors;" surely the two parties could have come to some mutually beneficial - and private - agreement.
[Hat Tip: Bob Vineyard]
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