The business of Viatical Settlements usually involved a terminally or chronically ill person selling his or her life insurance policy to an investor in return for a lump-sum payment. This came into being in the earlier days of AIDS, when many terminally ill people needed their cash while living. Family circumstances permitting, they sold their life insurance policies for a percentage of the face amount, dependent on their health.

For many, it was, and still is, a godsend.

But as with many legitimate practices, there are those who look to find a way to profit from it, perhaps skirting the intent of the offer. Life Settlements have been and surprisingly still are being offered as investments to the wealthy. It's a deal of your life. Literally.

The scheme begins when an insurance agent convinces an investor to purchase a high-value life insurance policy. He either pays with his own cash or borrows it; sometimes the hungry insurance agent fronts the premiums. Free life insurance, folks!

The investor or lender has to pay the premiums for two years, to avoid the contestability period. At that point, the policy becomes a ``free asset'' and can be sold. Many obviously believe that policies have higher values in the resale market than the cash value inside the policy, otherwise why would people who didn't need life insurance succumb to the rigors of applying for it? Could it be greed? It hasn't always worked out well, needless to say, and regulators are on it. But there's more to the point for me.

First of all, when you apply for this life insurance, you must lie on the application as to the reason you're purchasing it, and it's your advisor who is guiding you to lie. He or she also has to lie when they submit the application, as they know full well that purchasing a life insurance policy for the purpose of selling it is a no-no.

An insurable interest must exist at the time of purchase, meaning that you must expect emotional or financial loss from that person's death. The law exists to prevent one from being in the business of making a profit by purchasing life insurance on strangers and then collecting the proceeds when they die or speeding up their death. Ultimately, one is conspiring to violate insurable interest laws and the prohibition against wagering on life. If your application expressed the real reason you were purchasing it . . . game over.

It's greed that would make a man of supposedly high morals be untruthful in order to make an investment. And although it's possible that this may work, and has worked for many who have not yet been exposed, so has Medicare fraud.

This particular game may be drawing to an end, but hopefully your investment path has not. In this Brave New World of stricter regulations and oversight, may I remind everyone that having to look over your shoulder for any reason, be it creditors, the IRS or a lie on an application, can mean that there may be a lot more risk than bargained for, in going along for the supposed reward. Just say NO if it's iffy, and certainly if it compromises your ethical makeup; or if it sounds too good to be true.

Meg Green is a certified financial planner. Mail questions to her c/o Sunday Business, The Miami Herald, 1 Herald Plaza, Miami FL 33132, or send an e-mail to askmeg@MiamiHerald.com. Include your full name and city of residence.

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