Tuesday 21 February 2012

You can take it with you [updated]

Life insurance policies, at least in New Zealand, will pay out subsequent to diagnosis of terminal illness. But if you can't quite wait that long, well...
Prominent unionist and left-wing agitator Matt McCarten is taking offers on his life insurance policy in an attempt to settle a $150,000 tax debt.
The cancer-striken Unite union boss said the policy had a face value of $230,000 and prompt payout was highly likely following a terminal diagnosis.
“I was given odds last year, in September, of a 0.8% chance of survival,” he told the National Business Review of the cancer that has spread to his liver.
“If anyone wants to buy the policy I’m open to offers. They can invest in my death, bet on it, and give the tax department the money that I owe them,” he said.
Mr McCarten said he was happy to provide potential bidders with access to his medical records “if they want to make it a calculated gamble”.


Parties interested in purchasing the policy should contact Mr McCarten who is seeking a quick sale. “I’m aware that I’m running against the clock and I’m determined not to die in debt,” he said.
I don't know that there's any rule barring sale of beneficiary rights in a life insurance policy, nor do I think there should be any such rule, but I'm still a bit surprised that this is allowed.

Update: A former student and current solicitor tells me [this doesn't constitute legal advice, should not be interpreted as legal advice, etc] Section 43 of the Life Insurance Act 1908 allows such transfers; here's the form for assigning policy benefits to someone else. Again, this provision makes a ton of sense. But given that life insurance was illegal for a really long time because folks viewed it as betting on someone's death, that the 1908 legislation let somebody buy out your policy is a bit surprising. I'd have thought we'd have had policy failure due to voters viewing such markets as repugnant.


  1. So yes I will buy Matts death policy. What company does it come from, and why would his estate insurance be responsible for his debts.
    If he has an AMI policy or STATE or any rubbish the idea is off.
    Why would he sell to me unless for advantage
    Did you get insured with good people Matt?

  2. I know that such policies are legal in America. When they were first introduced, the spread was quite high between the value of the policy and the buyouts that were offered, but they came down over time. So long as the current beneficiaries of the policy agree to it, there's really no harm to it. It helps people get their houses in order before they die so their heirs are not left with a bunch of mess to deal with.

    1. Excellent. They should be. But I know too that a lot of things that make sense are banned because some folks think the exchange repugnant; this had reasonable chance of being in that set.

  3. I don't really see the logic from Matt here. I would expect that his debts would be written off when he dies. I'd be spending the money on his medical expenses, then letting the IRD write off the tax debt. I realise that's a bit unethical, but hey, he's dying.

    1. I'd expect it's so that his company can keep going. But I really don't know.