Life Insurance

On the transaction-cost front, commissions as high as 30 percent of the sale figure have been reported. To avoid usurious fee structures, sellers should ask for written documentation of fees (amounts and types), and details on who will receive compensation.

• The lump sum payment may be taxable, depending on the selling individual's circumstances, and its receipt could trigger loss of Medicaid or other federal assistance benefits. It's best to work with a financial and tax adviser well versed in the policies to avoid unintended consequences.

• Prospective purchasers will request that sellers authorize them to obtain medical and other personal information, to determine the possible offer price for the policy. That information may be shared with other parties including lenders and third-party investors, among others. As such, it's very important to ensure confidentiality of sensitive information will be protected.

Prospective sellers may want to contract younger family members who may have the assets and desires to buy the policy so they could be the beneficiaries. Additionally, if they do sell, the insured should decide how to conservatively invest the proceeds to give them income.

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