Profiting at Death

Q

Is a viatical settlement a good way to get some money? — K.W., Ocala, Florida

A

If someone is expected to live only three more years and needs cash to pay for medical bills or anything else, he might sell his life insurance policy. If it’s set to pay $100,000 on his death, the buyer might pay, say, $66,000 for it. It sounds like a win-win plan, as the seller gets a big lump sum while still alive and the buyer can expect to receive $100,000 in about three years — roughly a 15 percent annual return.

But it’s not quite that simple. There are typically fees involved, and the sick person might live for many years, reducing the investment’s ultimate return. A cure or new treatment might even have him outliving the buyer. (Note, too, that there are related “life settlements,” focusing on older people and those not terminally ill.)

There have been many instances of fraud with these settlements, but they’ve become more regulated and are legal in most states. They can be win-win, offering both parties money, but they can be risky and can cause a little discomfort, too, with investors waiting for death. Learn more about them at sec.gov/answers/ viaticalsettle.htm and at the viatical.org and lisa.org industry websites.

Q

Is it too late for me to refinance my mortgage? — K.R., Phoenix

A

Rates have been rising in recent years, but they’re still quite low. Depending on your current mortgage’s interest rate and some other factors, such as how long you plan to stay in the home, refinancing may still make good sense for you. Learn more at fool.com/mortgages and bankrate.com.