Broad Financial does not offer investment advice, and neither encourages nor discourages viatical settlements as an investing strategy.
“Would you bet your life on it?” is a popular question that gets thrown around when engaging in debates with family and friends, but not one meant to be taken literally. Or so we thought.
Unbelievably enough, in the world of viatical settlements, people are actually betting someone else’s life on it. According to Investopedia, a viatical settlement is “an arrangement in which someone with a terminal disease sells his or her life insurance policy at a discount from its face value for ready cash. The buyer cashes in the full amount of the policy when the original owner dies.”
You read that right. Essentially, an interested party bets that someone who is ill will die by purchasing their life insurance on the cheap. And then profits when the sick person actually dies.
Of course, the risk is if the ill person’s health recovers. And the morality, well, that’s a totally different discussion.
This raises the question if your Self-Directed IRA or Solo 401k can invest in viatical settlements? The answer is yes and no. Yes, your Solo 401k can invest. No, your Self-Directed IRA cannot invest in viatical settlements.
Again, Broad Financial does not advocate or promote any particular investment. We only tell you if the IRS permits it or not. In general, for SD IRAs the IRS only prohibits two classes of investments: collectibles and life insurance (e.g. viatical settlements). In theory, everything else is in play.
There really isn’t much you can’t invest in with a Checkbook Self-Directed Plan.
This discovery was made by our Self-Directed experts. To find out even more of what Self-Directed IRAs and Solo 401(k)s are capable of, you can ask our experts directly at our Self-Directed Questions Hub.