New York Court Rules On Arthur Kramer Life Insurance Case - New York Estate Planning News

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New York Court Rules On Arthur Kramer Life Insurance Case

Alice Kramer filed a lawsuit against Phoenix Life Insurance Co. in New York's Southern District Court to claim life-insurance benefits after her husband Arthur Kramer's death in 2008, according to CTnow.com. The lawsuit ended up evolving into a larger issue where the New York Court of Appeals has recently ruled that that individuals in New York may now purchase life insurance policies and sell them to strangers as a means of investment.

As a result, life insurers will now have to honor millions of dollars in claims.

Arthur Kramer had taken out a couple of life-insurance policies in 2005 and placed them in two trusts, naming his children as the recipients. He then directed his children to trade their interest in the trusts to investors in exchange for cash. One of the policies was sold directly to an investor, and Arthur Kramer and his children never had to pay any premiums.

Alice Kramer's lawsuit said the policies of her husband's life-insurance benefits violated New York's insurable interest rule, which means that a beneficiary of a life insurance policy must maintain an interest in keeping the subject of the policy alive. The ruling by the Court of Appeals, however, now states that strangers who buy off policies do not even need to be concerned about keeping the subject alive.

It is still unclear as to whether whole-life and universal life policies will be affected by the court's ruling. An experienced NY estate planning attorney can provide legal counsel about creating a trust or selecting a life insurance policy that fits your needs. For general information on estate planning, visit the Related Resources links.

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