Variable annuities are sold by insurance companies as an investment vehicle. They are similar to 401 (k) plans. An individual invests money by purchasing the annuity which have a death benefit. Insurer’s typically guarantee that the investor’s beneficiaries will get back the amount invested plus a built-in interest return. The best part of the annuity is that it is guaranteed. Even if the market tanks, the insurer is on the hook for the full amount invested.
Enter the enterprising lawyer. Joseph Caramadre, an estate lawyer in Rhode Island decided he would try to game the annuity market. He ran ads and recruited terminally ill people that he would pair with investors. The investor would put up the money, the annuity would be purchased by the sick person and both would make money.
What do you think? Macabre? Bizarre? Morbid? Just good business? A smart loophole?