Stranger-Originated Life Insurance (STOLI) is best thought of as a "mortality futures" transaction where certain parties have one expectation as to the future value of the article of trade that is the subject of the “futures contract”, while other parties have a different expectation as to the future value of that article of trade. In a STOLI transaction, the article of trade that is the subject of the “futures contract” is the life expectancy or mortality of the insured. While current marketing practices suggest STOLI is an easy way to make money with little if any risk and that all parties will profit, STOLI is actually a complicated transaction involving at least six parties to the transaction and where certain parties will profit and certain parties will lose, just like in any “futures contract”. Explored herein are the various risks of loss and potential for profit from the perspective of each of these parties to the transaction.
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