HBA-ATS H.B. 2288 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2288 By: McCall Insurance 4/17/1999 Introduced BACKGROUND AND PURPOSE A common practice in the insurance industry to avoid adverse estate taxes, especially in buy/sell insurance, key-person insurance, and trust-owned insurance, is for an insured to authorize a third party to purchase, or apply for, an individual or group insurance policy on the insured if the insured actively participates in the application process and consents to the purchase in writing. A similar procedure is followed when an employer insures the lives of its officers, directors, employees, and retirees for the purpose of and in an amount necessary to provide funds to offset fringe benefit-related liabilities. In those cases, the insured provides written consent in a group or master contract to designate third parties as owners and beneficiaries. H.B. 2288 authorizes any person of legal age to consent in writing to the purchase of or the application for individual or group insurance policies issued by any legal reserve or mutual assessment life insurance company by third parties, and, in such written document, consent to or designate the third party as the absolute or partial owner or owners, beneficiary, or any combination of the two, of any policy or policies issued in connection with such consent or designation. The third-party owner or beneficiary is required to have an insurable interest in the life of such person, except that a third party who is engaged in the business of burying the dead cannot have an insurable interest in the life of any person. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 3.49-1, Insurance Code, as follows: Sec. 1. DESIGNATION OF BENEFICIARIES OR OWNERS IN APPLICATION. Makes a conforming change. Sec. 2. DESIGNATION OF BENEFICIARIES OR OWNERS IN EXISTING OR FUTURE POLICIES. Makes no change. Sec. 3. CONSENT TO OWNERSHIP OR BENEFICIARY OF POLICIES. Adds this section to authorize any person of legal age to consent in writing to the purchase of or the application for individual or group insurance policies issued by any legal reserve or mutual assessment life insurance company by third parties, and, in such written document, consent to or designate any person, persons, partnership, association, corporation, or other legal entity, or a combination of these entities, as the absolute or partial owner or owners, beneficiary, or any combination of the two, of any policy or policies issued in connection with such consent or designation. Requires the owner or beneficiary, with respect to such policies, to have an insurable interest in the life of such person, except as provided in Section 4 hereof, at all times thereafter. Sec. 4. EXCEPTION OF PERSONS, ETC., ENGAGED IN THE BUSINESS OF BURYING DEAD. Includes Section 3 among the sections which do not grant a person, persons, partnership, association, corporation, or other legal entity, or any combination of entities, engaged in the business of burying the dead, an insurable interest in the life of any person. Makes a conforming change. Sec. 5. CUMULATIVE EFFECT; LIBERAL CONSTRUCTION. Makes a conforming change. SECTION 2. Makes application of this Act prospective for all insurance contracts delivered, issued, or used on or after January 1, 2000. SECTION 3.Emergency clause. Effective date: 90 days after adjournment.