The Wall Street Journal
Markets – June 17, 2013
By Kelly Greene
State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process.
The strategy marks a tacit endorsement of so-called life settlements, a practice in which policyholders sell their policies at a discount in the secondary market and the buyer takes over premiums and consequently collects the death benefit.
The states hope to stop people from dropping their life-insurance policies in order to qualify for Medicaid. To keep policy owners from spending settlements frivolously, the bills generally require that the money go straight to an irrevocable bank account used solely to pay for long-term care.
In most cases, there is nothing to prevent life-insurance owners from selling their policies now to pay for long-term care, but the new laws will help publicize and regulate the strategy. “This focuses on middle-class policyholders with term coverage worth $100,000 on average,” said Chris Orestis, chief executive of Life Care Funding LLC of Portland, Maine. “They’re not wealthy enough to pay for long-term care for a long time, and they’re not poor enough to qualify for Medicaid right away.”
Such settlements have one big drawback: The company buying the policy keeps a sizable chunk of its value. For example, customers of Life Care Funding get about 45% of their policy’s death benefit, depending on their age and health, Mr. Orestis said.
Comments June 17, 2013
Before selling your life insurance policy at $0.30-$0.45 to the $1.00 determine what type of policy you own. Some policies have long term care riders that will pay 200%-500% of the death benefit if you need long term care. Some Combination Life and Long Term Care Insurance policies provide a 100% refund of premium at any time, for any reason (even if you don’t qualify for care, as defined by the policy).
Most Long Term Care Insurance policies will pay for care in your home, an assisted living facility or a nursing facility of your choice. If the policy is certified under your state’s Long Term Care Partnership Program (as most are) your assets can be protected away from the state – without a “look back period”.
Let us research the market and design a long term care solution to meet your needs and budget at:
Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.