Selling Life Insurance Policies To Third Parties A Growing Concern
Bloomfield Hills, MI (Law Firm Newswire) July 1, 2013 – Some life insurance policyholders are selling their policies to fund long-term care, but at what ultimate cost?
Bills in numerous states, including California, Florida, New York, Kentucky, Maine, Louisiana and New Jersey, are allowing elderly residents to sell their life insurance policies to pay for custodial health care.
“For anyone concerned about their long-term care, selling off their life insurance is not their only option,” commented Michigan elder law attorney Christopher J. Berry. “Long-term care insurance is designed specifically to ensure that no one needs to borrow from the future, or their children’s inheritance, to be safe and cared for in their later years.”
While state lawmakers backing the bills believe financing long-term care with life insurance policies might save the Medicaid system money, elder care advocates are concerned that this is just another way seniors are being convinced to pay out of their own pocket when a system is in place to help them.
The bills are part of a new push toward “life settlements;” a life insurance policyholder can cash in their policy at a discount, and the new buyer makes their premiums and then later collects their death benefit.
“What policyholders do not usually take into consideration,” said Berry, “is that the third-party buyer typically takes a huge chunk of value from the policy – as much as 45 percent, in some cases.”
In Texas, Gov. Rick Perry has signed a new law which allows Texas Medicaid officials the right to inform individuals who are applying for Medicaid assistance that they are allowed to sell their life-insurance policies to fund their long-term care. Opting to do so will not negate their eligibility for Medicaid later, when those funds run out.
If any individual chooses to sell their insurance policy to a third party, the fund typically must be placed in an irrevocable bank account so that the funds will solely be used to meet long-term care bills. While life insurance owners were not previously prohibited from selling their policies, the new laws are designed to both regulate and publicize the practice. Most policy holders are above the poverty level and not yet eligible for Medicaid, but do not have the funds in place to pay for needed long-term care.
Medicaid is a health program run jointly by each state with federal oversight for individuals below a standard poverty level, typically with less than $2,000 in assets.
Learn more at http://www.michiganelderlawattorney.com/
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