Paying for care
Life settlement
A life settlement is the sale of a life insurance policy to a third party for cash. The buyer pays more than the policy's cash surrender value but less than the death benefit. The buyer then pays the premiums and collects the death benefit. Sellers are usually older adults.
Why it matters for your family
Some families consider a life settlement to pay for care. FINRA lists the risks: broker fees can be high, taxes can be significant, and the seller gives up a death benefit that may be much larger than the sale price. The seller must also share medical information. A common mistake is to sell before asking the insurer about other options, such as a loan or an accelerated death benefit. Get more than one offer. You do not have to accept any offer. Check your state insurance department for rules, and speak with a tax professional.
Source: finra.org
Related terms
- Accelerated death benefitAn accelerated death benefit is a payment of part of a life insurance death benefit to the insured while still alive.
- Life insurance with long-term care riderA life insurance policy with a long-term care rider lets the owner use part of the death benefit while alive to pay for qualified care.
- Private payPrivate pay means a family pays for care directly from its own money.
- Hybrid long-term care policyA hybrid long-term care policy combines life insurance or an annuity with long-term care benefits.
- Medicaid planningMedicaid planning is the legal arrangement of income and assets so a person can meet Medicaid rules for long-term care.
- Elder law attorneyAn elder law attorney is a lawyer who focuses on legal issues of older adults.
