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Can Life Settlement Proceeds Help Pay for Long-Term Care?
By Saul L. Appel, CLU®, ChFC®
Life settlement proceeds can generally be used for any purpose, including home care, assisted living, nursing care, medical expenses, home modifications, or support for a family caregiver.
For someone who no longer needs a life insurance policy—or can no longer afford its premiums—selling the coverage may create funds that are useful today. The proceeds may exceed the policy’s cash surrender value, but no amount is guaranteed until buyers complete their review and make an offer.
A life settlement is different from a long-term care insurance benefit. It is a sale of the policy, not a claim for care. After the sale, the buyer owns the policy and receives the death benefit. The former beneficiaries will no longer receive that coverage.
Before proceeding, compare the settlement with other options, including keeping the policy, using an accelerated death benefit if available, borrowing against cash value, reducing coverage, or exchanging the policy for coverage with long-term care features. Eligibility rules and tax treatment differ among these choices.
If the policyowner receives or may apply for Medicaid or another means-tested benefit, obtain elder-law advice before closing. Settlement proceeds may affect eligibility.
The right decision balances current care needs, future premiums, family protection, taxes, and government-benefit rules.
To request a confidential policy evaluation, visit Policy-Cash.com.
Saul L. Appel, CLU®, ChFC® | President, Appel Financial, Inc. | 50+ years experience