Author: StefansLawGroup: Donna Stefans

Stefans Law Group,New York & Long Island Elder Law Attorney

When individuals find out they need to “spend down” their assets to qualify for Medicaid, selling a life insurance policy might seem like a great place to start. Though most people may not realize the sale will trigger the Medicaid eligibility penalty period, too.

New York is considering a bill modeled after a recently passed Texas law. It will allow you to sell your life insurance policy that you may no longer need without triggering the ineligibility penalty period. Most of all, you will be allowed to spend the money on the long-term care provider of your choice. Read this article about the Texas law.

States Moving to Encourage Seniors to Sell Life Insurance Policies to Pay for LTC

Desperate times call for desperate measures.  States looking for ways to reduce Medicaid costs are beginning to encourage seniors to sell their life insurance policies to life settlement companies and use the proceeds to forestall their need to access Medicaid long-term care funds.

Texas governor Rick Perry signed a bill June 14, 2013, that enables the holder of a life insurance policy with a face amount of more than $10,000 to sell it to a life settlement buyer without jeopardizing Medicaid eligibility as long as the former policy owner uses the cash to pay for long-term care services.  Similar bills are being considered in at least seven other states, including California, Florida, Kentucky, Louisiana, Maine and New Jersey, and New York, according to The Wall Street Journal.

The bills generally require that the money go to an irrevocable bank account used solely to pay for long-term care, the Journal reports.

Life settlement companies buy insurance policies — term, whole life, universal and other types — from seniors, pay the premiums, and collect the death benefit when the policyholder dies. Payments are usually significantly more than a policy’s trade-in value, but far less than the death benefit. For example, customers of Life Care Funding  — which calls itself “the major driver behind the legislation” — get about 45 percent of their policy’s death benefit, depending on their age and health. Read More

Author: Donna Stefans, August, 06, 2013