Convert Life Insurance into a Long Term Care Benefit Plan

Mom is aging and needs lots of care but has limited resources.

The family is looking for a way to cut her unneeded expenses while meeting her needs. One expense that families consider cutting is a life insurance policy. After all, most of us purchase life insurance to pay for living expenses of a family, children’s college or to pay-off the house following the death

of the insured. Often a senior has grown children and a paid off mortgage and a family with sufficient resources. Therefore, the temptation is to stop paying the life insurance premiums. What many families fail to realize is that the life insurance can be converted into a life care plan specifically designed to pay the costs of care for their loved one.

How it works:

The policy owner transfers ownership to Life Care Funding who creates a fund to pay for the care of the individual. Money is held in a FDIC insured bank. Every month the nursing home, assisted living center, home healthcare provider or others providing medically necessary services or supplies are paid as directed.
Benefits:

• Provide federally tax-free fund to pay for covered expenses
• Eliminates the expense of life insurance premiums
• Prevents forfeiture of life insurance investment
• Can delay need to apply for government benefits
• Provides family with flexibility to adjust the care to meet their loved one’s needs

Part of Your Long Term Care Planning:
The importance of this as a tool cannot be overstated. Some use this strategy as part of their Medicaid or Veterans Wartime Pension planning.
The Internal Revenue Code Section 7702B(b) provides special exemptions for sales of life insurance policies insuring the lives of individuals who are terminally ill or chronically ill. In the case of a terminally ill insured, the proceeds from the sale of the policy will not be subject to U.S. federal income tax regardless of how the proceeds are used. And, if the insured is chronically ill, the proceeds will not be subject to U.S. federal income tax so long as they are used solely to pay for qualified long-term care services.

Please call 405.340.6554 to find out if this is right for you. Or Complete An Application

Have More Questions:  See Life Care Funding Questions & Answers Page

Please note that the actual tax treatment of the proceeds from the sale of a life insurance policy will depend on many factors, including but not limited to who owns the policy, the health of the insured, the use of proceeds, the size of the estate and the state in which the policy owner lives (for purposes of state taxation).  This material does not constitute tax, legal or accounting advice, and neither Winblad Law PLLC nor any of its attorneys, agents, employees, or representatives are in the business of offering such advice.  The information above cannot be used by any taxpayer for the purpose of avoiding any IRS penalty.  Anyone interested in selling a life insurance policy in order to fund Long Term Care Benefits should seek professional advice based on his or her particular circumstances from an independent tax advisor.