As the US baby boomers generation ages, a concern is how they will be funding LTC (Long-Term Care). Life settlements can provide an alternative source to the funding of LTC.
As the government faces fiscal constraints in funding long-term care benefits. It appears that regulators are looking to improve the viability of the use of life settlements. Significantly, investors can provide a source of LTC funding through the purchase of cash value policies.
On the 30th November 2018, a Bill (HR 7203), was introduced to the US House of Representatives.
This Bill would allow Seniors to use the proceeds of the sale of their Life Policies. This would allow them to pay for healthcare costs and long-term care arrangements (including long term care insurance premiums). Significantly, this would also allow the sale amount to be rolled over into tax-free accounts.
Any distributions from the accounts would not be taxed if used for permitted healthcare costs. Conversely, distributions for unauthorised purposes would be subject to income taxes and 20% excise tax.
Undistributed amounts in the accounts, including investment earnings, would not be taxed during the Senior’s lifetime or his or her spouse’s lifetime.
This will be achieved by amending the Internal Revenue Code of 1986 and creating a new IRS Code Section 139H via a “Long Term Care Account Act”.
This kind of option has previously only been available to proceeds of Viatical Settlements (Terminally Ill insureds with short Life expectancy).
Extension of these arrangements to the “Life Settlement” market is further evidence of the significant benefits that flow to the US economy from the Secondary Life Insurance market.
This continued legislative support and consequential additional market exposure clearly bode well for the continued supply and prosperity of the market for Secondary Life insurance.
Funding LTC (Long Term Care) with Life Settlements
Clearly, this is a significant move. Rising health care costs during retirement are one of the chief reasons people over 65 investigate life settlements. Significantly, this legislation would link the two in a way that will provide tangible benefits to Americans seeking to make the most of their retirement years.
If an elderly person is fortunate enough to have a life insurance policy, then a life settlement can be a good source of funds to pay for long-term care. Seniors need multiple options for funding long-term care. In most cases, savings and accepting the cash surrender value (CSV) of the policy aren’t enough. Certainly, for many in long-term care and significant illness situations, there is no other alternative source of funds. Waiting for the death of the insured is not possible when money is desperately needed for medical and long-term care expenses.
In addition to turning a lump sum payment, life settlements eliminate premium payments for the former policy owner. Certainly, this can be very helpful to a family with finances already stretched to the limit with long-term care costs.
About Global Insurance Settlements Funds PLC (GISF)
Global Insurance Settlements Funds PLC (GISF) is incorporated in Ireland as an umbrella type investment company. The fund permits segregated liability between sub-funds. The first sub-fund launched, GIS General Fund (the Fund), is listed on the Irish Stock Exchange.
This structure is aimed at Sophisticated / Institutional investors and provides tax clarity by ensuring there is no tax leakage. It enables a number of different investment options to suit the specific needs of our investors.
The Fund’s core activity is to actively manage a large and diverse portfolio of life settlements. These are primarily issued by companies in the USA. Policies are sourced by licensed U.S. Provider companies and the Board of GISF select those that best meet the Fund’s policy purchase criteria.
Disclaimer: This information is intended for qualifying investors only. It was correct at the time of preparation. It has been prepared to provide general information only and should not be considered as a “securities recommendation” or an “invitation to invest” in any jurisdiction. Potential investors should consider the relevance of this information to their particular circumstances. Before proceeding, investors must obtain the prospectus and take their own legal and taxation advice. If you acquire or hold one of our products we will receive fees and other benefits as disclosed in the prospectus and relevant offering documents.