This ‘Last Resort’ Could Help Pay for Long-Term Care: Financial Planner JUNE 17, 2013 | BY Michelle Fox For those struggling to pay for long-term care, selling their life insurance policy may be a good idea, financial planner Paul Auslander told “Nightly Business Report.” “This is something of a last resort, either by themselves or their children who are helping to pay for their long-term illnesses and are also running out of money to be able to do so,” said Auslander, co-founder and CEO of American Financial Advisors and president of the Financial Planning Association. The idea has taken hold in several states, where lawmakers are hoping to encourage elderly residents to cash in their death benefits to pay for long-term care in an effort to help ease the burden on Medicaid. Texas legislators recently passed a bill allowing life-insurance holders to sell their policy through a settlement company to pay for long-term care services like a nursing home. California, New Jersey, Florida, Maine, Kentucky, Louisiana and New York have similar bills pending, according to The Wall Street Journal. “What these bills are trying to do, in effect, is keep people from dropping those policies to qualify for Medicaid and, in fact, burdening the system more,” Auslander said. However, cashing in your life insurance policy comes with a cost—the settlement company keeps a portion of the policy’s value. Auslander said the amount depends on the company. For a $100,000 benefit, the payout could be anywhere from $35,000-$65,000. “Even though the companies that put this together are extracting a rather healthy fee, the fact is that the money the client winds up with is something that they desperately need,” he added. Auslander also stressed that the policy holder talk to the family so they are aware there will be no benefits. He also said that those thinking of selling their life insurance first talk to an independent third party, like a certified financial planner, to make sure it is the best move. While there is always the option of purchasing long-term care insurance, Auslander warned that it has been harder to get over the last few years. “The big name companies have frankly exited the business” because they found it was not profitable, he said. “So, there are [fewer] choices out there and it’s become more expensive.” with Koscoaching Financial Education and Entrepreneurship
Posted on: Sat, 22 Jun 2013 10:22:38 +0000