March 3, 2020

Congress Proposes Tax-free Way for Seniors to Pay for Health Care Costs

H.R. 5958 encourages seniors to use proceeds from the sale of their life insurance to plan and pay for health care, tax-free; a valuable financial planning tool for financial professionals

New bipartisan legislation recently introduced in Congress will provide millions of American seniors a way to invest in and pay for their own health care by selling their life insurance policies and rolling over the proceeds into a tax-free health care account. H.R. 5958, the Senior Health Planning Account Act, will give seniors the opportunity to generate significant new resources dedicated to planning for their health care needs in retirement, and to pay for immediate medical and long-term care needs. Rep. Brian Higgins (D-NY) and Rep. Gregory Steube (R-FL) introduced the bill on February 25, 2020.

The sale of a life insurance policy – known as a life settlement – is an alternative to the policy’s lapse or surrender back to the insurance company for little or nothing. Lighthouse Life Solutions LLC, works with policyowners to pay them as an average of four times or greater above what they would receive from the insurance company. That is “found money” that helps seniors live in retirement. This legislation would allow that money to be used, tax-free, for health care costs.

Michael Freedman, CEO of Lighthouse Life said: “Life settlements make financial sense for seniors who are not going to keep their life insurance policies. The legislation helps seniors help themselves by maximizing the money from the sale of policies they are very likely going to lapse or surrender while in retirement to fund their health care.”

“Financial professionals are recommending life settlements to their senior clients as a way to monetize a life policy that is becoming too expensive to maintain or because their client’s financial or health status makes selling the policy a suitable option,” said Michael Coben, Chief Distribution and Business Development Officer, adding: “It is often in a senior client’s best interest to have their policy appraised for its market value before simply terminating it for little or no value back to the insurance company.”

In 2019, the National Association of Insurance Commissioners (NAIC) stated that “Seniors may use life settlements … to generate resources to pay for their LTC needs.” A 2017 NAIC report responding to the deepening long-term care crisis facing individuals and governments stated that life settlements are “one option seniors might use to generate resources to pay for their long-term care needs.”

Lighthouse Life supports adoption of H.R. 5958.