SENIOR HEALTH PLANNING ACCOUNTS: COMING SOON?

Lisa Rehburg, Rehburg Insurance Settlements

A new long-term care saving solution has been introduced in Congress by Rep. Brian Higgins (D-NY) and Rep. Gregory Steube (R-FL).  H.R. 5958, the Senior Health Planning Account Act, allows proceeds from life insurance settlements to be rolled over into a special account – without tax – which may be used for qualified medical expenses. This new account can be an additional resource and solution for seniors to plan and pay for their health care and long-term care needs in retirement. According to the Life Insurance Settlements Association (LISA), who recently endorsed this bill, “the ‘Senior Health Planning Account Act’ would help seniors and other policy owners use underutilized life insurance assets to help plan for medical expenses without having to wait until after they are seriously ill.”

Key data points LISA highlights are:

A healthy couple aged 65 retiring in 2019 can expect to spend $285,000 on health care costs, according to Fidelity Investments.

A recent University of Chicago study projects that by 2029, there will be 14.4 million middle-income seniors, 60% of whom will have mobility limitations and 20% of whom will have high health care and functional needs. The study further explains that 54% of seniors will not have sufficient financial resources to pay for it.

In 2018, 7.7 million life insurance policies, with an aggregate face amount of $570 billion, lapsed, for which policy owners received nothing. This lapse rate is 40% higher than just five years earlier.

In a 2017 report, the National Association of Insurance Commissioners stated, “Policy owners who sell their policies receive a lump sum payment that is generally four or more times greater than if they lapsed or surrendered the policy, according to government and university studies.”

Senior Health Planning Accounts extend the tax-free benefits to all life insurance settlement clients, as long as the funds are used for qualified health care expenses. This is a creative way to help Americans fund long term care and help mitigate federal and state budget pressures at the same time. The bill has been referred to the House Committee on Ways and Means.

Lisa Rehburg and Rehburg Life Insurance Settlements are in the Wellness Village where they have been members since July 2019.