The Pros and Cons of Converting Life Insurance into a Long-Term Care Benefit

These days, it’s fairly common to see advertisements and articles encouraging seniors to sell their life insurance policies in order to free themselves up from expensive monthly payments, to get much-needed funds to supplement their retirement lifestyle and/or long-term care or to do both. It sounds like a win-win situation. But, is it really? Here’s some insight from a leading elder law attorney in New Jersey.

There are Significant Costs Involved

In the ads, the pros are very clear – you can get rid of a large monthly expense and receive a lump sum that you can use to meet your current needs. There are some cons to this arrangement, however: 

  • First of all, it can be difficult to determine what a good price would be for your policy. So, it’s a challenge to know if you are being treated fairly by the company buying your policy.
  • Secondly, there are usually commissions that have to be paid, which can amount to 30% of your lifetime settlement. This means that you’ll get quite a bit less in the bank than what you are being quoted by the buyer. You’ll also most likely be subject to paying income tax on the amount you receive, while your heirs wouldn’t have to pay income tax on the death benefit they’d receive if you kept your policy in place. 
  • Finally, receiving this lump sum can significantly affect your Medicaid eligibility. This is because it will change the value of your assets that Medicaid and other public assistance programs look at when deciding if you qualify to receive assistance or not.
  • Know All Your Options – Speak to an Elder Law Attorney in NJ

For these reasons, it’s essential to speak to an elder law attorney if you are considering this option. They can evaluate your options and put a financial strategy and Medicaid planning strategy in place to ensure you get the maximum benefits you are entitled to.

If you would like to get the legal assistance you need to protect your assets and long-term wellbeing, speak to elder law attorney Frank R. Campisano today. Experienced in elder law and estate planning, he is compassionate and committed to his clients, ensuring that you’ll receive the highest quality legal expertise and guidance. 

In addition to sound elder law advice on preventing elder abuse, Medicaid assistance, and Medicaid planning, you can also prepare additional estate planning documents, such as a Last Will and Testament, Power of Attorney documents, health care proxy, and trusts. For a free consultation, please contact us today or visit the website at 

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