Proposed bipartisan legislation could help millions of seniors generate billions of dollars for their health care needs.
If passed, the Senior Health Planning Account Act (HR 5953) would allows seniors to use the proceeds of selling a life insurance policy (known as a life settlement) tax-free to pay for health care expenses.
Current law already provides that the proceeds from the sale of life insurance are tax-free, but only if the policies are sold after the policy holders are seriously ill, by which time they often no longer own their policies.
Under the Senior Health Planning Account Act, seniors will be able to roll over their life insurance sale proceeds, tax-free, into Senior Heath Planning Accounts, which would be dedicated to paying health care costs for themselves and their spouse.
The Accounts would be exempt from federal income taxation, similar to existing federal tax programs that encourage younger working Americans to invest in their own health care.
The legislation was introduced by Rep. Brian Higgins (D-NY) and Rep. Gregory Steube (R-FL) last week, and has been referred to the House Committee on Ways and Means.
“H.R. 5958 will allow millions of seniors to use life insurance assets they already own to help provide for their own health care in retirement,” said Michael Freedman, Chair of the Life Insurance Settlement Association’s (LISA) Public Policy Council. “Seniors are the only group of Americans who are not eligible for existing tax programs for contributing their own resources to help pay for health care,” added Freedman.
According to LISA, life insurance policies are among many families’ most valuable assets, with 138 million individual life insurance policies, with a total face amount of over $12 trillion, in force in 2018. Fewer than one in ten policies (by face amount) ever pay a death benefit, with over 90 percent ending in a lapse or surrender.
To read the full text of the bill, go here.