Today’s aging adults are living longer lives than in years past. This means that despite careful years of planning for retirement, many are facing the reality that their retirement funding was designed for less life in terms of months or years than their retirement realities present. This is a good thing in many ways. Unfortunately, many people are running out of retirement incomes when they are just beginning to need more care and assistance.
The decision to move into an elder care facility is one that’s never taken lightly. You can review the top assisted living chains in our resource directory. There are many factors involved, though, including funding, that prove challenging for aging adults considering this move and the families that love them. These questions and answers may prove helpful as you explore your options for care.
What are possible solutions for funding elder care?
Money matters are no small obstacles for many people when it comes to making the decision to move into elder care facilities. In fact, it can be a huge obstacle making the process seem nearly impossible.
Some aging adults were fortunate enough to invest in assisted living insurance or long term care insurance in its infancy to help with some of the costs associated with assisted living communities.
Most aging adults facing those decisions today, though, are ill-prepared for the full scope of costs of living in elder care facilities, which Bankrate places somewhere in the neighborhood of $3,500 per month as the average rate for a one bedroom apartment in an assisted living community.
For these adults, there are other options to consider to raise funds for their care, including:
- VA Assistance (available for veterans who have served at least 90 days of active duty with at least one day of that service during a time of war)
- Reverse Mortgages
- Life Settlements
- Medicaid Assistance for Assisted Living (covers partial costs of assisted living, but is only available in some states)
You can find out how others are funding their move from homes to assisted living facilities at Living Senior, which is an excellent resource for all things elder care as it strives to be the definitive resource for senior care information on the web today.
What is a life settlement?
Many people feel that the only option they have to “cash out” of their life insurance is to either surrender the policy, which nets them some cash value for their years of faithful payments, or to allow the policy to lapse, which means they simply stop paying for it and get nothing in return.
There is another option, though, one that offers a much bigger reward. That alternative is a life insurance settlement program or life settlement.
A life settlement involves selling your life insurance policy for an amount that’s greater than the surrender value but less than the policy’s face value. This allows aging adults to get access to funds that are needed now in order to downsize, make lifestyle changes, pay medical bills, move into long-term care or assisted care facilities, or accomplish dozens of other goals. There are no restrictions on how you spend the money.
On average, life settlements for elder car offer many benefits to adults facing the need for assisted living without access to the hefty funds required to pay for it.
Why consider a life settlement?
People make the decision to pursue life settlements for many different reasons. For some, it’s a matter of paying to make the move to retirement or assisted living communities. For others, it’s a way of securing assets for their families. Still others use this settlement to help supplement retirement living funds that are coming up short.
With so many retirement accounts hit hard during the recession, many retirees are facing hard choices about their retirement lifestyles. A life settlement can help to fill in some substantial gaps in their retirement funding if invested wisely.
Some even choose to use this money to fund a dream trip. From practical to extravagant, life settlements allow option that would not otherwise exist for many aging adults. Life settlements can also help fund items like iPads, digital photo frames, and other items that make the transition to an elder care facility easier, while also assisting with the costs of storing these items if necessary.
Who qualifies for life settlements?
Life settlements are typically available to seniors, aged 65 or older, who have universal life or convertible term life policies. Though some life settlement agencies will consider policies of all kinds.
Life expectancy is an important determining factor, with people who are older in age with lower premiums enjoying greater potential rewards over those who are younger and/or have higher premiums.
Other factors that affect consideration involve health and age of the insured. The actual value of the policy also weighs into the equation with a preference for policies valued at more than $250,000. Even then, policies are only eligible if the policy’s surrender value is greater than the current market value of the policy.
That doesn’t meant that your policy will not qualify for a rewarding life settlement if it doesn’t fall within the “ideal” parameters mentioned above. Working with the right partner can help you net a settlement that is far more rewarding than the typical surrender value. Working with a life settlement broker can help match you with the right life settlement offer to help you meet your goals whether they involve supplementing your retirement income by padding your investment portfolio or moving into an assisted living facility.
What is the difference between a life settlement and a viatical settlement?
The terms life settlement and viatical settlement are used almost interchangeably in many situations. The truth, though, is that there are subtle differences between the two. In many states, viatical settlements are similar to life settlements, but are reserved for cases when the insured person is either terminally ill or has a shorter life expectancy.
What are the tax implications of life settlement proceeds?
In 2009, the IRS provided guidance for tax payers in IRS Revenue Ruling 2009-13 on the proceeds of life settlements indicating that they should be claimed as ordinary income rather than as capital gains, which are lower. This only applies, though, to the excess over the premiums you’ve paid over the years.
Anyone considering a life settlement transaction is highly encouraged to seek counsel with his or her tax, legal, financial, and insurance, financial, tax and legal advisors.
What is the job of a life settlement broker?
A life settlement broker is a party who works with consumers, life insurance agents, and financial advisors, and insurance agencies with respect to the sale of life insurance policies in the secondary market. A life settlement broker has the fiduciary duty to obtain the best price for sellers by shopping and negotiating with multiple providers. You can liken it to a real estate broker who solicits multiple offers on one’s home.
The life settlement broker collects bids, and acts as an advisor to help sellers evaluate life settlement offers based upon a number of criteria, including offer price, net yield, and commission. The life settlement broker usually has developed relationships with a number of buyers, which facilitates getting the best transaction for the seller.
What if assisted living facilities are not an option?
For some people, assisted living facilities are simply not an option. Whether it’s a financial decision, a logistical decision, or an emotional decision, sometimes it’s the right decision for your family and your loved one.
If going to an assisted living facility is not an option in your circumstances, you might find this article from Senior.com: 6 Tips to Get Your Home Ready for “Aging in Place” useful.
Incidentally, life settlements can be extremely useful for funding structural changes that may need to be made to your home in order to accommodate these changes of living in your own home as you age.
How do you choose the right elder care facility?
Choosing the right elder care or nursing home facility may be one of the more difficult choices you’ll face. While finding one that’s appropriately priced is always a priority, it’s also very important to find facilities that offer the right services for your needs or those of your loved ones.
Lifestyles and living are also important in elder care facilities. These facilities are designed to provide long-term care for aging adults who still have a lot of living left to do. Look for facilities that offer a wide range of activities daily such as exercises, gardening, arts and crafts, trips and excursions, and a vibrant sense of community. The more aging adults have to occupy their hours the less likely they are to suffer from depression, which can greatly reduce not only their quality of life, but also their overall health and life expectancy.
If you’re facing special needs, such as care for dementia and/or Alzheimer’s disease, you’ll find that Dementia & Alzheimer’s Caregiver Center is a good support forum for families dealing with Alzheimer’s disease and dementia. It is a resource that may help to point you in the right directions when it comes to choosing elder care facilities that offer specialized care and treatment for patients living with these conditions.