GWG Holdings Endorses Federal Legislation Allowing Seniors to Use Life Insurance Proceeds for Long-Term Care Costs Tax-Free
December 13 2018 - 4:15PM
GWG Holdings (NASDAQ:GWGH) announced its endorsement of a new piece
of federal legislation that, for the first time, would enable
seniors to sell life insurance policies they own and set aside the
proceeds for long-term care, tax-free. By keeping seniors off
Medicaid for their long-term care, the legislation has the
potential to save taxpayers as much as $2 billion over the next
nine years, according to the Alliance for Senior Health Care
Financing, and it gives seniors access to assets that can improve
the quality of life in their final years.
H.R. 7203, introduced by U.S. Rep. Kenny Marchant (R-TX) and
U.S. Rep. Brian Higgins (D-NY) would permit seniors, regardless of
their health status, to use life insurance policies they already
own to fund a wide range of health care costs, including long-term
care expenses and long-term care insurance premiums.
The concept of using life insurance proceeds to fund a tax-free
account only to be used for post-retirement health and long-term
care costs was created by GWG Life Executive Vice President Chris
Orestis in 2010. It became the LifeCare Xchange®, the GWG Life
product that has options for seniors, one of which gives those with
chronic illness or a terminal condition the ability to exchange a
life insurance policy for a tax-free benefit plan paying for living
expenses and long-term care. It was endorsed in 2017 as part of the
National Association of Insurance Commissioners (NAIC) white paper
“Private Market Options for Financing Long-Term Care.”
H.R. 7203 would take the LifeCare Xchange one step further and
give seniors the right to set aside money received from life
insurance policies tax-free before they need it, allowing seniors
to plan for long-term care and not have to wait to cash in their
policies when they are ill.
“I am thrilled to see the concept we have pioneered being put
into legislation,” said GWG Life Executive Vice President Chris
Orestis. “Seniors who have felt they had no choice but to lapse a
life insurance policy to qualify for Medicaid now have an option
that can improve their lives in their final years. This is an
important step toward finding solutions to the long-term care
crisis this country faces.”
For many seniors, a life insurance policy is one of their most
valuable assets, but the policies may only pay out benefits when
the holder dies, leaving untapped resources for many retirees. A
secondary market has evolved to purchase the policies, but many
seniors, unaware this opportunity exists, abandon the policies as
the premiums rise or sell them back to the original insurer for
pennies on the dollar.
In addition, anyone who is covered by Medicare cannot contribute
to a Health Savings Account, which would be a logical place for
life insurance proceeds to be held in. This bill would authorize
using the proceeds of a life settlement—the sale of a life
insurance policy for a market value return—to be rolled over,
tax-free, into accounts dedicated to permitted health care
expenses.
Currently, end-of-life decisions about care become a race to
find assets to pay for what can be very expensive options –
Fidelity Investments estimates the total cost of healthcare and
long-term care costs in retirement will average $280,000 for the
senior who retires this year. With these costs so prohibitively
high, 62 percent of all nursing home residents rely on Medicaid
funding to pay for their care, according to the Kaiser Family
Foundation. Of that population, the Government Accounting Office
estimates 38 percent own a life insurance policy that they will
abandon to qualify for Medicaid.
The 2017 National Association of Insurance Commissioners white
paper identified life settlements as “one option seniors might use
to generate resources to pay for their long-term care needs.”
“Policyowners who sell their policies receive a lump sum payment
that is generally four or more times greater than if they lapsed or
surrendered their policy, according to government and university
studies,” the report found.
Under the proposed legislation, distributions from the accounts
would not be taxed if used for permitted expenses. Distributions
for unauthorized purposes would be subject to both income taxes and
penalties. Any undistributed amounts in the accounts, including
investment earnings, would not be taxed during the lifetime of the
account holder or their spouse.
Supporters of H.R. 7203 believe it has widespread, bipartisan
support as a solution to the growing cost of senior care in the
country that cuts the costs of a massive taxpayer-financed
government program. The bill has been referred to the House Ways
and Means Committee on which Marchant and Higgins serve.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq: GWGH), the parent company of
GWG Life, Life Epigenetics and YouSurance, is a leading provider of
liquidity to consumers owning life insurance policies, an owner of
a portfolio of alternative assets, and the developer of epigenetic
technology for the life insurance industry and beyond. GWG Life
provides value to consumers owning illiquid life insurance products
across America, delivering them more than $564 million for their
policies since 2006. GWG Life owns a life insurance policy
portfolio of $1.96 billion in face value of policy benefits as of
September 30, 2018. Life Epigenetics is commercializing epigenetic
technology for the life insurance industry and beyond. YouSurance,
a digital life insurance agency, is working to embed epigenetic
testing into life insurance purchasing to provide consumers a
value-added ecosystem that supports their health and wellness while
reducing the cost of their insurance.
For more information about GWG Holdings,
email info@gwgh.com or visit www.gwgh.com.
Dan Callahan
GWG Life
612-746-1935
dcallahan@gwgh.com
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