Comparing Senior Funding Options

Life Settlement funding defined by the Life Insurance Settlement Association:

Definition - The purchase of an in-force life insurance policy insuring an individual who does not suffer from any life-threatening condition, purchased prior to maturity (death of insured) at a discount of the policy’s net death benefit.

Benefits -

Liquidate existing life insurance policy for an amount in excess of the death benefit to raise cash that can be used without restriction.
Relatively easy and quick process that involves little more than filling out a qualifying application and signing a HIPAA authorization form to allow release and review of medical records for underwriting purposes.
There are no caps on the amount of money that can be raised through a life settlement.
All fees are paid at closing by the third party acquiring the policy.
A life settlement is a liquidation of an asset and not a loan.
There are no interest fees, guarantees or liens associated with a life settlement.

Drawbacks -

Funds derived through a life settlement are taxable but only the capital gain above the total premiums paid is subject to taxation. And, in the case of any capital gains that are spent on senior housing and long term care, the entire amount spent would qualify for the tax deductible treatment as defined in the U.S. Master Tax Guide as: any tax implications for capital gains realized from such a transaction would be offset by deductions based on "the entire cost of maintenance in a nursing home or home for the aged" (sec. 1016 U.S. Master Tax Code 2008)
A life settlement involves signing over the death benefit to a third party that will continue to pay the policy’s premiums until they collect the full value upon policy maturity.

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The Benefits of a Life Settlement

Comparing Senior Funding Options