Freedman, a 16-year industry veteran, expects the Senior Health Planning Account Act to roll forward no matter who wins the White House in November. “We’ve never had partisanship in all my years working on life settlement issues,” he said, and “this is a revenue-positive piece of legislation.”
If adopted into law, this legislation could generate approximately $2 billion in new tax revenue over a decade and save approximately $2 billion in Medicaid spending, he said.
Freedman is hopeful the bill could get picked up in tax or appropriations legislation later this year. He also thinks senior health planning accounts could be implemented quickly.
Institutional investors have the capital to purchase policies through life settlements and their demand exceeds the supply, he said. The language in the legislation regarding senior health planning accounts is identical to the language used for HSAs, he said, so it would also be easy for account administrators to add these accounts for seniors.
Policyholders who open SHPAs wouldn’t have to hang their beneficiaries out to dry. Some states permit them to sell off a portion of their policy and retain the death benefit for a beneficiary without future premium payments, said Freedman. It would be important not to overfund the accounts because nonqualified withdrawals would be subject to taxes and penalties, he said.
Advisors who have a fiduciary duty should be looking at their clients’ life insurance policies and figuring out what’s in each client’s best interests, said Freedman. One of the many variables that factors into a policy’s value is the policyholder’s health history.
It’s important to get policies appraised because each one is “as individual as a snowflake,” said Freedman. “There’s no Zillow for life insurance policies.”