Single Premium Long Term Care Insurance For Asset Protection
A reader asked me about using a long term care insurance product as an asset protection tool. The reader says that an insurance agent told him about long term care insurance that can be paid up front in a single premium payment. The insured makes a lump sum payment to the insurance company in return for long term care policy for the rest of his life. The age and health of the insured determines the amount of the lump sum payment.
Built up cash value in life insurance policies is exempt from creditors and bankruptcy trustees under Florida statutes. The statutes do not exempt cash value of any other insurance. Other insurance, such as health insurance and property insurance, if paid up to date is not an asset subject to creditors because no money is owed to the debtor prior to the event covered by the insurance (medical expense or property loss). Money spent to buy expensive insurance generally is not a fraudulent conversion because most people buy insurance for reasons other than asset protection. .
I have never seen a fraudulent transfer case dealing with the debtor’s single premium long term care insurance. In my opinion, the answer depends on whether the debtor/insured retains any right to cancel the policy and receive a refund. If the single premium is irrevocable with no right to cancel if the debtor changes his mind then I think the debtor has protected the money from his creditors. On the other hand, if the debtor is entitled to a refund or to borrow unused future premiums then I thank a creditor could levy upon the money. The creditor cannot attach any more than the creditor can get for himself.
