Long Term Care Insurance Proceeds In Bankruptcy

A caller asked me for help with his parent’s debt and judgment. The parent has long term care insurance and is living in an  assisted living facility. The parent is expecting a lump sum reimbursement from the insurance company to reimburse for prior care expenditures. The parent intends to deposit the insurance check in a checking account. The question posed was whether a bankruptcy trustee could claim the long term care payment and whether the proceeds would be protected in the parent’s bank account. 

Florida statutes exempt several insurance products including disability insurance and some life insurance. There is no exemption for long term care insurance.  I think a creditor or bankruptcy trustee could attack the parent’s right to long term care proceeds due and payable. There is no protection of the proceeds in the debtor's financial accounts. 

If the parent had assigned his right to the care insurance to the assisted living facility as part of the assisted living contract then the parent may have a defense to garnishment or bankruptcy. I asked the caller whether the long term care was part of a disability insurance package so that the insurance could possibly be protected under the disability insurance statue; it is not. 

I think due and receivable long term care reimbursements are subject to a bankruptcy trustee until they are paid and received, and after receipt, they are vulnerable in the parent’s account. Using insurance proceeds to pay for ongoing long term care should not be a fraudulent conveyance or a preference in bankruptcy, in my opinion.