Client of the Month: Using Qualified Funds – May 2016

May 19, 2016

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Step Three:
Design Your Custom Plan and Get Approved

c5a83c_8e07c203e50c432ab8805c98163cb24e-mv1Husband 59 and wife 61, planning on retiring in the next few years wanted to set up a long-term care insurance plan to protect their savings and income. Because they had social security and pension for retirement income, we looked into using some of their retirement funds to leverage into a lifetime benefit of long-term care insurance.

We transferred a single deposit out of their IRA account of $150,000. This provides them with an initial benefit of $305,923 which is guaranteed to be returned to them in either long-term care at a rate of $9,178 per month per person or in a single payment as a death benefit. The initial deposit will grow at a guaranteed rate and the clients can surrender the plan for the cash value at anytime. The surrender value is as follows: Year 10 – $174,093, Year 20 – $201,925, Year 30-$240,542.

The clients will get the guaranteed benefit starting day one but will be able to stretch out the tax payment due on the IRA distribution over 20 years. This means they will receive a 1099R in equal amounts over the next 20 years and the withdrawal will count toward their minimum required distribution.

This plan also allows the clients to put a continuation of benefits rider on their plan which will provide each of them a monthly benefit of long-term care insurance of $9,178. Meaning if both are on claim, they can draw up to $18,356 per month out tax-free to pay for care for the rest of their lives. This rider can be paid for in a lump sum or in guaranteed level payments of $3,008.27 per year. This payment will never increase and will be waived once the clients are on claim for long-term care services.

This is a tremendous way to leverage retirement funds into a lifetime of long-term care benefits and take advantage of favorable tax treatment provided by proper long-term care planning. Because of the design of this plan, the clients will never lose value of the initial deposit even if they cancel. However, this deposit is now leveraged into a lifetime of long-term care which will protect the rest of their assets as well as their income.

Let us know if you know someone who would like to look into a similar plan.

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