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Asset Based: LSP, CSV, DB, GLP, PPA
Husband 74 and Wife 72, make a single deposit of $270,788 into their plan and pay a guaranteed level annual payment of $2,647 for a continuation of benefits rider. This provides each of them a monthly benefit of $8,000 for long term care. This policy will last a minimum of 50 months if both are on claim and drawing out the maximum benefit of $16,000 per month. They may cancel the plan at anytime for the cash surrender value and there is a second to die death benefit of $400,000 that will be paid to their estate if they never use the plan for long-term care. Note: Here is a great example of an alternative to self insuring. Although these clients are well into their 70's, this plan provides great protection should they need care. This design was chosen for the flexibility this plan provides. The plan is made up of two parts. Part 1: The initial deposit purchased them $400,000 of benefit that is guaranteed to come back to them either as long-term care, death benefit or the cash surrender value. Part 2: The continuation of benefits is a second pool of money that can be used if part one is exhausted for care and is available for a guaranteed level payment of $2,647 per year. This premium will stop once client is on claim. Part 2 can be cancelled at anytime without affecting part one. This gives the clients maximum protection if they need it early on but also allows them flexibility in case one of them passes away and they don’t need the full amount of coverage. The death benefit and cash value growth are guaranteed.
Asset Based LSP, CSV, DB, PPA Funded with:
Female 61 makes a single deposit of $120,000 into her plan that provides her with an initial long-term care benefit of $282,392. The monthly amount she can pull out will grow with inflation along with her total benefit and she will receive monthly benefits for a minimum of 5 years. This plan also provides a death benefit that declines over time as the long-term care balance increases. It also has a minimum guaranteed death benefit of $31,969 payable to her beneficiaries even if she uses all of her long-term care benefit. Note: This plan is unique in that it is an indemnity plan. Meaning once the client is on claim, she will receive the full monthly benefit regardless of how much she is spending on care. It has a death benefit all years that slowly decreases as the total long-term care benefit increases. It also has a guaranteed death benefit paid to her estate even if she uses all her long-term care benefit. The initial deposit for the plan will be returned at any time, without penalty, if she cancels her plan.
Asset Based LSP CSV DB PPA Funded with:
Husband 62 and Wife 60, make a single deposit of $260,393 into their plan that provides them with an unlimited long-term care benefit of $10,000 per month for each person. If both clients are on claim, they may draw up to $20,000 out of their plan tax-free for an unlimited amount of time. This plan also includes a second to die death benefit of $500,000 that will be paid to their beneficiaries if they never need long term care. Note: This plan provides the clients with an unlimited amount of long-term care protection that can be accessed up to $10,000 per person for life. If they never need care, the death benefit will be paid to their estate. The policy can be surrendered at anytime for the guaranteed cash value. There are no additional payments required on this plan.
Asset Based: LSP, CSV, DB, PPA, GLP
Husband 65 and Wife 62, make a single deposit of $210,000 using retirement funds and pay a guaranteed level premium of $1,292 per year for a continuation of benefits rider. This provides them with a joint policy that can be accessed up to $8,163 per person per month with a total coverage of$816,300 for long-term care. The initial deposit was drawn out of a 401k retirement account and will be taxed over equal installments for 20-years. Note: This plan used qualified funds meaning taxes have not yet been paid on them. The advantage of this plan is they get the immediate long-term care and death benefit that comes from the plan on day one. However, they will be taxed on their withdrawal from the retirement account over 20 years. The funds came from the husband’s account but will create a joint policy so both are covered. This will also count as required minimum distribution when he reaches age 70 ½ meaning he will be forced to withdraw less from his retirement account to meet the RMD requirements. This plan offers many advantages and uses provisions in the Pension Protection Act to provide additional tax advantages.
Asset Based: LSP, CSV, PPA
Male 84 makes a single deposit of $100,000 into his plan, this provides an immediate long-term care benefit of $298,845 which can be used over 6 years. The client has access to his cash value and can withdraw up to 10% a year which will simply decrease his long-term care benefit by 10%. If the client passes away, his estate will receive the cash value minus any long-term care benefits paid.
Note: Mistakenly, his advisors told this client he was too old for a long-term care plan. He wasn’t. This plan gives the client a simple 3 to 1 leverage on his money should he need care. And all the proceeds come back to him tax-free for that care. To fund this, he used savings that would have been used to pay for care if needed but now he will receive approximately three dollars back for every dollar he put into the plan. These plans work for individuals up to age 85.
Asset Based LSP, CSV, PPA, GLP, LP, DB Funded with:
Female 47 makes initial deposit of $50,000 into her plan and pays a guaranteed level payment of $1,282 per year for a continuation of benefits rider (COB) which will be fully paid up in 20 years. This plan provides her with an immediate long-term care pool of $297,938 that will continue to grow over time. Her initial monthly benefit is $5,959 and will provide her a minimum of 4.2 years of coverage. She will also have a death benefit of $148,969 all years and a guaranteed growing cash surrender value. Note: This policy is really made up of two parts like some of the other examples. It combines a single payment for part one and a 20-year level payment for the second part of the policy. Part one is a result of the $50,000 deposit which provides the client with $148,969 of benefit for long-term care or death benefit. If part one of this plan is exhausted for care, then she will have access to part two which has an inflation growth factor on it. This client chose to pay part two in 20-years so she will have a fully paid up policy at age 67.Her total of payments will be $25,640 plus the initial deposit of $50,000. So her cash surrender value will be approximately what she put into the policy when she is done paying the annual premiums at year 20. This policy will continue to grow until she needs it and she can always cancel it for the surrender value.
Funded with: Female 68, transfers $137,562 from an existing deferred annuity (using a 1035 exchange) into an asset based plan with immediate long-term care coverage of $327,077 that she can access over a 5-year period. She can also withdraw up to 10% of the cash value per year if needed and keep her plan in force (long term care benefit will decrease with withdrawals). Note: The cash value on this policy decreases over time because the client chose to maximize her long-term care protection. However, this plan provides the client with great tax advantages, as all of the growth on the existing annuity used to fund this plan will now come out tax free thanks to the Pension Protection Act. This is a great way to fund a plan as you can now avoid paying taxes on the growth you have on your existing annuity. This will also give the client over 3 times the coverage versus keeping and using her existing annuity for care. And if she needs it, she can always get the cash surrender value in the policy.
Asset Based LSP, CSV, PPA Funded with:
Female 77, sets up an asset based plan with a single payment of $192,000 funded with the proceeds of a reverse mortgage. The client has an initial benefit of $576,000 for long-term care that can be pulled out over 6 years. She also can pull out up to 10% of her cash value per year without penalty without canceling her long-term care coverage. If she dies without using long-term care, her estate will receive the cash value of the policy. Note: This client wanted to age in her home and did not want to risk spending through her retirement accounts if her health became compromised. By using a reverse mortgage, she was able to access the equity without having to make any payments and this provided her with over three times as much long-term care coverage compared to the equity in the home alone. If she does not use the long-term care policy her estate will receive the cash surrender value of the policy. This plan provides her with a meaningful amount of coverage without changing her retirement income or lifestyle.
Hybrid Plan LP CSV DB GLP IP Funded with:
52 year old male makes 10 annual payments of $10,000 into his plan. This provides him with an immediate long-term care benefit of $394,783 and an initial death benefit of $122,065. The plan will grow each year with a 3% inflation rider which is included in his plan. Note: This plan trades cash value growth and death benefit for maximum long-term care benefit. However, the client can still surrender this plan and get his money back if he chooses. The goal of this plan is to keep up with inflation and provide maximum benefit which will be paid out tax-free over a 6 year period. This plan also has the safety net of a death benefit so his beneficiaries will receive this tax-free minus any long-term care benefits paid.
Hybrid Plan LP, CSV, DB, GLP, IP Funded with:
Husband 52 and Wife 49, make guaranteed level annual payments of $3,833.60 into their plan which provides them with an initial long-term care benefit of $200,000. The long-term care policy will be paid up in full after 20 years and the long-term care benefit will continue to grow as it has an inflation rider. Note: This plan is comprised of two parts that work together like some of the asset based examples. The clients will have an initial benefit of $100,000 that will be paid to them in either a long-term care benefit of $4,000 a month or a death benefit minus any long-term care claims paid. When they exhaust this initial benefit, the long-term care benefit will continue for a minimum of another 25 months. Part two has an inflation protection rider so their available benefit will continue to grow each year. Total of premiums paid will equal a maximum of $76,672 as the plan is paid up after 20 years. Regardless of how they access this plan, they are guaranteed to get a benefit out of it. Premiums are guaranteed to remain level and they can cancel and get the cash value back at anytime.
Hybrid Plan GLP, CLP, DB Funded with:
Husband 65 and Wife 64, pay guaranteed level annual payments of $7,949 into their plan that provides them with an unlimited amount of long-term care protection. Each person can pull out up to $6,000 per month for as long as they need it. Meaning if both are on claim, they will have $12,000 a month of tax-free income for life. This plan also includes a second to die death benefit of $150,000 that will be paid to their beneficiaries minus any long-term care benefits paid out. This policy will also build a cash surrender value over time. Note: The power of this plan is that it provides an unlimited benefit for each client. The premiums are guaranteed level and will eventually stop if one or both clients end up on claim. This plan provides meaningful protection against ongoing long-term care costs and allows the clients to budget as the premiums will never increase. If for some reason the clients change their mind, they will still be able to cancel and get the cash value of the policy back. The death benefit is second to die and will be paid to their estate minus any long-term care costs already paid by the company.
Hybrid Plan LP, CSV, DB, GLP, IP Funded with:
Female 47, makes 10 annual deposits of $10,000 into her plan. Her initial long-term care benefit is $324,897 which she can access over a minimum time of 4 years. The total benefit and monthly benefit will grow over time with inflation and the client has a full return of premium all years after she has completed her 10 scheduled payments. Note: This is a cash or indemnity policy that provides the full monthly benefit to the client once she is on claim regardless of how much she is spending on care. The client has a growing amount of coverage each year, a death benefit, and she can always get her premiums back after she has finished paying into the plan. She also has a guaranteed death benefit of $31,091 which is paid to her estate even if she uses all the long-term care benefit.
Guaranteed death benefit if all benefits are used: $31,091
Traditional Plan SPP, IP Funded with:
Female 48, in excellent health, sets up a state partnership long-term care plan with annual payments of $3,068.86 which provides her with an initial benefit of $292,000. She can access this amount over a minimum of 4 years. This plan will grow by 3% each year which will also increase the amount she can access. Note: This is a cash or indemnity policy that provides the full monthly benefit to the client once she is on claim regardless of how much she is spending on care. The client has a growing amount of coverage each year, a death benefit, and she can always get her premiums back after she has finished paying into the plan. She also has a guaranteed death benefit of $31,091 which is paid to her estate even if she uses all the long-term care benefit.
Traditional Plan SPP, IP Funded with:
Husband 58 and Wife 57 set up a State Partnership Program for an annual payment of $3,118.37. The initial long-term care benefit is $250,000 and will grow by 3% each year. The clients can each access the plan as it is a shared care policy. Clients also have the option to choose 40% of the monthly benefit as a cash option (indemnity). Note: This is a more flexible plan than most traditional plans as it has a cash option. This comes in handy as most long-term care situations start in the home and may not require the full monthly benefit that is available. Since traditional plans reimburse you for actual costs, by having a cash option the clients don’t have to wait to get reimbursed and they can spend the money as they see fit. Regardless of how they choose to draw out the money, the policy will pay out the entire long-term care balance.
Traditional Plan SPP, IP Funded with:
Female 64, sets up a traditional State Partnership Plan with a monthly payment of $335.06. This provides her with an initial long-term care benefit of $125,000 that she can access up to $6,000 per month. The policy will increase 3% each year for the first twenty years. Note: This policy provides the client with a meaningful amount of coverage but will also allow her to protect assets and still qualify for Medicaid should she end up in an extended long-term care situation. This plan fit financially for this client and has flexible options for drawing out the money, including an indemnity option.
Critical Care Plan Funded with:
Male 64 purchased a Critical Care Plan with an annual payment of $2,924. This plan will pay the client $3,000 per month for 24 months on diagnosis of several major conditions including Alzheimer’s disease. Note: This client was turned down for long-term care insurance due to reporting minor memory problems and was considered uninsurable. However, he was able to qualify for this critical care policy which will pay him a monthly benefit upon diagnosis of several conditions including Alzheimer’s or if he is unable to perform 2 out of 6 Activities of Daily Living (ADL’s). This is a perfect example of how a critical care policy can work when long-term care is unattainable.
Critical Care Plan Funded with:
Female 34 pays an annual payment of $486.32 for a critical care policy that will pay her a lump sum of $101,000 upon diagnosis of many illnesses including; Heart Attack, Cancer, Stroke, Alzheimer’s Disease, Major Organ Transplant, Kidney Failure, Deafness, Blindness, Paralysis.Note: This plan pays out a single tax-free payment on the diagnosis which will allow her to use the money as she sees fit. This may include paying bills, substituting lost wages or even paying for additional medical treatments not covered by her medical insurance.