Examples

Here are some ways we have helped clients design a plan for their situation. It is important to know when putting a long-term care plan in place that it is not necessarily “how much it costs”. Long-Term Care Insurance is about having a plan. First we look at your age and health to determine what options you can qualify for there. Then we look at how much benefit you want based on your goals, finances, and plans in retirement. Finally, we discuss the best way to fund your plan.

Future pricing is subject to change and the following examples may not be available due to carrier changes. However, once your plan is in place, there will be no changes to your plan.

Asset-Based Plans

Husband 68 and Wife 66 make a single deposit of $238,313 into their asset-based plan. They will each receive a monthly benefit of $7,200 ($86,400 annually per person) for an unlimited amount of time should they need care. The plan also has a $240,000 guaranteed return of premium which is structured as a 2nd to die death benefit. Both the husband and wife can pull out $7,200 a month for as long as they need it.

 Year 10Year 20Year 30
  Total Long-Term Care BenefitUnlimitedUnlimitedUnlimited
  Monthly Benefit Per Person$7,200$7,200$7,200
  Tax-Free Death Benefit (return of premium)$240,000$240,000$240,000

Note: The death benefit means they are guaranteed to get $240,000 back in either long-term care benefits, tax-free death benefits or a combination of both. So they will always get what they put into the plan back but they can pull out long-term care benefits for as long as they need without a limit. Therefore protecting their entire estate from an on-going long-term care event.

Female 56, Makes a single deposit of $127,168. This gives her an immediate benefit of $367,481 that she will be able to pull out at $4,734 a month. This plan will last her a minimum of 6 years once she is on claim. Both the monthly benefit and the total amount of coverage will grow each year by 3% compounded. The plan offers an immediate death benefit of $127,168. Even if she uses all of her long-term care insurance, this plan will still pay a guaranteed minimum death benefit of $22,725 to her beneficiary.

 Year 10Year 20Year 30
  Total Long-Term Care Benefit$479,480$644,381$865,994
  Monthly Cash Benefit$6,177$8,302$11,157
  Tax-Free Death Benefit (return of premium)$127,168$127,168$127,168

Note: This is a cash benefit plan so no receipts are required to receive her monthly benefit. Cash benefits can be used to pay for informal care. This plan also has a return of premium feature that grows each year and will return her full premium after 10 years if she cancels her policy.

*Guaranteed death benefit even if all long-term care benefits used: $22,725

Husband 74 and Wife 72, make a single deposit of $359,088 into their plan. This provides each of them a monthly benefit of $8,000 for long term care. This policy has an unlimited lifetime benefit of $8,000 a month for each of them. They may cancel the plan at any time 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.

 Year 10Year 20Year 30
  Total Long-Term Care BenefitUnlimitedUnlimitedUnlimited
  Monthly Benefit Per Person$8,000$8,000$8,000
  Tax-Free Death Benefit (return of premium)$400,000$400,000$400,000

Note: Here is a great example of an older couple who were told they were too old for long-term care insurance and they could self insure. By repositioning some of their savings into this plan, they are guaranteed to get a minimum of $400,000 back tax-free in either long-term care benefits, a death benefit to their estate or a combination of both. Whenever you see a death benefit, the estate will get that amount minus any long-term care benefits paid. However, if they end up in an extended long-term care situation, they have an unlimited benefit that will pay each of them $96,000 a year for the rest of their lives. This is not a shared benefit for long-term care. They each receive up to $8,000 a month for life. There are no payments required and they are guaranteed to get more back then they put in and the benefits come back to them tax-free for long-term care and are not counted as income ever!

Female 61, makes a single deposit of $120,000 into her plan that provides her with an initial long-term care benefit of $310,682 that she can pull out at a rate of $4,003 per month. The monthly benefit and total amount of coverage will grow by 3% each year. The death benefit guarantees her estate will get all of the money she puts into the plan if she doesn’t use it or only uses part of it. Also, if she does use all of the long-term care insurance, her estate will still get a guaranteed minimum death benefit of $19,212.

 Year 10Year 20Year 30
  Total Long-Term Care Benefit$405,369$544,782$732,142
  Monthly Cash Benefit$5,222$7,018$9,432
  Tax-Free Death Benefit (return of premium)$120,000$120,000$120,000

Note: This plan pays cash, which means she can use the funds tax-free to pay for informal or formal care. If she uses less than the death benefit for long-term care then her estate will receive the difference upon her death. However, she has a long-term care benefit that will pay out monthly for a minimum of 6 years.

*Guaranteed death benefit even if all long-term care benefits used: $19,212

Husband 62 and Wife 60, make a single deposit of $312,635 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.

 Year 10Year 20Year 30
  Total Long-Term Care BenefitUnlimitedUnlimitedUnlimited
  Monthly Benefit Per Person$10,000$10,000$10,000
  Tax-Free Death Benefit (return of premium)$500,000$500,000$500,000

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 any time for the guaranteed cash value. There are no additional payments required for this plan.

Husband 70 and Wife 69, make a single deposit of $225,000 that is rolled out of an IRA and taxed over 10 years. This plan will provide each of them with a monthly long-term care benefit of $5,603 per month per person for an unlimited amount of time. The plan also guarantees at least $280,141 will be paid back to them or their estate in either long-term care benefits, death benefit or both, tax-free.

 Year 10Year 20Year 30
  Total Long-Term Care BenefitUnlimitedUnlimitedUnlimited
  Monthly Benefit Per Person$5,603$5,603$5,603
  Tax-Free Death Benefit (return of premium)$280,141$280,141$280,141

Note: Since we funded this with an IRA, the insurance company will set up another account that will fund the long-term care plan on their books over 10 years. The clients will receive a 1099R each of those 10 years in the amount of $27,000. This is the amount they will have to claim as income, not the initial roll-over amount. The insurance company is essentially giving a 20% bonus upfront. The clients could just keep their money in their IRA and pay the 10 annual payments of $27,000, but the insurance company will let them buy those payments for an upfront deposit of $225,000 and spread the taxes out over 10 years.

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. If the client passes away, his estate will receive the cash value minus any long-term care benefits paid.

 Year 10Year 20Year 30
  Total Long-Term Care Benefit$298,537$296,303$296,303
  Monthly Benefit $4,089$4,059$4,028
  Cash Surrender Value$94,512$98,768$98,028

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.

Female 47, Makes an initial deposit of $53,000 combined with 10 guaranteed level payments of $6,259 per year. She made the deposit to lower the ongoing payments. Her plan will provide her with an initial total long-term care benefit of $388,105 that she can access at a starting rate of $5,000 per month. This plan has a 3% compound growth rider that grows the monthly benefit and the total benefit each year. After all ten payments are made the policy is paid up in full and she has a full return of premium if she cancels along with a $120,000 death benefit that starts year one.
 
 Year 10Year 20Year 30
  Total Long-Term Care Benefit$506,389$680,545$914,596
  Monthly Cash Benefit$6,524$8,768$11,783
  Tax-Free Death Benefit (return of premium)$120,000$120,000$120,000

Note: This is an example of putting some money to work upfront and paying the remainder of the premium over time. She has full coverage from day one along with a guaranteed minimum death benefit of $24,000 that is paid out even if she uses all of her long-term care insurance. Long-term care benefit is cash so she can pay for informal care with this plan as well.

*Guaranteed death benefit even if all long-term care benefits used: $24,000

Traditional

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.

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Note: Since this is a State Partnership  Program, the client will be able to protect an amount of assets equal to what was paid out on her behalf and still qualify for Medicaid. This gives her an extra level of protection from a prolonged long-term care situation such as a cognitive issue. Once she goes on claim, she will stop paying premiums and start receiving her benefit.  

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).

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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.

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.

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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.    

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