Leveraging Qualified Funds into Long-Term Care
Husband 65 and wife 64 had a traditional long-term care policy in place that would pay them $200 a day for a period of 3 years. Their company stopped selling long-term care insurance in 2014 and raised the annual premiums to $6700 on our clients. Our Concern: Clients are facing increasing premiums in the years ahead. Because their current company no longer sells long-term care insurance, the company is going to be under increasing pressure to raise premiums in the future on existing clients to stay profitable. Many of the highest and most consistent rate increases have come from companies who service existing policies but who no longer sell long-term care insurance. Our Solution: Part 1; We were able to leverage $130k of qualified funds the clients were not going to use for income into $241,789 of life insurance and long-term care benefit. This will provide the clients with an immediate death benefit, or each client may pull out $7,254 tax-free for long-term care benefits until the pool of money is exhausted. The clients get the benefit of the full insurance starting day one but the withdrawal from the qualified account will be taxed evenly over a 20-year period. Part 2; The clients will also have the option to add a continuation of benefits which will provide each of them an unlimited benefit of $7,254 per month for long-term care coverage. The cost of the continuation of benefits is a guaranteed level premium of $2,982 per year and may be cancelled at any time without affecting the initial policy funded with their qualified funds.
The policy may be surrendered at anytime for the cash value which will grow as follows:
Summary: Clients choose to go with the continuation of benefits so each person will have a lifetime benefit of $7,254 per month. This is superior coverage to their current policy for a fraction of the current premium they are paying. Their current retirement funds will continue to grow and are leveraged into a pool of money that can be used as a death benefit, long-term care or surrendered for the cash value at anytime. This plan provides unlimited coverage, more flexibility and tax advantages for drawing down their qualified funds and an endless stream of tax-free money for long-term care should they need it.