Long Term Care Insurance — Act Now!

By Terry Savage
June 16, 2020

One of the most tragic aspects of the coronavirus pandemic is that as of June 3, 42% of all COVID-19 deaths in the U.S. have come from nursing homes or assisted-living facilities. The statistics reinforce every senior’s desire to remain at home in his or her final years, which is only possible if you have the resources to afford this very expensive home health care — or if you have long-term care (LTC) insurance. Otherwise, state Medicaid programs provide care for the impoverished, though mostly in institutions.
 
Perhaps because of this growing awareness (or ongoing low interest rates earned by insurers), prices of the newest hybrid/combo LTC policies are starting to rise. David Phillips, an estate planning specialist and consumer resource for LTC insurance at ROP LTC (www.ropltc.com), has issued a warning of a 10% to 15% price increase on July 15 for new applicants for one of the best hybrid LTC policies for people under age 71. Other insurers are likely to follow.

Long-term care insurance: The basics

Traditional, annual-premium LTC insurance policies got a bum rap in recent years, as insurers unexpectedly raised the annual premiums. Then along came a new era in long term care policies — the “combo” or “hybrid” policies, most of which are based on a life insurance policy and offer a fixed one-time premium, or a series of fixed payments.

Combo policies offer both an expanded pool of benefits to be used for long-term care costs and a death benefit for the heirs if the care isn’t used (or a guaranteed return of premiums paid). Premiums can’t rise along the way because you either make one single deposit or, depending on your age, have the choice to spread out your deposits from five to 15 years. Either way, your premium will buy you an expanded guaranteed benefit pool of tax-free cash and/or a death benefit.

For example, Brian Gordon of Murray A.Gordon Associates Long Term Care experts (800-533-6242) offers this example of a combo policy for a single 60-year-old single woman using the Securian (Minnesota Life) SecureCare product.

The quotations assume good health at time of purchase, and a 90-day elimination or “waiting” period before benefits begin after a physician certifies her inability to do two basic activities of daily living or she becomes cognitively impaired. SecureCare pays out a cash indemnity monthly benefit, which means you could use the money to pay anyone, even a relative, to care for you, or to pay for a home health care aide or a care facility.

A single deposit of $100,000 into SecureCare would generate an initial monthly LTC benefit of roughly $4,000 per month, for six years — a total initial pool of benefits just over $318,000. But because a 3% compounding inflation rider was added, at age 85 the monthly benefit will increase to over $8,500 per month, for a total available LTC pool of $666,291 — more than 6.5 times her initial premium. Should she die without using the care, her heirs would receive a death benefit of nearly $110,000.

If instead of a single deposit she chose to deposit her $100,000 over 10 years — $10,000 per year, the overall benefits would be reduced by about 10%.

Act Now — Prices rise soon

David Phillips notes that a 60-year old married man could today make a $100,000 deposit into a policy with a 5% inflation rider that would increase his LTC benefits to over $1 million by age 85. But after prices rise on July 15, it will take an initial deposit of roughly $113,000 to get the same benefit.

It’s important to be guided in your purchase of LTC insurance by an independent and knowledgeable agent. I can highly recommend these three independent agents. (Note: I receive absolutely no benefit from these recommendations.)

—David Phillips at Estate Planning Specialists, 888-892-1102 or www.ropltc.com

Sadly, it has taken a pandemic to demonstrate the need for long term care insurance. But now you know. And if this purchase makes sense in your total finances, now is the time to act. That’s The Savage Truth.

A PICTURE IS WORTH A THOUSAND WORDS! Thanks to Tom Riekse, Jr of www.LTCIPartners.com for this chart below:

By David T. Phillips, CEO, 9/17/19
Estate Planning Specialists

The other day I met new clients for the first time, Jim and Debbie. I asked them to bring, among other documents, their current insurance policies and their Wills to the meeting. Jim and Debbie are in their early 40s and have twin daughters, Dana and Donna, age 10. While reviewing their current life insurance policies, I noticed a huge hole in their estate plan: the beneficiary designations of their policies were a mess. A mistake that we immediately corrected.

Here is what I read:

Jim’s Policy Primary Beneficiary: Deb, spouse of the insured. Contingent Beneficiaries: Dana and Donna, children of the insured.

You should never name minor children as direct or contingent beneficiaries of your policies, since a life insurance company can’t pay out proceeds directly to children until the children reach the age of majority, typically 18 or 21 depending on your state law.
 
In most jurisdictions, to protect the interests of a minor, state law requires appointment of a guardian or trustee to administer proceeds payable to the child. Appointment proceedings will delay access to the death proceeds and generate unnecessary legal and administrative expenses. Furthermore, the fiduciary named by the court may not be the one the insured would have chosen if they had made this decision during their lifetime.

This is what Debbi’s policy read:

Deb’s Policy Primary Beneficiary: Jim, spouse of the insured. Contingent Beneficiaries: (none indicated).

You should always designate a contingent beneficiary in all of your life insurance policies, and in most cases, the beneficiary designation should be worded in a way that will best benefit your children.
 
Having no named contingent beneficiary is the same as naming your estate as the beneficiary. Is this a bad thing? It can be; in the absence of a Will designating a guardian or trustee, the courts will intervene, which may cause long, frustrating delays. The courts could also impose restrictions on how the proceeds will be spent or distributed, which may be contrary to what you would have wanted for your children.
 
While Jim and Deb have gone to great lengths to protect their children (that’s a major reason they purchased the life insurance), they needed proper advice when establishing their policy in the beginning. It is also important that the beneficiary designations allow for the distribution of the life insurance proceeds in the most disciplined manner possible to provide maximum benefit to the children when you are gone.
 
Okay—here are some practical ways to ensure that minors, through the people entrusted with their care, have access to the life insurance proceeds intended for them:

Option 1:

Make the contingent beneficiary of the insured’s life insurance policy a Testamentary Trust in your Will.

The terms of your Will can contain this trust, which does not spring to life until your passing. Referencing the trust in the Will is a precise way to ensure that your exact wishes for your children are followed. The trust, which is a legal document, names the person you choose as the Trustee, and describes how you would like to have the money managed and spent and for how long. An 18-year-old may be an adult under the laws of many states, but the client’s testamentary trust could be written to keep the newly-minted adult from blowing the money.

• In this case, the contingent beneficiary section of the life insurance application should state: (Trustee’s Name) as Trustee under (Article X) of (Jim or Deb’s) Last Will and Testament dated (January 1, 20XX).

Option 2:

Taking advantage of the Uniform Transfers to Minors Act (UTMA)

is an excellent way to ensure that children receive proceeds from a life insurance policy, especially if you have not yet executed your Wills. Under the UTMA, you would name an adult custodian who is given the discretion to make distributions for the minor’s welfare. The UTMA account (which is essentially a statutory trust) allows parents to choose a custodian—a person they trust—who would manage the life insurance death proceeds, and other assets they might have in the account, as they see fit prior to the children reaching majority.

• Some insurers have a specific form to assist in making a beneficiary designation with UTMA custodian the beneficiary or contingent beneficiary of a life insurance policy.
• If no special form is available, the following wording would generally be accepted: (Custodian’s Name) as custodian for (child’s name) under the (State) Uniform Transfers to Minors Act. Note: you should confirm with the insurance company for the specific wording they would accept.

Option 3:

Designate a Revocable Living Trust (Family Dynasty Trust) as beneficiary or contingent beneficiary in place of the child directly.

This is similar to the testamentary trust referenced above, except that a Living Trust exists at the moment it is executed, whereas the trust in a Will (testamentary trust) begins its life only at the insured’s death. Like the trust in a Will, a Living Trust allows the insured to detail the terms and conditions of gifts and plan for every contingency. The only downside of this type of trust is that it will require some level of administration from the outset. If you have a child with special needs, you absolutely should have a living trust. If your net worth is in the tens of millions, it’s a no-brainer, and in that case, you might want to establish an Irrevocable Dynasty Trust as well.
 
Should you have any questions regarding your beneficiary designations, give us a call, 1-888-892-1102.

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By David T. Phillips, CEO
Estate Planning Specialists Because you recently asked me to send you our Special Report on the new Return of Premium Long Term Care Plan I wanted to share with you a conversation I had the other day with a client when telling her the good news that she was approved for coverage.

Bonnie (not her real name) is a single, 58 year old nurse from Michigan. She called us a few weeks ago, after reading about my firm and The ROP LTC Plan in Bob Carlson’s Retirement Watch newsletter. After a series of discussions and illustrations, she completed an application and the interview with the underwriter. She was now approved and it was time for her to transfer the funds to bind her coverage.

While these are not her exact words, this was the gist of our conversation:

“Thank you David for making this happen. With my ROP LTC Plan, I now have options. Before today, I really only had one option, and that was to hope my savings and retirement plans lasted through any long term medical situation I might experience. I mean, as I nurse I have seen it all. I know firsthand that anything can happen.Now with my ROP LTC Plan in force, I have options.

Let’s say, 10 years from now, I slip and fall on the ice and find myself disabled. Since my ROP LTC has an Indemnity pay out after 90 days, I will have plenty of tax-free cash to do as I please.If I want to have my friend Charlotte move in and take care of me, I can.
 
If I want to relocate to Florida so my daughter can watch over me, I can.  And in both cases I can pay them a tax-free salary, from the cash I will receive from my ROP LTC Plan.

If I want to stay here in my home in Michigan and have a professional care giver take care of me, I can. In that case I will be able to use the tax-free cash from my ROP LTC Plan to pay for my care and will not be forced to deplete any of my other assets.

If I want to move to “Friendship Village” and have them take care of me, I can use the cash from my ROP LTC Plan to pay for it.Point is David, I have options, plenty of them.  Before I talked to you, I really only had one option and that was to spend down all of my cash first, then sell off everything else.
 
Now I have endless options.  And what’s more,
it really isn’t costing me anything.
 
I just transferred $100k from a silly CD that was set aside to pay for a potential LTC event.  Now I am initially leveraging that $100k by a factor of 3, and because I have included an inflation rider that factor will increase as high as 6 times.

Furthermore, if I get lucky and am one of the 20% that miss the LTC train, all of my deposit is returned to my ultimate beneficiaries at my passing.  It is just like you said when I first called you.  I transferred my CD funds from my left pocket to my right pocket and the money is still on my balance sheet, but now I have options.
 
All it is costing me is the use of that CD money through the years and SO WHAT.  I was hardly earning any net after-taxed interest anyway.  And had I invested it in the market when it came due, chances are I probably would have lost it anyway.
 
Now I have options – so many options.
 
David, I can’t imagine why everyone else doesn’t jump on this opportunity while they can.”
 
Bonnie absolutely gets it and she is right!  Everyone should know about the leverage and benefits of the ROP LTC Plan and the peace of mind it creates.
 
With the ROP LTC Plan, Bonnie is confident in her future and doesn’t worry about tomorrow. Best of all, since every aspect of her ROP LTC Plan is completely guaranteed, she will NEVER have to worry where the cash is coming from to take care of her, should her LTC train arrive at the station.   

Your first step is for you to find out for yourself what your ROP LTC Plan would look like should you reposition some of your assets. For your convenience, simply complete the ROP LTC Analysis Request Form CLICK HERE to submit your Request online and we will send to you at no cost your personalized ROP LTC Summary.

Feel free to call our office if you have any questions – 1 888-892-1102

Estate planning is the act of preparing how your assets will be distributed at death. It is often touted as money planning. Who gets what and when do they get it? But the real issue is people and the problems they face at your death. Spouses, children, grandchildren, dependents, business partners, and others will suffer not only emotionally but also economically if you fail to plan. Taking care of people problems is the main objective in estate planning. Estate planning is people planning.

In our business we meet wealthy people daily. We’ve always had a difficult time understanding why a large number of affluent American’s with huge estate tax liabilities refuse to address planning their estates. But even if your estate isn’t as large as Michael Jackson’s, the last thing you want is to leave behind a frenzy of loved ones fighting over your estate. When done correctly, you can leave a clear, concise and well managed plan to distribute your assets so your family and loved ones can focus on bonding and start the healing process.

We spend a lifetime raising families, creating income, taking care of people, and planning for the future, and in an instant it can end. We lose our opportunity for a plan of continuation if we fail to plan before death. Estate Planning is really living planning. Generally, the planning takes time, thought, and guidance and can appear complicated and confusing. But take heart, it can be simplified.

We’ve spent years trying to make estate planning easy. Here’s how to get started:

• Order your comprehensive Estate Analysis and complete our Personal Estate Profile form.