Amy and Jeff W. reached out to me just days after Jeff’s father had passed away. Along with other family members, they had cared for Jeff’s father for three years. Their experience convinced them they needed a plan that would protect their family from having to care for them. They didn’t know where to begin.
Our first meeting was all about discovering what was really important to them.
Self-insuring seemed like a viable option to them. Of course, that’s what Jeff’s father had done. But he’d had very limited resources – and those were depleted within six months. Amy and Jeff have already built up substantial amounts in their 401ks. They expect these assets to continue to grow over the next 30 years when they will each be 84 years old – with a high probability of needing some personal care.
They told me that a $200,000 CD in their portfolio would mature within the month and they were disappointed in the renewal rate of 1.62%.
I suggested they look at a hybrid long-term care policy, such as the Lincoln MoneyGuard Reserve. A hybrid plan links life insurance to protection for long-term care expenses with the same premium dollars. In other words, they could use either the long-term care benefits or – if care is not needed – the death benefit.
If they each used $100,000 of the CD to create two hybrid plans, they could each have a plan that provides $600,000 in protection against the cost of long-term care needs or $180,000 of the death benefit if they never use the long-term care account. The policy provides income tax-free reimbursements for qualified long-term care expenses. Or, if the insured uses the life insurance, the policy pays tax-free benefits to the beneficiaries.
Plus, the $100,000 buy-in can be spread over 3, 5, 7 or 10 years. And the premiums will not increase.
The policy grows by a guaranteed 4% interest rate, and the long-term care account inflates by 3% annually.
Jeff and Amy can also elect to have their premiums returned via an optional return of premium rider that provides a money back guarantee. The initial premium payment minus any loans, withdrawals or benefits paid can be returned to them.
By implementing a hybrid plan, Amy and Jeff can draw on the tax-free policy benefits while preserving their 401k assets.
If you have questions about the details of how hybrid policies work, please give me a call at 914-242-3250.
Nancy’ Gould’s article, “Hybrid Policies,” appeared in the Fall 2017 WESTCHESTER SENIOR VOICE MAGAZINE http://westchesterseniorvoice.com/