According to the U.S. Department of Health & Human Services  60% of Americans who reach age 65 will need some form of Long Term Care. Hopefully you are one of the 40% of Americans who reach 65 who will not need Long Term Care during your life time; but we certainly consider the statistical odds when planning our clients retirement.  http://www.tdi.state.tx.us/consumer/hicap/hicapltc05.html (June 2006) http://www.cms.hhs.gov/ (June 2006)
Let’s take a look at the current cost of long term care. Read slide As you can see the cost of Long Term Care is not cheap. http://seniorjournal.com/NEWS/Eldercare/2008/8-04-30-Long-TermcareCosts.htm
When I’m talking with my clients about the need for Long Term Care coverage there are basically just 2 reasons to have coverage. The first reason is to protect their spouse from the cost and the second reason is to protect their estate from the cost.
There are a couple of ways to cover the cost of long term care. First of all, you don’t have to buy Long Term Care insurance. If you have a boat load of money and more monthly income than you can spend you might be able to be self insured. The question is how long could you afford to pay $6,000/month and what would that do to your estate? If Long Term Care insurance makes sense for a client, there a 2 ways to buy it. The traditional way is to pay monthly or annually for the insurance. The cost of this insurance will vary based on the benefit you are seeking and your age. If you need Long Term Care, the policy will begin to pay the long term care benefit. If you never need long term care what do you suppose happens to all the money you paid for the insurance all those years? The insurance company keeps it. The other way to purchase long term care insurance and the only way to be certain that someone will benefit from it is asset based long term care. Insurance has changed a lot over the years and now we have life insurance policies that have long term care included. If you need long term care the policy will pay the benefit and if you never need it your beneficiary will collect the tax free death benefit. The other feature of the asset based long term care policy is that if you ever change your mind and don’t want the coverage anymore you can cancel the policy and get back all the money you originally put in. http://seniorjournal.com/NEWS/Eldercare/2008/8-04-30-Long-TermcareCosts.htm
(Go through bullet points)
Now since we’re n the topic of insurance, how many of you own life insurance policies? Life insurance policies are often one of the neglected things we own. They need to be checked on from time to time. One of the ways to check on a policy is by getting an in force illustration from the issuing company. This illustration will show you how your policy is performing and how long it will last. We expect them to last for the rest of your life. Sometimes they can expire worthless while your’e still alive, other times we find that the policy is very good and other times you may be able to improve on the policy that you have. These illustrations really help to diagnose any problems and it’s very easy for us because we do it all the time for our clients.
A 1035 exchange is when we move money from an existing annuity or life insurance policy to another annuity or life insurance policy on a tax deferred basis. You have to be careful when considering a 1035 exchange, there may be penalties on moving an existing annuity and you are locking up the money for another term specific to the new annuity. On the life insurance side there are several factors to consider. The cash value vs the surrender value as well as the cost of the new policy and new surrender period.
We evaluate policies for our clients all the time and don’t charge for that service.
Americans reaching age 65 and Long Term Care Needs U.S. Department of Health & Human Services Centers for Medicare & Medicaid Services 2006.
Today's Costs of Long Term Care <ul><li>The average costs in the United States (in 2009) are: </li></ul><ul><li>$6,000 /Month for a semi-private room in a nursing home </li></ul><ul><li>$7,000/Month for a private room in a nursing home </li></ul><ul><li>$3,131/month for care in an Assisted Living Facility (for a one-bedroom unit) </li></ul><ul><li>$21/hour for a Home Health Aide </li></ul><ul><li>$19/hour for a Homemaker services </li></ul><ul><li>$67/day for care in an Adult Day Health Care Center </li></ul>Source: http://www.longtermcare.gov/LTC/Main_Site/Paying_LTC/Costs_Of_Care/Costs_Of_Care.aspx#What
<ul><li>To Protect Your Spouse From the Cost </li></ul><ul><li>To Protect Your Estate From The Cost </li></ul>Two Reasons To Have LTC
Two Funding Options <ul><li>Self Insure </li></ul><ul><li>How long could you afford $6,000 per month? </li></ul><ul><li>Private Insurance – 2 Ways </li></ul><ul><li>1. Traditional Long Term Care Insurance </li></ul><ul><li>Pay annually </li></ul><ul><li>2. Asset Based Long Term Care Insurance </li></ul><ul><li>One Lump sum </li></ul>The cost of Long Term care insurance will vary based on age and health status. Long Term Care Policies will normally have a 30 to 90 day waiting period after admission to a long term care facility before the long term care policy begins benefit payments.
Important disclosures <ul><li>MoneyGuard ® Reserve is a universal life insurance policy with a rider that accelerates the specified amount of death benefit to pay for covered long-term care expenses. An Extension of Benefits Rider (EOBR) is available to continue long-term care benefit payments after the entire specified amount of death benefit has been paid. The cost of this benefit will be deducted from the policy account value and will vary based on the specific contract. In the following example the cost of this rider is $38.45 a month. </li></ul><ul><li>The Return of Premium Rider (ROPR) is included at issue with no ongoing cost (single premium only). Guarantees are backed by the claims-paying ability of the issuer and are subject to policy terms and conditions. </li></ul><ul><li>This policy has exclusions and/or limitations which are a two year suicide and contestability provision applies (one-year in some states). </li></ul><ul><li>This material was prepared to support the promotion and marketing of a universal life insurance product. Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Any tax </li></ul><ul><li>statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein. </li></ul><ul><li>MoneyGuard Reserve is issued on Policy Form LN850 (8/05), Return of Premium Rider on Form LR850 (8/05),Convalescent Care Benefits Rider on Form LR851 (8/05), and Extension of Benefits Rider on Form LR852(8/05) and state variations, by The Lincoln National Life Insurance Company, Fort Wayne, IN. Products and features are subject to state availability. Not for use in MA and NY. </li></ul>
Solution <ul><li>MoneyGuard Reserve Benefits </li></ul><ul><li>Provide for an LTC Program by repositioning assets </li></ul><ul><li>Choices where you want to receive your care </li></ul><ul><li>Provide Tax Free death benefit to your children if you don’t need Long Term Care </li></ul><ul><li>100% Return of Premium </li></ul><ul><li>Guaranteed never to have a Rate Increase on your LTC Plan </li></ul>Plan: MoneyGuard Reserve offered by The Lincoln National Life Insurance Company
Asset Preservation Strategy MoneyGuard Reserve <ul><li>Based on a 65-year-old female non-smoker in good health </li></ul>Premium $57,690 Death Benefit $100,666 Long-Term Care Benefit $201,332 or Money Back Guarantee Choices on where to receive the care Plan: MoneyGuard Reserve offered by The Lincoln National Life Insurance Company. Policy Form LN850 (8/05), ROP Rider – LR850 (8/05), CCB Rider LR851 (8/05) cost $4.23/month EOB Rider LR852 (8/05) cost $38.45/month Income Tax Free
<ul><li>IN FORCE ILLUSTRATIONS </li></ul>LIFE INSURANCE You should also recognize that a policy which has been in existence for a period of time may have certain advantages to you over a new policy. If the policy coverage's are basically similar, the premiums for a new policy may be higher because rates increase as your age increases. Under your existing policy, the period of time during which the issuing company could contest the policy because of a material misstatement or omission on your application, or deny coverage for death caused by suicide, may have expired or may expire earlier than it will under the proposed policy. Your existing policy may have options which are not available under the policy being proposed to you or may not come into effect under the proposed policy until a later time during your life. Also, your proposed policy’s cash values and dividends, if any, may grow slower initially because the company will incur the cost of issuing your new policy. On the other hand, the proposed policy may offer advantages which are more important to you.
IF ANYONE IS UNHAPPY WITH A CURRENT ANNUITY OR LIFE INSURANCE CONTRACT, YOU MAY HAVE A WAY OUT! E X I T E X I T E X I T E X I T E X I T E X I T E X I T E X I T E X I T E X I T New surrender charges and Fee’s maybe incurred.
HOW MANY PEOPLE HERE KNOW ABOUT FORM 1035? Tax Deferred exchange may not be appropriate for everyone. In most cases a new life insurance and Annuity policy will have a new surrender charge schedule , which may extend beyond that of the original policy. The cash value will be reduced by premiums paid and other costs and charges for the new policy. Life Insurance cash value may be reduced by cost of insurance and by surrender charges. Coverage is based upon approval from underlying insurance companies approval.There may be unfavorable tax consequences caused by surrendering an existing policy, such as a potential tax on outstanding policy loans. New surrender charges and Fee’s maybe incurred.
Tax Deferred exchanges may not be appropriate for everyone. Things to consider before you 1035 exchange an annuity 1. You could incur a penalty on the existing annuity 2. You may loose a death benefit that exceeds the current value of the annuity 3. The new annuity will have a new surrender penalty. 4. The new surrender period could extend beyond the original policy. Things to consider before you 1035 exchange a life insurance policy 1. The cash value on the existing policy will be reduced by the cost of the new policy 2. There may be surrender charges that will reduce the cash value 3. New surrender charges & fees may be incurred. 4. There may be unfavorable tax consequences caused by surrendering an existing policy, such as potential tax on outstanding policy loans.
ARE YOUR ANNUITY CONTRACTS OR LIFE INSURANCE POLICIES DUE FOR A CHECKUP? Actual Premium will vary based on underwriting results based on age, gender, and state of health. Not all clients will qualify for coverage. Death benefit is guaranteed by the claims paying ability of the issuing insurance company. The issuing company’s credit rating should be considered when contemplating a purchase. New surrender charges and Fee’s maybe incurred.
WE'LL LOOK AT THOSE POLICIES FOR YOU AT NO CHARGE! IT IS A COMPLIMENTARY SERVICE WITH US ! Actual Premium will vary based on underwriting results based on age, gender, and state of health. Not all clients will qualify for coverage. Death benefit is guaranteed by the claims paying ability of the issuing insurance company. The issuing company’s credit rating should be considered when contemplating a purchase. New surrender charges and Fee’s maybe incurred.