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chuck@charlesjgoldman.net
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Your Hybrid Life + Long-Term Care Insurance (LTCi) Resource for Complex Estate, retirement & Elder Care Planning

Estate plans should optimize exclusions, discount estate assets, transfer asset growth outside the estate and reduce estate taxes. The average cost of a LTCI claim in Greater Boston and in much of New England is now approaching the $300,000-$400,000 range. If we encourage our clients to insure for an estate tax liability of similar amounts, why would we not also encourage them to insure for an LTC liability of similar amounts ?

For affluent households (those who are not exposed to an estate tax under current law but have estates in the $2M-$11M range), the costs of LTC have become the new estate tax. So, though their estates will not likely be diminished by a 40% estate tax on amounts over an exemption, their retirement portfolios will likely be decimated by similar amounts paid to the various providers of LTC services. Not purchasing Hybrid Life + LTCI threatens estate plans and jeopardizes their ability to leave a legacy. Also, what if they lack the liquidity to pay out-of-pocket for LTC services and are forced to sell assets during down markets, or take out a reverse mortgage to pay their LTC expenses, ultimately jeopardizing the ability to keep the family home?

Life insurance is usually the best way to create a legacy for your loved ones. At the end of 2019, Congress eliminated most of the advantage of the Stretch IRA. However, Life Insurance with an Accelerated Benefit Rider is an excellent substitute, as up to $15,000 per year can be gifted to each child and grandchild as the dividends and cash surrender value grow tax-sheltered.

One A++ insurer offers the most competitive premiums to insureds as young as age 19, pays out monthly LTCI benefits in cash, with a policy that’s paid up to age 121 - ensuring that your beneficiaries will receive their income-tax free death benefit, even if the insured should live beyond age 100.

For HNW clients (those whose estates are large enough to pay estate taxes), A ULIT (Ultimate Life Insurance Trust) may be used, which is a type of ILIT for the purposes of getting LTCI rider benefits from the trust. The ILIT is made “defective” for the purpose of being able to access funds from the trust using arms-length fully collateralized loan provisions. The loan must be legitimate — secured by property pledged by the Grantor/Insured, with interest charged and an agreement to fully pay back the debt. Collateral can be anything that covers the debt; a house, artwork, coin collections, etc., as long as the asset has a legitimate fair market value. Collateral can be pledged all at once or can be pledged along the way as long as there is always adequate collateral pledged to cover the full amount of the current loan balance. 

The interest rate charged should be at least equal to the guaranteed interest rate charged on the life insurance policy (although in this concept there will be no loan taken against the policy itself). Because a larger interest debt allows for more funds to be paid from the estate to the trust, using an appropriate interest rate on the high side may work best. 

LTCI planning is an indispensable part of every client’s retirement plan, and now that a terrific Hybrid policy is available, it is our fiduciary responsibility to provide each of our clients with all the applicable LTCI strategies.

I offer free webinars to attorneys, CPAs and investment professionals so that they can become comfortable with a complex area of practice. Let’s chat about which strategies work best for your clients.

Let’s have a conversation.

Hybrid Life + LTCI For your Business

Once reaching age 65, there is a 70% chance that we will need LTC, while the average cost of a private room in Boston-area nursing homes are in the $14,000-$17,000 per month range. Covid-19 transformed Hybrid Life + LTCI into nursing home avoidance insurance, as the trend toward receiving care at home is here to stay, yet 24-7 care at home is even more expensive than a nursing home.

40.4 million people in the US, or about 20% of workers, provide unpaid care to an older adult in need, and for caregivers who opt to exit the workforce, the lifetime associated costs are approximately $300,000 in lost wages and retirement benefits. And researchers say that presenteeism—the problem of workers being on the job but, because of illness or other medical conditions, not fully functioning—can cut individual productivity by one-third or more.

94% of caregivers would stay with an employer that provided relevant caregiving benefits/resources, and employees purchase the majority of their insurance coverage through work. Yet, only 43% of employers believe their employees are interested in voluntary benefits. This disparity provides room for a win-win for both the employer and employee.

What can employers do? Traditional group insurers have left the market and most workplace carriers provide products with inferior benefits. However, one insurer now provides superior coverage and, with a minimum of just three lives, will streamline the application process so that your valued employees can remain productive.

Two options can be considered, the Executive Carve-Out and Voluntary Worksite plan:

Executive Carve-Outs enjoy liberal ERISA treatment, meaning a portion of the premium is tax deductible even though you may form a group with as few as three partners and/or key employees; it is 100% portable at the same rates; has cash benefit (indemnity) claims payments; reimbursement of the 90-day waiting period in month 4; deductible policies for spouse/partner and dependents; guaranteed premiums and benefits; those under age 62 may skip the cognitive part of the application; and multiple premium payment and coverage options.

The sad reality is that the vast majority of the middle class cannot afford LTCI. However, in some Voluntary Plans, employees are eligible to apply for coverage as young as age 30. When is the best time to discuss buying LTC coverage with clients? Anytime the client is willing and able. The younger the client, the better, since the policy will be more affordable and getting approved for coverage is more likely. Clients who are still working are often more open to buying LTC coverage since they still have income coming in. And if a client is dealing with a parent’s LTC needs, they are more like to see the need in planning for themselves.

Plus, with Pay-To-Age 65 and 100 options, the premiums may be low enough to become affordable since they will be spread over decades. And if the employee leaves the firm or retires, the premium and coverages stay the same.

I’m fortunate to be working with LTCI Partners, an experienced team of experts who provide excellent support to both myself and my clients, as well as being truly committed to the mission of extended care planning. You can check their website out at www.ltcipartners.com

Hybrid Life + LTCI For your Family / Property Casualty insurance

Great news in the LTCI marketplace! Everyone needs LTCI, but for the last 30 years the insurance industry had been unable to design a product that makes financial sense—as a result, of the 125 insurers that were competing in the marketplace, fewer than 10 remain.

The insurers’ actuaries underpriced the premiums of standalone LTCI due to the prolonged historically-low interest rates and much lower-than-predicted lapse rates of in-force policies. And insureds became frustrated with a series of premium increases and the use-it-or-lose-it problem—it coverage is never needed, all the premiums stayed with the insurers.

Since mid-2019, however, an insurer is finally providing a Hybrid product that is competitively priced; has guaranteed premiums (no risk of future rate increases); guaranteed benefits (no risk of future benefit decreases); cash payment of claim benefits (no submission of receipts); the option to receive informal care from family, friends or unlicensed caregivers; 3% or 5% inflation options; excellent leverage (for each dollar of premium, there are 3x to10x more dollars in the asset pool, depending on one’s age); and the waiting period retroactively becomes a 0-day waiting period, as the insured receives 4 monthly payments in month 4 instead of getting only 1 payment.  Why is this important? Since almost 50% of claims close by the end of Year 1, it is far better to receive 12 monthly checks rather than only 9 (for example, an 85-year-old insured who is guaranteed $10,000 per month, she would get $120,000 instead of $90,000.)

This combination of pricing and coverages is unprecedented.

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Protecting your assets is at the heart of proper risk management. As a self-employed insurance broker for more than three decades, we have placed our business exclusively with HUB International New England since 1997. HUB is the largest broker in MA and fifth largest worldwide based on revenue, so clients enjoy access to all the insurers in the marketplace, as well as to a large and diverse team of talented specialists and support staff.