The Ultimate Tools to Longevity Risk Planning in 2011 and Beyond

This niche is set to become the Holy Grail to Medicaid and Veteran Benefit planners who are seeking answers to the complex strategy of qualifying the single client for entitlement benefits, due to the challenges presented by the extended look-back period of any transfers done within five years. The Deficit Reduction Act (DRA) has made it a bit challenging and limited for these clients. With the aging population, many of financial and estate planning techniques that have been used for years need to be revisited and revised. It has been estimated that 80 percent of women outlive their husbands by seven to 10 years as widows. The sad reality is that the financial advisors or “safe money” advisors, whatever they portray themselves as, have unfortunately not addressed the true risks to the pre-retired community. These risks are the direct economic impact to the client for the enormous cost of health care and catastrophic illness expenses that are costing families and spouses their life savings.

Case Study: Ethel, who is 85 and needs full-time nursing home care, plans to apply for the Medicaid program benefits to help cover the new cost of her care. She has $100,000 in CDs and savings that she had planned to leave to her daughter, Kim, 52, and to her son, Mark, 55, to help cover her grandchildren’s’ education expenses. Under Medicaid rules, Ethel would need to spend the $100,000, completely depleting the legacy she has worked hard to create. The usage of the single premium whole life insurance policy would name Kim and Mark as the rider beneficiaries. Since Kim has three daughters and Mark has one son, Ethel wants the death benefit to be paid out to Kim and Mark in a 10-year payout at 75 percent to Kim and 25 percent to Mark. Ethel also designates Kim as the policy beneficiary to receive $1,000 in lump sum death benefit. Kim would receive a monthly income for 10 years of $619 and Mark would receive a monthly income of $265.

A new era of single premium life products is intended to provide a limited guaranteed death benefit and cash value that meets the Medicaid rule standards to fully exempt assets in order to qualify for government entitlement benefits. By the use of this type of whole life policy, there is no underwriting requirement or any physical in order to qualify, because it is a guaranteed-issue life insurance policy. Using this type of life insurance, clients can still maintain peace of mind from the enormous expenses of LTC costs and offer guaranteed death benefits for their family. These are two things in life that are certain- catastrophic illness/nursing home spend down and death.

With this product, if our clients live another 30 years, they can know that they can leave their legacy to their children and grandchildren while also protecting their hard earned assets from the costs of long-term care.