Will you and Your Spouse Need Long Term Care as you Age?

The shaken 8 ball says…………………”probably”
According to government statistics if you live to age 65 there is a 70% chance that you will need Long Term Care of some kind after that point.  This could be anything from a family member helping you day to day at home, a nurse professional at home, all the way to full time care needed at a long term care facility.

This is not an easy topic to think about or discuss but with tens of millions of people who will find themselves in that position in the upcoming years it is mandatory to get over the uncomfortable nature of the topic and discuss options.  You basically have 3 options at your disposal:

  1. Do nothing and hope you are in the 30% that needs nothing of the sort or pray that if you are one of the 70% you won’t need “much” care and maybe a family member could help when the time comes
  2. Plan ahead and purchase a long term care insurance policy for you and your spouse and pay monthly premiums that would cover you both (to what degree is very much individual company and policy driven)
  3. Structure your existing assets to create a “hedge” or “cushion” that could pay for long term care or home health care expenses and possibly without any monthly premiums payable. Typically referred to as “Asset based long term care”

The first option is what most people choose and it’s hard to blame them because it’s without a doubt the easiest (currently) decision to make.  Most people decide by not deciding or being properly educated about the other two options that are available.  Surely, you and your spouse will fall into the minority group of 30% or into the “Not too expensive or long” group of people in the 70% majority that will need some type of care; right?

If you are correct with your hope and wish, and both you and your spouse don’t need long term care help in your later years, than you have dodged the proverbial bullet.  If, however, your bet is a loser then you run the real possibility of not receiving the care you need or receiving the care you need but at cost of draining all the assets you have worked so hard to accumulate during your lifetime.  You run the risk of leaving behind little to no estate for your family or cherished causes.

Many people who find themselves needing long term care, but haven’t planned for the possibility, end up attempting to transfer assets out of their names into family member’s names or trusts to appear poor so they can have their care paid for by the government.  This strategy is wrong on many levels.  First there are very specific time tables when those transfers will have had to occur BEFORE you knew you needed long term care (usually years before) and most people fall well short of meeting these time tables.  This will mean you will have to exhaust almost all your assets before any help from Uncle Sam kicks in to help.

If the government is involved and paying for your care, do you think you will get the best care available allowing you to extend your life; in time and in terms of quality of life?  Just look at the VA health system and realize you will likely be getting the same sub-standard care.

Also, I have always wondered why the government should have to pay for someone’s long term care? I am not talking about the truly poor and needy as I think we have enough wealth to provide needed safety nets to that group of people.  I am talking about people who have worked their entire lives and built up assets.  Those assets are meant to be used to make your life better and if you leave money behind to your family that is an added bonus.  We are not supposed to fleece the system because we refused to plan accordingly when we had the means and ability to do so just so we can leave our family behind a chunk of money.  If you want to pay for your care and leave money behind to your family then this will require knowledge and planning.

The second option is to take out long term care insurance policies for you and your spouse.  This can be a great way to plan ahead for the possibility of needing long term care in the future.  These premiums will not be inexpensive but neither is long term care or eventual poverty.  There are many variables to these plans based on the kind of coverage you’re looking to obtain.  The upside is you will have an insurance policy that will pay out monthly to help you and your spouse pay for long term care expenses (make sure you can use the policy for home health care as well as actual long term care facilities) should they occur.  Terms and amounts will vary widely so if this is the way you decide to plan for these expenses find an agent who has much experience and knowledge about these kinds of policies and has access to several of the top carriers in this arena.

The downside of this option is that many people can’t afford the premiums and even if they can afford them, if they never use the policy they don’t get the money back (in almost all cases) just like your car insurance.  If you don’t file a claim on a car they don’t send you back all your premiums because if they did the entire system would become insolvent.  It is very possible that you could pay tens and even hundreds of thousands in premiums and yet never need the coverage.  This is a thought that drives many crazy and causes some not to decide to use this option.

The third option is called “Asset based long term care” and it has several variations.  Let’s talk about the most common use of this strategy.  A person might opt to take a sum of money and open up a specifically designed life insurance policy.  Most of these policies are opened up with a very specific goal of generating a death benefit but that “death benefit” can be accessed during the applicant’s lifetime to pay for long term care expenses.  The applicant put in a certain amount of money (could range from $50,000 to $200,000 per applicant) and buys a life insurance policy on themselves.  Let’s use $50,000 one time single premium into the policy that buys a $200,000 death benefit and that death benefit is guaranteed not to go away after that single premium.

This is not done to have the $50,000 premium actually perform and do anything except generate the bigger death benefit.  However, there will also be cash value generated that can be accessed should the policy owner choose to in the future.  Any loans taken from the policy will reduce the eventual long term care payout.   There is a rider built into this type of policy that allows you to access your death benefit early should you need long term care. (Make sure the policy will allow you to use the benefit for home health care as well as going to a facility)  So in this case you could draw up to $200,000 to pay for long term care expenses.  If you went into a facility this would be enough to pay for about 3 years of care (depending upon where you live and what kind of facility you enter) and if you can stay at home your money would typically last longer assuming it is part time nursing or family members coming in to help you live.

What happens if I live longer than the benefit?  You will then start using other assets or consider putting in more money up front to generate a bigger death benefit.  Maybe $100,000 would generate $350,000 worth of death benefit that could be drawn on later for long term care.  There are also certain policies that might have a “lifetime long term care benefit” after that initial period of coverage is spent you might be able to pay some nominal annual premium on top of the upfront premium already paid years beforehand.  There are many options depending on the company and product chosen.

What happens if I die and never need the long term care benefit?  Simple, this is a life insurance policy so the $200,000 death benefit is paid out tax free to your heirs.  So with that up front premium you either get a higher multiple to use for your eventual long term care or you leave that amount behind for your family.

We hope this article helps shine some light and makes you aware of the options for you and your family. If you would like more information on asset based long term care please email us at info@wealthwithoutstocks.com

2017, The Year to Shatter the Myths of Whole Life insurance

There are many myths about life insurance that most people unfortunately consider as facts. Most of these myths are perpetrated by Wall Street and people who want every nickel of your money in the market under their management. The first huge myth is “buy term and invest the difference” and this one is so big it required its own article to debunk.

Myth #2

Life insurance is a lousy place to put money

What I described in previous articles about designing policies is very true but there are also some other facts that blow this myth away. Simply ask yourself this question, if putting money into life insurance contracts is such a lousy place to put money, why do the biggest and most wealthy institutions put loads of their own money into life insurance products? Major Banks, large corporations, and family dynasties have been putting boat loads of money inside these kinds of policies for generations. Are they that stupid about money? Not hardly. They are very savvy with money which is why they use life insurance contracts and other products to grow and protect their wealth.

Major Banks High Cash Value Life Insurance
As of 12/31/2014, Federal Financial Institutions Examinations Council Call Reports

JPMorgan Chase 10.6 Billion Dollars
Wells Fargo Bank 17.995 Billion Dollars
Bank of America 20.794 Billion Dollars
PNC Bank 7.699 Billion Dollars

Whole life insurance is too expensive

When someone tells me that I will simply say “in relationship to what?” If you are just comparing it to premiums for a term policy on the same coverage amount you are correct. However, because of the tax free guaranteed compounding of a proper life policy many of my clients will overcome the actual cost of the insurance in the first few years of the policy. These policies will get to the point where they self complete which means the insurance company owes you more than you owe them in minimum premiums. So if you decided to, you could have the basic premium paid out of cash value and your cash value will still grow and move forward. So when 20 years from now you still want coverage and go to extend your old term insurance policy or buy another one, get ready for the shock of the new premium based on your attained age. If you had strongly funded a life policy 20 years before, that policy’s death benefit would have been growing these last 20 years (all part of proper design of the policy with a proper carrier) and no more funds would be required to maintain the policy due to the huge cash values you have accrued. You would have also have had access to large cash values to use for other wealth strategies.

Myth #4

Universal life or Indexed Universal life does the same thing as Whole Life

This is such a myth that I will need more than the space allotted to let you know how these policies really work over time and why the cost of insurance will skyrocket over the life of the policy. Please download my free report at my website and find the indexed universal life report under the video. Don’t you dare buy one of these policies until you read this free report. If you already have one of these policies get the report and be thankful there is probably something we can do for you to help. Ask us about a 1035 exchange of that kind of a policy to one that is better suited for long term and being your own bank.

Myth #5

I am too old or in too bad of health to obtain a life insurance policy

I have clients all over the country who once believed this to be true but now own life insurance policies. If you like the concepts of self banking and insurance policies don’t assume you can’t qualify for one of these policies. You may be able to qualify and the numbers will still make sense. If you indeed can’t qualify yourself there are other options.

Many of my clients take out policies on their children or grandchildren which mean the younger, healthier person qualifies for the insurance but my client owns the policy with all the benefits. I have clients in their 70’s who took out new policies but put the policy on their adult children. They then went on to use the funds in the policy as their own bank. Contact us to see if this might be an option for your situation as well.

When I am speaking to a crowd on this topic I often call a properly designed whole life policy as the “one account” because it is so truly unique and powerful. It is the only account that I am aware of that can function with many different uses that all work together. This is the only account that can be:

Savings Account– When you are not using your money it is sitting inside of the life insurance contract collecting much more in interest than it would if it was sitting in a bank. As of this writing most savings accounts are paying 0.5% or less and some life carriers dividend scale is almost 6.5% on life policies. Even after you take out the cost of insurance in the early years of the policy your money still does far better than dying a slow death in a traditional bank. You have easy access to your funds just like a savings account so why keep most of your money in the bank doing nothing for you or your family?

Your Personal Bank– Just as described in the last chapter you can put these funds to use to plug up your 4 massive wealth drains and help you grow wealth as the bank. Because you are doing this inside of your life insurance contract your earnings are tax deferred inside the policy and when properly done can be accessed tax free. Also with some policies and carriers the money you borrow out will still be credited with growth and dividends. This is not common but there are carriers that allow this and we can help you determining which carrier is best for your needs

Retirement Account- There will come a time when you desire to pull an income stream out of your policy. You will be able to either withdraw the money as you see fit (not optimal most of the time) or take policy loans that you will not pay back. In most cases policy loans are optimal because you don’t have to pay taxes on policy loans. If you choose, you don’t have to pay the policy loans back during your lifetime. The loans can be paid back out of the death benefit after you pass away. For instance you have a $1,000,000 death benefit but have borrowed out $250,000 in policy loans and deferred interest and you pass away, your family will receive the $1,000,000 death benefit less any outstanding policy loans which in this case are $250,000. This will produce $750,000 tax free to your estate after you pass away.

Rainy Day Fund- You should never borrow all the cash value out of your policy but rather keep a chunk of money in the policy in case of emergency. This is a rainy day fund that produces solid interest rates and return.

Estate Creator- Let’s not forget you are creating all this wealth inside of a life insurance contract which will automatically leave behind money for your family and/or anyone else you choose after you pass away. My mom, as she aged, started to worry more about leaving money behind for her family instead of living as abundant of a life as she should have lead. This is the only kind of program where you can spend every nickel during your lifetime and still leave behind extra for your family. Wherever you have your money saved or invested currently, ask yourself if the account you have it in has all of the benefits listed below. These are all benefits of a properly designed life insurance contract. Please feel free to contact us if you need more information.

Free Webinar – Banking and Life Insurance

Please join us on Thursday, May 28th 2015 for an absolutely FREE Personal Banking and Life Insurance Webinar hosted by #1 Best Selling Author, John Jamieson

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Ask yourself this question; How much money would you have today if you had back every payment you had ever made on anything in your life? Every car, house, credit card, student, business loan, and any other debt in your life, you would have today. Not only would you have all those payments back but they would have been growing for years, tax-free, at a strong rate of return and you had access to the money any time for any reason without penalty.

You see, the average American family spends approximately 40% of their income on outgoing payments. We pay that money to banks and finance companies for the use of their money; in the form of principal and interest. Meanwhile we are told to invest 10% of our income into 401ks, IRAs, and other similar investment vehicles and hope the stock market goes up so maybe one day we can retire. Yet, as of December 2014 the US National Average Savings Rate was just 4.3%.

What if you were the bank and could pick up all those payments for yourself and your family? Would you be much wealthier than you are now? The answer for all of us is a big YES! If that interests you and would like to know more, join us on the webinar to get more details. You have the ability to start your own finance company and build wealth rapidly and safely.

Banking and Life Insurance Webinar is May 28,2015 at 8:00 pm EDT. This is free to join, please share this with others you know that would benefit from the great information being shared by John Jamieson. Don’t forget to register and put the date/time on your calendar!

Indexed Universal Life – A Ticking Time Bomb!

How would you like to put money into a financial product that lets you benefit from market gains, but never feel the pain of its losses? The money and growth inside the policy will be 100 percent tax-free for life. That’s the seductive pitch often used to tout an investment called indexed universal life insurance.

Based on that sales pitch, it would be no wonder if your response were, “Sign me up for that right away!” Unfortunately, all that glitters is not gold. The sales materials for your IUL policy will almost always be illustrated with unrealistic compounded rates of return. But as we all know, stock market growth does not simply compound over time. Sure, you can measure an “average rate of return,” but in the real world, prices oscillate, and performance can be a creature of timing much more than investing.
Bomb
In fact, an indexed universal life insurance policy will almost always leave you holding the bag.

Let me clarify first that these are entirely different investments than the “properly designed whole life policies” that I wrote about in February. When you invest money inside an IUL policy, you’re setting up a life insurance policy with an annual renewable term cost of insurance. The extra money placed in the policy goes into sub accounts, and those funds will generally follow an index (or indices) in some form when that index increases in value. This structure will cause the cost of insurance to rise every year, which is why most people let these policies lapse in later years.

One Man’s $50,000 Premium

A retired neurosurgeon at one of my seminars told me about his IUL nightmare. He invested substantial money in an indexed universal life insurance policy when he was 49. He funded this policy for 20 years, and the projected profits never seem to materialize. Among the reasons why:

  • The projections that were illustrated for him were not realistic.
  • The expenses of the insurance and many other hidden fees come out daily.
  • The guaranteed growth of 3 percent was only payable at policy cancellation.

Much worse was the bill when he turned 70. This policy was structured with a 20-year guaranteed term policy for the death benefit, and his premium hit almost $50,000 — and not one nickel was going into any cash value.

Surely, something must be wrong, you say? He assumed it was clerical error until he called the carrier and was told that is how those types of policies are built. In the 21st year of the policy, the premium was supposed to be almost 100 times the first year’s premium, and it was only going to rise further, since term insurance gets more expensive as people age. This man closed the policy down, which meant he no longer would receive the death benefit, and even the pitiful gains his investment had realized were now taxable because he’d lost the umbrella of the insurance policy tax structure.

Lousy Ideas, Without Clear Numbers

Welcome to the wonderful world of indexed universal life insurance. I can’t wait to see in this articles comments that somehow, one of you knows about a “special product” that has a “no lapse” guarantee or some other new (and yet old) wrinkle that allegedly makes these lousy policies better. These dogs with fleas are generally sold to those with high incomes, such as doctors, as a way to put loads of money away in a tax-free environment instead of the limitations of an individual retirement account or 401(k). The illustrations are not realistic and fail to speak plain English as to what is going to happen with these policies.

If you have been sold one of these policies, examine the illustration you were shown and notice the cost of insurance cannibalizing the cash value in the later years of the policy. Study the cost of insurance, which will never be plainly spelled out in dollars and cents (your first clue something is amiss) but rather in decimal points. Watch how that number grows in the later years.

If you have the misfortune of having one of these policies, you might still have an option to roll into a 1035 tax-free exchange. It would allow you (assuming you qualify health-wise) to exchange your cash value in your IUL policy into a properly designed whole policy with solid guarantees and fixed costs all disclosed up front.

For more free training and information on this topic, watch our video of the week and get free downloads.

Do you review your beneficiary forms?

The importance of an annual review of your beneficiary forms on your different accounts and/or policies is often overlooked. Think of your smoke alarm; most people have an annual schedule to change their battery. Your beneficiary forms on your IRA, 401k, annuity or life insurance policies, etc… are important too and should be added to your schedule. At a minimum they should be reviewed by you annually and/or after a life-changing event such as death of a loved one, divorce Calendar 300x301or birth of a child.

Just think how upset you would be if the government took more taxes on your monies because you didn’t name the beneficiary correctly on one of your accounts. Maybe you forgot to change the beneficiary from your ex-spouse to your new spouse on your life insurance policy. Or you just named your estate as the beneficiary and therefore your estate goes to Probate Court. The probate process could take a year or more to get finalized; delaying your beneficiaries from getting the monies. This could have large ramifications for your loved one’s after you have passed away when you wanted to bring them peace of mind.

Did you know that your beneficiary form will override your will on your IRA accounts? Say you remembered to update your will after you remarried but didn’t update your beneficiary form on your IRA account. This means the monies in that account might not be going to the person or persons you wanted.

There could be tax ramifications for those named as your beneficiary on your different accounts and/or policies. For example; naming a person or trust as a beneficiary will usually help those monies avoid going to probate court. This could also keep the monies away from your estate and available to creditors. We recommend you speak with your tax advisor to determine the best way to list your beneficiary to avoid the common pitfalls that beneficiaries deal with after the death of their loved one.