As a result of the Deficit Reduction Act of 2005, with the average nursing home charging $6,000.00 per month for nursing care, all gifts being subject to a 5 year look-back period and a delayed penalty fuse, and with half-a-loaf gifting plans consuming approximately 50% of a client's spend-down amount, your clients cannot afford to self insure their long-term care costs.
What should your clients do? If your clients can afford to purchase traditional long-term care coverage, and they are healthy enough to get a preferred rating, it is my opinion that traditional long-term care insurance coverage provides the best result, especially if the policy contains non-forfeiture and full return of premium riders. However, in those cases where your clients are not healthy enough to qualify for traditional long-term care coverage, the next best solution would be for them to consider a non-traditional long-term care policy, such as “Money Guard Reserve.” This policy is a universal life insurance contract which provides the following 3 key benefits:
- Long-Term Care Coverage
- Money Back Guarantee
- Income Tax Free Death Benefit
To illustrate an example, assume that Alice Smith is 65 years of age, in good health, a non-smoker, and believes that $300,000.00 is necessary to pay for her anticipated long-term care needs. If she self-insures, she will need to retain $300,000.00 of cash assets. With a Money Guard Reserve policy, if she invests $100,000.00, she will be entitled to receive $83,203.00 per year, for 6 years, for her long-term care needs (that's a maximum of $6,934.00 per month benefit - for a potential benefit payout of $499,218.00). In the alternative, if Alice does not require any long-term care needs during her lifetime, and dies with the policy, her beneficiaries will receive $166,406.00 in an income tax free death benefit.
Money Guard Reserve is offered by Lincoln Life and Annuity Company of New York, Syracuse, New York. The company has an AM Best rating of “A+” (2nd highest of 16).
