Chalk Talk: Long-Term Care



Hi. This week in Chalk Talk, we have got something I’m guessing you’ve not seen before. And if you have, great. But I bet most of you’ve not seen something like this. It’s a really interesting way to take $100,000 and turn it into $700,000 to pay for potential long-term care. So, let’s go ahead and talk about how this works. So, here we go. I have up here, as you can see, $100,000. And let’s imagine we put it into this contract, that at the beginning says you get about $400,000 of long-term care benefit. Now, by the way, I should preface my entire conversation with this. I’m assuming that we’re talking about someone who’s about, somewhere in their early 60s. 60 to 65 years old. Somewhere in there. What we’re talking about here is technically a life insurance contract that has long-term care benefits attached to it. That’s kind of what we’re talking about.


So, here we go. We take … here you’re 60 to 65 years old. You’re reasonably insurable. We take $100,000. We dump it into this single pay life insurance contract, and right away from the get go, you’re getting about $400,000 of long-term care benefit. Something along those lines. Please understand that if you call us up, and you say, “Hey. I want to talk to you guys about this. I want to see what the numbers are for me.” That might be a little bit different for you depending on your age, insurability, blah, blah, blah. Right? Male, female, etc. Anyway, general rule, this is how it works. You start off $100,000 goes in. The insurance company says, “Okay, if you need long-term care right away, we’re going to pay out a total of about $400,000 in care in over maybe a six year period of time.” Something like that.


But we recognize that you may not need long-term care today. In fact, you’re only in your early 60s. If you can qualify for this insurance, you probably don’t need long-term care. Well, not probably. You definitely don’t need long-term care right now, and we recognize you’re probably reasonably healthy, and it’s probably going to be about 20 years or so before you need long-term care. And so, what these companies will do is they’ll say, “You know what we’re going to do? Each year that goes by where you do not use this account for long-term care, we’re going to increase that $400 K by maybe, 3% of your compounded.” Maybe something like that. So, that $400 K after one year is … now you’ve got 412, and the next year it’s more and it grows, and it grows, and it grows. And if you do the math. Let’s say now you’re 85. Now you’re age 85, and you’re saying, “Alright. I’m 85 years old and now I need care. I’ve got Alzheimer’s or something.” Well, guess what, this bucket of money that was $400,000 way back when you were in your 60s, well it’s now 20 years later, 22 years later.


This thing is probably work somewhere in the range of $700,000 that you can use for your care. That’s a big chunk of money that you can use to pay for your care. Now, again, it’s got to be paid out maybe over six years. So, they’re saying, “Okay, well you could get … 120 a year or 116 a year or something like that.” That’s a pretty neat thing. That’s a big number. If you need care, that’s a lot of money it’ll pay out, and they’ll pay it. It doesn’t matter if you’re at a nursing home. If you’re at home. It doesn’t matter where you are. They’ll pay it out. That’s a cool thing.


Now, I know what you’re thinking. You’re thinking, “Mike, that is pretty cool.” But, what if you never need long-term care? What if you’re saying, “That was a sweet deal, but Mike, I ended up never needing care before I died. Is that money all gone when I die?” Well, that’s the best part. This is single pay life insurance, which means that when you made a single payment of $100,000, there’s a death benefit that comes along for the ride. Now, by the way, guess what. It’s not a big death benefit. It might be, the death benefit coming back out.


If you don’t need care, the death benefit might be $120 K. It might not be a real big number. Essentially, it’s, hey I got the same return I would have gotten if I would have left my money in the bank all those years. Right? But it comes back to you tax free if you don’t need it. The long-term care benefit is tax free if you do need it. So, it’s a great way to expand your assets if you need it for long-term care, but if you don’t, get your money back and it’s tax free with a little bit of gain. Kind of a neat idea. Don’t know if you’ve ever seen it, but it might be worth checking out.

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Centennial Advisors