Here are some suggestions:

· Jack, I’ve come across a new long term care insurance plan that can increase the amount of money you can leave to your family at your death, transfer wealth to your family members without gift taxes – and will refund 100% of your premium cost to your family when you die if you never need care.

· Ruth, as partner at a law firm, I want to tell you about a new tax-deductible long term care insurance plan that can preserve assets for your children, guarantee that you won’t have to reduce your lifestyle after you retire if you need extended health care – and will refund 100% of your premiums to your family at your death.

· Peter, as a shareholder-employee in your closely held “C” Corporation, I’ve come across a new long term care insurance plan that will enable you and your wife to buy long term care insurance income with the following key features:

- Your corporation will pay your premiums.

- The premiums will be tax-deductible to your corporation.

- The premiums will not be taxable to you or your wife.

- Your insurance benefits will generally be income tax-free.

- You can include employees of your choice in the plan because it is not subject to discrimination rules or testing.

- When you die, 100% of the premiums that your corporation has paid for your personal insurance will be refunded to your beneficiaries. And when your wife dies the premiums paid on her behalf will be refunded to her beneficiaries.

In summary, the Plan will help preserve your assets, protect your retirement income, reduce your corporate income taxes, and transfer corporate assets to your personal beneficiaries.

· Alice, as the Director of Executive Compensation in a public corporation, you should know about a new plan to help your company attract and retain the top talent it needs to compete in today’s global economy. Here are the key features of the Plan:

- It will preserve your employees’ assets and protect their retirement income.

- The cost is tax-deductible to your company but not taxable to the employees.

- You can pick and choose the participants; there are no discrimination rules.

- The Plan is not subject to IRS Section 409A rules.

- You can use it as a non-taxable recruiting bonus.

- When the employee dies, 100% of your corporate premium payments will be paid to his or her beneficiary as a survivorship benefit.

- You can design the Plan on a cost-neutral basis to both your firm and your employees.

· Roger, as the Director of Human Resources for a large non-profit organization, you will want to know about a new plan to help you attract and retain top talent. Here are the key features of the Plan:

- It can provide deferred compensation benefits without IRS Section 409A and 457f issues.

- It will preserve your employees’ assets and protect their retirement income.

- You can pick and choose the participants; there are no discrimination rules.

- You can use the Plan as a true “Golden Handcuff” to retain employees.

· Ellen, as the owner of a substantial IRA account, I know you will be very interested in a plan that will help you preserve its assets for the benefit of your children – and that will involve little, if any, cost to yourself.

Click here to request your free eBook “How to be a Long Term Care Insurance Superstar!”

Dear Ms. Jones,

As you know, the cost of long term health care can easily run over a million dollars from serious injuries and strokes, or from illnesses such as Multiple Sclerosis, Parkinson’s and Alzheimer’s. These costs can represent a direct threat to your financial security – and that of your family – because it is highly unlikely that Medicare or Medicaid will ever reimburse you for them.

To make certain you will never have to liquidate family assets to pay for these costs, we have created the following plan:

• We will set up a $1,750,000 account that you can draw against at the rate of up to $175,000 a year should you need long term health care.

• We will charge you $4,500 a year interest on the account – and if you ever need long term health care we will waive your interest payments.

• When you die we will refund 100% of your interest payments to your family, less any benefits you have received.

• If your firm sponsors the plan for other employees we will reduce your interest payments. Further, if you are a sole proprietor, a partner in a partnership, a member of an LLC, or a shareholder/employee in a corporation, some or all of your interest may be tax-deductible on you Federal Return. And if you pay income taxes to the state of New York, your interest payments may receive a direct 20% tax –credit.

• The identical plan is available for your spouse.
___________________________________________________________

Of course banks cannot offer this plan to you or your clients – but you can through any number of insurance companies and we have enclosed sample interest rates on the attached page. Click here to view.

The SERP Exchange

Many corporations have Supplemental Executive Retirement Plans. These are nonqualified deferred compensation programs that promise to pay eligible employees supplemental retirement benefits. For example, the corporation could promise a group of executives that, when they retire, the corporation will pay each of them $100,000 a year for 10 years. Under these programs the corporation recognizes a current expense liability, but can deduct the retirement benefits only when they are actually paid. When the executives receive the benefit it is taxable income and some, or all, of it may be subject to the estate tax when they die.

An attractive alternative is to provide the executives with a corporate paid LTCI program. For example, the corporation could purchase a 10-payment LTCI policy – with a return of premium death benefit – for each executive and reduce the retirement benefit (as an example) to $80,000 a year. The reduction in benefit reduces the corporate funding liabilities that, in turn, can be used to pay the insurance premium. In this case, the premium is currently deductible to the employer but it is not taxable to the executive. Equally important, the long-term care insurance benefits payable to the executives are generally income tax-free. Further, if the executive should die without receiving any benefits, all of the premiums paid by the corporation will be paid to his or her beneficiaries. In addition, through the use of an irrevocable long term care trust, the survivorship benefits can be made estate tax-exempt.

The result: the corporation has exchanged a tax-deferred deduction for a current deduction and the executive has exchanged taxable benefits for tax-free benefits.

The 401k Exchange

An employer eliminates some or all of its 401k, 403b, and/or 457 retirement plan contributions for a group of highly compensated employees. In exchange, it purchases LTCI policies – with a return of premium death benefit – for the employees.

For example, the matching and profit sharing contributions to the highest compensated 25 employees of a corporation are $15,000 a year per employee. The contribution is currently deductible to the company and there is no tax to the employee until distributions are made.

The corporation terminates the $15,000 retirement contribution for the 25 employees and purchases LTCI policies for them. The $15,000 premium for each employee is currently deductible to the company and is not taxable to the employee.

However, if the employees need long-term care they have the potential of receiving millions of dollars of tax-free benefits – benefits that will far exceed the retirement plan assets that might have to be used to pay the cost of care. And should the employees die without receiving any benefits, their families’ net cash position will not be materially different than under the retirement plan because of the return of premium feature (at death, all of the insurance premiums which have been paid by the corporation are returned to the employees’ beneficiaries and can be made estate tax-exempt).

In addition – if desired – the corporation can replace the retirement plan contributions using a nonqualified deferred compensation plan approach. Unlike the qualified plan program, it can include substantial forfeiture provisions that can help the corporation in its ongoing efforts to attract and retain top talent.

However, many large financial service firms now provide group LTD benefits to their highly paid employees of up to $40,000 a month. This means that a high percentage of the total LTD risk is owned by a relatively small percentage of the firm’s employees.  In addition the Social Security disability benefit offsets a high percentage low monthly benefits, but only a small percentage of high monthly benefits. For example, SSDI offsets about 35% of a $5,000 benefit but only about 5% of a $35,000 benefit.

The combination of these factors almost guarantees a rate increase if a “bad” run of claims is incurred by higher paid employees – for example, the reserve necessary to fund a $35,000 monthly disability claim on a 40 year old employee can easily exceed $3,000,000. 

To solve this problem CCP has developed a risk transfer program to minimize the rate volatility inherent in high-benefit disability plans. This is accomplished by transferring 1/3 of the long-term disability insurance risk into an individual policy guaranteed premium pool (40% of compensation is insured by the group contract and 20% by individual policies). Claims experience from the individual policy component cannot affect the premium structure of this pool because the rates are guaranteed to age 65. Equally important, the insurance carrier cannot cancel individual policies nor modify their benefits.

In addition, 40/20 type plans can usually be implemented without an increase in the current total group insurance costs. There are three reasons for this cost neutral result: (1) The unit cost of the remaining group insurance left in force is materially reduced because the risk charges applied against high dollar benefits can be eliminated (2) the Social Security offset becomes a much higher percentage of the total benefit and (3) the individual policy premium rates are highly discounted.

Another advantage of the 40/20 plans is that the insurance in the guaranteed pool can be made portable at the age of issue premium rate and without any reductions in benefits. This feature enables employees to continue a sizeable portion of their protection in force on a favorable basis if they separate – or are forced to separate – from the company.

We utilize a sophisticated software program to compute the optimum percentage of coverage to be shifted to the guaranteed risk pool.  In addition, the program enables us to effectively administer the integrated 40/20 LTD plan design on an ongoing basis so as to minimize human resource work and involvement.

That changeover usually comes when individuals realize that if they lose a substantial amount of their assets they won’t have the time, or the opportunity, to recoup them. The result is that a lifetime of hard work can be destroyed without any hope of it being replaced.

A substantial – and irrevocable – loss of assets can be caused by any number of unforeseen events such as a bear market, a bad investment, an unexpected legal liability, and by just plain bad luck.

Another – and often overlooked – cause of the loss of substantial assets are the costs arising from a serious injury or stroke, or from illnesses such as Parkinson’s, multiple sclerosis, cancer and Alzheimer’s.

 These costs have a number of common characteristics:

-   They can run into the millions of dollars because the events that cause the need for extended health care can last for years.

-   They have been increasing at the rate of about 5% a year.

-   They are not reimbursable, to any meaningful extent, by Medicare or personal health insurance.

Surprisingly enough, relatively few affluent people have transferred these million dollar risks to insurance companies. As a result, by default, they have transferred the risk to their families because every dollar spent on health care costs will be a dollar less for that family.

Making one’s family the ultimate insurer of multi-million dollar risks is completely counterproductive to the individual’s estate and tax planning efforts.

It is also completely unnecessary in the light of creative insurance solutions to the extended health care cost problem. These solutions, in the form of innovative new policies, can often be significantly subsidized by tax savings and credits – and will refund all of their premiums if benefits are never paid from them. 

In addition, it is now possible to purchase multi-million dollar extended health care protection in the form of disability insurance contracts that pay benefits regardless of the actual costs incurred.

In other words, for individuals who now want to make certain their assets are protected against unforeseen catastrophes, the time has come for them to give serious consideration to this new form of catastrophe protection.

Hardly chump change. 

But it’s amazing how many financial advisors and wealth managers still advise their clients to self-insure long term health care – when they would never dream of recommending they self-insure their liability, property, disability, and health insurance risks. 

Tempting, as it may be to say that they are dumb, this is not the case – advisors and wealth managers, for the most part, are highly intelligent and pragmatic individuals. So why are they giving their clients advice regarding long term health care that makes so little sense? 

The reason, I think, is that they know very little about long term health care – its causes, its costs and its financial and emotional consequences – and even less about the long term care insurance and tax solutions that are now available. 

As a result, rather than embarrassing themselves talking about a subject they know very little about, they make it go away by telling their clients they have “enough” money to “self insure” the risk.

What are your thoughts?

Let’s look at the three key words in this recommendation: 

1. “Self-Insure”
2. “Need”
3. “Enough”

Self Insure

Self-insurance is a risk management technique used by many large institutions and it involves quantifying the hazard and then setting aside reserves to pay the potential costs of it.  This process, of course, is rarely used by individuals who have been told to “self-insure” long term care costs and, instead, it simply becomes an excuse to completely ignore the issue (it’s also a guaranteed put down to insurance agents).  

Need

The logical extension of the “you don’t need long term care insurance” means that affluent individuals should also cancel their liability insurance, their property insurance, their disability insurance, and their health insurance because they don’t “need” those coverages either.  The fact of the matter is the affluent don’t buy insurance because they need it, they buy insurance because it is prudent to do so.  For example, an individual may have enough liquid assets to rebuild his $700,000 house if it burns to the ground, but why should he want to take that risk when he can transfer it to an insurance company for a couple of thousand dollars a year?  And the same can be said for the liability risk, the disability risk, the health risk, and even the death risk. 

Enough

When advisors tell their clients they don’t need long term care insurance because they have “enough” money to pay for it, what are they really saying?  Here are some possibilities: 

• “You have $2,000,000 in your investment account so if you run through a million dollars to pay your spouse’s Alzheimer’s bills there will still be $1,000,000 left – assuming we don’t have to liquidate any assets at a profit in which case you’ll have to pay some capital gains taxes.”
   
• “You have $2,000,000 in your profit sharing account so if you run through a million dollars paying your spouse’s Parkinson’s bills there will still be $333,333 left in it (distributions from qualified plans are 100% taxable as ordinary income).”
   
• “Don’t worry about deciding how much money is ‘enough’ for your family; I’ll make that decision for you.”
   
• “If you or your wife – or both of you – actually need long term health care, it may turn out that you don’t have ‘enough’ to pay for care costs and still remain financially secure.  But not to worry, should that occur I’ll pay your long term care health care costs for you.”

Here are the realities behind the advisor recommendation of you not needing long term care insurance because you have “enough”: 

• Advisors are not qualified to tell you how much of your money is “enough” money – that is a personal judgment call.
• Advisors usually do not think about the financial or tax consequences of liquidating assets to pay care costs.
• Advisors usually do not think about the emotional consequences of having to deal with an incurable illness and watching your assets being sold off to pay for it.
• Advisors are not going to pay your long term health care costs if you incur them – even if they had recommended against the purchase of long term care insurance.
• Advisors, in general, are not aware of new long term care insurance solutions, the tax subsidies that are often available to pay for them, and the fact that premiums can be refunded if the insurance policy is never used. 

If you have heard these common words from your advisor please take another look as to whether your family’s financial security will be impacted by the costs of extended health care. Take 3 minutes to dial our toll-free, automated phone line to determine the impact of long term care costs on YOUR income and assets:

DIAL (877) 503-9665 or click here to have our automated system call you.

A great book was published a few years ago, The Number by Lee Eisenberg, wherein we are asked to determine our individual number – the amount of money we think we should have to base our retirement upon.  Everyone has their own “Number” or their own yardstick for determining whether they are rich and, of course, once people hit their “Number” we often increase it as we quickly realize that the income generated from those assets may not be what was expected.  Being rich is an individual determination, but one thing is certain for all – whether rich or not – losing the money one has accumulated will not keep them rich or help sustain the wealth of their heirs.

To maintain wealth, we all insure against the risks that may affect that wealth and may decrease our “Number” including life insurance, auto, health, umbrella policies, disability and more. I never hear the question raised with these types of policies, “Should I self-insure?” However, true story, when I asked my financial advisor several years ago about long term care insurance he looked me in the eye and said I should self-insure.

With the Return of Premium rider, yes this makes the insurance more expensive, but with the tax deductibility of premiums, purchasing a long term care policy basically creates no cost to one’s estate.  With a no-cost solution available, the advice to self-insure – or the exercise of even thinking about it – becomes absurd for the well-to-do, rich and ultra rich.

Here is an article about the true costs of long term health care when self-insuring:

How Investment and Tax Surcharges Increase the Cost of Long Term Health Care

As soon as I forget a friend’s name, where I placed the keys, put my book and other daily forgetfulness, I immediately fear Alzheimer’s – I know I am not alone in this situation.  As I quickly diagnose myself to envisioning living with Alzheimer’s I think, “What would I want for care and what would be the consequences on my family? 

Such thoughts long ago caused me to buy long term care insurance.

For me, I want to stay in the comfort of my own home as long as possible and be around those that I love and love me – at least as long as I am not an undue burden.  It is my quality of life decision – quality for me and quality for those I love.  Being cared for at home, would allow me to have my care overseen on a daily basis by those that know me best.  Knowing I will be properly dressed, bathed and have my needs met are great sources of comfort to me, and I imagine will be to those that care about me.

I have read that those cared for at home have a greater degree of independence and mobility than those secured in lock-down Alzheimer’s units in nursing homes and long-term care centers.  With care at home I may still enjoy familiar surroundings, family interaction and the comfort from everyday household activities.

When the time comes and one is faced with a decision:  whether to keep a family member at home – I know – requires individual decisions with no right or good answers.  At this point in time, being in my fifties and healthy, I know that having a good long term care policy with cash benefits is, for now, the best I can do for me and my family.

Watch this compelling video interview!

CBS News correspondent, Barry Petersen’s wife was diagnosed with Alzheimer’s disease five years ago.  He describes what the devastating disease mans to the patient and the caregiver. 

 Click to play Barry’s Story Part 1.

To view the World Alzheimer’s Report 2010, click here.

Protecting income & preserving assets for you and your family

— When people stop working they become entirely dependent upon the unearned income from their savings and investment portfolios.

— When they need long term health care – and there is no insurance to pay for it – income has to be redirected to pay the costs of care leaving them with only two choices:

1. Live on less and experience a reduced lifestyle for themselves and their families or…
   
2. Liquidate assets to pay their costs, to maintain their pre-care lifestyle, with these possible consequences:

• Additional taxes may be incurred when assets are sold at a profit, or distributions are made from qualified or nonqualified retirement plans.
• Assets may have to be sold at a loss.
• Assets earmarked for their families’ financial security – including inheritance and estate plans – will be reduced.
• The costs for care could consume the value of the families accumulated assets and they might be left with nothing.

— If you don’t own long term care insurance, and you or a family member needs care, your family will have to choose between living on less or liquidating assets.

— If you do own long term care insurance you can be assured that:  

1. If you or a family member needs care the insurance company will pay the costs so your family can maintain its standard of living and preserve its assets.
   
2. If you don’t need care the insurance company will refund your premiums to your family at your death.
   
3. Tax subsidies may pay a substantial amount of your premiums. 

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