You have a legacy plan. If you say, “I haven’t set up a legacy plan,” I say, yes you have. Without proper planning, you allow the government, nursing home facilities or others to do it for you. Of course, you need a good will and possibly thoughtful trusts to get you headed in the right direction. You also need health directives to make sure your wishes are followed through. And, you need an executor to make sure things are handled properly. As an insurance professional, I can help take care of some basic planning that can help you avoid the pitfalls of not having a plan in place. I can take care of legacy planning, income needs and planning for long-term care needs. Please allow me to explain…
Today I am going to focus on life insurance with accelerated benefits for long term care needs, and products that have accelerated benefits. In short, accelerated benefits on life insurance products mean that the death benefit would be paid out to you while living if you can’t perform two of the six activities of daily living.
Let’s look at a real-life scenario. You may have some dollars set aside that won’t be needed for retirement income. You purchase a life insurance policy (this could be a single premium life policy or a periodic premium plan) with the accelerated benefits as described in the paragraph above.
Let’s assume that a health issue develops, and you can’t perform two of the six activities of daily living. Let’s say that you opted for a single premium life policy with $100,000 of premium.
That premium would generate for a 65-year-old female anywhere between $180,000 and $300,000 of tax-free death benefit (the more underwriting… the greater the death benefit). So, let’s assume this policy has a $200,000 death benefit.
If a health issue occurs and you cannot perform two of the six activities of daily living – then, the entire $200,000 death benefit is paid out to you in tax-free payments. These payments are generally tax-free because they are an acceleration of the death benefit. These payments are paid directly to you, and you are able to use them to cover your health care costs.
But what happens if I don’t need those accelerated benefits and I pass away? The proceeds are paid tax-free to a named beneficiary. What happens if you have an emergency and need the money? These products accumulate cash value and you have access to the cash value when and if you need it.
Some life insurance policies offer a return of premium feature. This means if you decide to quit the policy, the insurance company will give you the premium you paid back.
Your financial professional can provide you with information on this type of product. What do you have to lose? This is a tax friendly approach to an important part of your retirement plan. Let me know if you would like more information about this type of legacy planning.
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