Leon Mehl

Legacy Assets are those assets in a retiree’s portfolio that are not needed to support their lifestyle but are available in case of some serious emergency (rainy day money!). These assets, if (hopefully) never needed, will probably pass to the retiree’s children, church, or charity after they die. The one most significant risk to those assets is the need to pay for long-term care.

Many people in this situation resist the idea of conventional long-term care insurance, not wanting to admit that they might need it. Taking the position that they can pay for any care out of pocket, they are choosing to “self-insure”. For these individuals, one effective planning approach may be to leverage some of their legacy assets to provide a larger pool of money. This money can be utilized to pay for care in the home, assisted-living facility, or nursing home.
If not needed, the money would then pass to the intended heirs. Unlike traditional long-term care insurance, life-insurance based or annuity-based long-term care protection can benefit both the policy-holder and the heirs.

To employ this strategy, money is transferred from its current location (bank account, older fixed annuity past the penalty period, etc.) into a specially designed life insurance policy with riders that allow accelerated payment of a large portion of the death benefit to the policy-owner upon a qualified health event, to help pay for costs of long-term care. Depending on the age, gender (in some states) and health status, the lump-sum premium paid into a life insurance
policy may provide a death benefit of double or more that amount. However, if the insured qualifies to begin using the long-term care benefits, the insured may receive as much as five times the amount of the original premium. Any monies not used for convalescent care would still pass to the heirs upon death of the insured.

This approach may suit those individuals who choose not to purchase annual premium long-term care insurance policies and intend to pay for long-term convalescent care, if they ever need it, with their own assets.