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June 19, 2021 8:30 am
Hans and Robby discuss Hybrid Long Term Care.
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The cuticle of the Russian nightmare know the devil's nightmare here from it's time to man up challenging men step into their true manhood. Your chosen Truth Network podcast is starting in just a few seconds. Enjoy it, share it, but most of all, thank you for listening to the truth. Podcast network. This is the Truth Network welcome to finishing well brought to you by Cardinal guy, certified financial planner belongs to Shiloh, best-selling author and financial planner helping families finish well for over 40 years on finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started with finishing well, finishing well. As a general discussion and education of the issues facing retirees Cardinal Drive.com partner advisors. I'm sure I'll see if Pete insurance this show does not offer investment products or investment advice is welcome to finishing well, a certified financial planner Hans Schild today show. I thought I'm really excited about his creative ways to pay for long-term care, which I think you're gonna be excited about some ways we talked about this on last week shows long-term care and how you really Jesus said in a delete and deny yourself and follow me right and take up your cross and follow me. Well, you gotta deny yourself in order to take up the cross. What happens with long-term care. A lot of us are in denial word were denying that at that point of our life are not to be able to take care of ourselves. Like when I can be able to take care of her own salvation but is, as we process this and we said, okay, long-term care, something that the looks like I'm in the need now you figure out how to pay for Hans and I love this strategy that you that you've got today to talk about yeah and we've had this effect. This particular policy which is using IRA money or 401(k) money through it asset transfer to purchase long-term care insurance is paid up for life was patented since it was designed back in the late 90s and the patent just ran out a few years ago and it was necessary, but is so carnivorous in another insurance product. Or, it is really two products put together having a patent on and so what is designed to do is to use just like it says to use IRA or 401(k) money in a tax efficient way to purchase long-term care insurance, which is attractive to people when once they understand it fundamentally is this hybrid long-term care is very attractive to people. The whole idea of just paying for once and been done with it is very attractive to people planning for retirement or in retirement. Be scared of these long-term care premiums were. You gotta three or four or $500 a month premium going on that could go up anything they just how long a Megan bill to pay for this. So once people are bought into the idea of having long-term care purchasing it.
Then they start looking at traditional long-term care and they say you know what I I just I don't like this. I don't like taking on a $400 a month premium on just pulling that on my head, but no significant amount that could go up and then having that just spinning into retirement so that when I'm finally getting use this at 90 or something. I either can't pay for it or it's gone up so much that my kids drop it, or whatever. So all of a sudden hybrid long-term care starts to look pretty good to people where they can know you're working to just pay one big payment or deposit or asset transfer whatever we were done with and you can never go up tall guaranteed so the whole idea of hybrid long-term care becomes attractive to people in the process that we put them through. Then the next step. Then we go find the money that were going to transfer and I just tell you about this example, this guy is very well-off. He's got over a 2.7 million in his 401(k) mean that's is pretty awesome. This guy also happens to be a CPA himself is not a practicing CPA as he runs this very large law firm that he's the run in the is like the chief financial officer of this in the thousands of lawyers okay and he's been very diligent about saving and investing in his IRAs.
Almost like he's rubbing his hands together.
He so excited about all these taxes he's avoided until he met me okay and cats have so I just kind of throw that afterthought in their meeting that I still want to see excited about a mean somebody comes to me for advice on how to retire and they start with the fact that they got 2.7 million bucks. I don't care whether they pay taxes on it or not I get some to work with you) mean I can I can line up your retirement and these people don't have a high lifestyle and I as I got to know my error. I really can't learn I'm a throw a couple of the wrinkles in there.
They have special needs and his 28 and lives with them and they very much care about love him and they're very joyous about having him in their life. For me, which is really really cool and started thinking about them and a lot of people could be down on this and here we are approaching retirement and got there Hassan that I'm sure with special needs is all kinds of problems, but these people are looking at that one and they really got me looking at that women's comic cool year here at Brown about my age and I'm more than blessed and I get to work with those folks every week you know is I've been teaching that group for over 20 years and in the special needs folks that I teach her older, and so their families are older that I can assure you that these students or whatever you want call my friends that I work with every week bring joy to your life because they have a certain joy that they see the world in a way that we can't see it. And so, as they bring that into your life. It adds a dimension like any relationship with. But now you got her dimension. Now you gotta of friends who sees things completely different than you do and and then that and they've got different filters than the cultures cannot put on them and so I can see completely and in fact I've never forgotten. As long as I live on this before ever taught special needs. I remember one day I was having lunch at a Burger King writer by Baptist Hospital. There were two families sit there.
One family had a special needs actually simmered down syndrome and then there were older family and the down syndrome gentleman was older to and I was watching them eat lunch and then over here to the right was what you would call a normal family. Such a fight and I was just observing. I was a casual observer and oh my goodness these people are here on the right. The so-called normal, for they were scream and yell and there was not a lot of fun going on over there that I just wasn't they were getting food eaten, but man I didn't want to be over there but if you could see the joy that was only added to the family BD that was also called abnormal cement I I get it constantly picking up from these people. Okay. And then as the financial planner and minimum I'm looking at all this and I'm thinking okay we nap does Ruben add that to the list and it just we got to cure him. When you're gone, but I'm also thinking how cool is this is I think often about how much I miss when my boys were younger and you know in just those times and my kids are grown up and having grandkids and you know and these people have this sons more than likely going to be with them throughout all their old age and now are talking about what happens to him. They they were smart enough they took care of the got a special needs trust because we really need one of those because if he inherits all this money which he will do at some point he inherits it directly. He's can lose all his government benefits and all the things that those people really need your Medicaid in I don't know if he moves to a group home which I don't know whether he'll do or not, but so so anyhow that's kind of off on a different subject. These folks are also very concerned, worried interested in long-term care especially after they met me and were talking through the her mother just finished she just passed away with after 11 years of a combination of home healthcare, but mostly facility care and actually this young special needs son and in the end, the lady of the house. They visited grandma and mom almost every day for years and but there they're looking at their own scissors you want to blow up this 2.7 million bucks you have one or both of them go through a big long-term care that Scott bought their retirement and their real well aware that so anyhow so we start doing all the planning and then hybrid long-term care was very attractive. Just like open the show. There you know.
But the only place these people have 2.7 million bucks in 401(k) they got like 14,000 of money not in 401(k). That's it. And very little savings.
They've really done a great job of diligently grading this big after-tax problem or before tax problem account where you want to call it, but it's a text file because it you know they all of a sudden were to die, or one of them dies or somehow or another they got to get that money out of that before the second one of them dies because you can't leave IRA or 401(k) money to special needs son. He can't get into the trust to lose all his benefits.
He is a CPA could see all that real clearly just never put all these pieces together you know is you talk will just gonna go along and what it really amounted to use it for going to get a hybrid long-term care policy.
The only place to get the money is out of the IRA or the 401(k) and because he's old enough he can do an in-service distribution I can figure that he doesn't pay taxes. It was around 1/4 of a million bucks a little more than that to because they bought a huge policy that covers both side by listening. You don't need 1/4 of a million bucks to cover two people that are about 65 on one of these types of policies unless you want to buy a superduper blown up long-term care policy, which they did and so this policy is just a blessing and mean it it it it just for the people. The thought of it in the insurance company behind it and it so we make this asset transfer.
We got this policy, you know, just issuing right now, they're all approved and then you made the transfer it into some type of an annuity. From what I understand where there wasn't actually taxes coming out in spite of the fact that you transferred it yet. So it's an IRA annuity mean specifically designed so there's two policies that this company has is that the receptacle for the big chunk of money is an IRA annuity and then the annuity specifically drains itself down over 10 years to transfer money into the life insurance for the hybrid life long-term care policy that sits beside it and just all those inner workings that that they don't need to worry about that the listeners don't need to understand that it's just all the stuff is preset up. Saul fixed so you can see, as we are moving that all my goodness you know that that's really helpful to have somebody that can help you finish well right somebody can help you with the long term planning with details because there's always potential and will only come back with him talk a lot more about that potential, but in the meantime when son tell you that potential getting on his book the complete cardinal guide to planning for living retirement. It's right there cardinal die.com as well as his email address. If you have one asked Thompson anything right back a lot more finishing well. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hahn's expertise and qualified charitable contributions veterans aid and attendance IRA Social Security and Karen long-term care. Just go to cardinal die.com and contact to schedule a live recording of finishing well, your church, Sunday school, civic group contact time to cardinal guide.com that's cardinal guide.com welcome back to finishing well certified financial planner, Honda shall today show. We are talking about creative ways to pay for long-term care. I'm sure that if you listen to the beginning. You show your intrigue. Now I'm intrigued by the reason I'm so intrigued is because what God taught me this morning. I give them complete credit because at first I wasn't paying any attention.
He told me to look at Romans 828 McKenna argued with ligaments by the fact that I know better that when I hear from from God. I need to believe it came from God and taken at what he says in go study it so as I began to study. Romans 828 which you might recall is all things work together for good for those who love God and are called according to his purpose that that word all there at the beginning I got a chance to study because God asked me to and it means potential. It has to do with all the days of your life and when you think about it every moment you have has all kinds of potential for good. If God's in their and and so the idea of potential if you could think of it in Hebrew letters is just think I want you to think of the palm of God's hand God is reaching 2.6 million or whatever, there's potential. That's absolutely phenomenal because he owns way more than 2.6 million in any Scott way more that he's working together for good for you right this very second. But in order to unlock the potential Hans what we have to do what we had to do with these folks is first they needed to get to a point where they really are accepting the serious problems that they have in front of the just discovered witches. They need some serious long-term care insurance to protect their lifestyle. At the end of their life, we can add with special needs son. He's not can be able to do for them when they're needing long-term care like they did for her mother and the CPA. His parents were both in there for a couple years separately at different times and he provided for them so there's all kinds of things going on with these people and we first thing we need to do is we we we we just always get a visit that is they needed to get to a point where they really accepted.
They had a problem the one to do some better before I'm in a go all the trouble of creating the strategy I don't really like to get myself in selling situations so they need to get to the right place and then as they when they got there we we we just discovered that most of the money that they have available to them is in a pretax situation so that they immediately tells us we can't take a big hunk of this out at once. But we can solve the long-term care problem by doing an in-service rollover or an in-service distribution where we roll the money into this product with this company that isn't in it was an annuity IRA that specifically designed to fund the life insurance and long-term care benefit over 10 years everything it's guaranteed there's no if's and anything if this happens if that happens, it's a 3% interest inherent in thing and were doing all this to get over this third situation which is the life hybrid life long-term care policy, which in their case is a bout $300,000 of of life, long-term care insurance and then it has an extension rider on it that when they you when they blow through all the long-term care benefits.
Then there going to get just as much as they blown through, they'll get again in an extension rider. So these people are really protecting themselves against long-term care with one premium and they're doing it with a premium. Out of their 401(k) so than the 2.7 million becomes about 2 1/2 million. Still a lot of money and you know we can talk in another show how I help them prepare to get retired and have an income which need understand about these people is at the end of their lives. At the end of the second one of their lives. They still got the sun. There we have the special needs trust, which right now has no money is just a piece of paper. Maybe they put 100 bucks and there something in the Catholic currently staff and I think they I think they did. Now that I'm correcting myself that if they put 100 bucks, but you know so this thing is waiting till they die and so I don't think they understood before the importance of getting everything right before they die or long before they die so that when they die.
We don't have a bunch of pretax money going into the special needs trust which doesn't work it has to go to the sun first Obama ages is a disaster and so life insurance is the answer to that is, life insurance payments are tax-free beneficiaries and the trust can receive that directly. So now the skies all over buying life insurance and so that's another show were will will talk about the just bought some with this life, long-term care, hybrid #which is IRA, which is another part of the equation when you think about it that okay in a let's say you don't need any long-term care or you need very little for the next two years of the good news is you didn't really lose any of your investment. I mean it's just sitting there to be used, even towards long-term care or to go to beneficiary.
You know, it's like having your cake and eat it too well. It is an and and again that if you don't use it up for long-term care and thereby in the policy under the assumption they're probably gonna blow through that and more. But if it happens, they're both killed in a car accident three years from now or something there'll know if the sun survives the beneficiary on this, the primary beneficiary of this policy is the Mrs. okay and their contingent beneficiaries at special needs trust. So she's gone before he dies because he's the 401(k) owner is the money will just go straight tax-free of the death benefit right into the special needs trust.
Once he understood that he's like that now organizes figure out a way to systematically move a bunch of that money into a whole life policy.
Bunch of 2.5 million remaining into a whole life policy over 10 years, which has a cash value so he if he needs that money is the list of 90 or something then will start happen that money tax-free cash value for them to live if he doesn't need it.
Then the beneficiary on that'll be the Mrs. says that Ms. I'm listening and I know a lot of our listeners. You know it's pretty hard for me to relate summaries got $2.7 million. However, what we will we look at potential right.Scott potential for whatever resources that that we do have blitz and save an example of a typical person I could use the same numbers I just remove zero.
I can't tell you how many people I run into that have 270,000 in their 401(k) and they've got $1400 in their savings account and basically almost nothing, or cash flow. And that's the situation you can buy a policy on one person with this thing for $50,000 asset transfer really. For starters, this kind of people could still look at this policy and then if you cover in a husband and a wife, or your cover in a couple you probably need 100,000.
However, we can do a combo count policy were were going to take some of your 401(k) money and pre-fund a single premium hybrid long-term care, and then maybe we buy a separate traditional policy to supplement and is all kinds of things you can do that we can do in planning to deal with income and that sort of thing by smaller policies that we have something for everybody and I'm just using them as an example right in and then there's a lot of us that fall under another category really were talking about creative ways right to pay for long-term care insurance and and so there's a lot of us that one healthwise. Don't qualify for certain times of of of these policies right but will there are and we've got short-term care and recovery care and we got you know that there's annuities write in my MRI and a language that that somebody that possibly had a again of a large sum of money or even now to me a large sum of money is $240,000 and that's a large sum of money to meet so if they had that in the end they didn't qualify healthwise for the hybrid there's other options that there is there is a definite. We do a lot of those people that have a we have a lady that had cancer like nine months ago she had mastectomy and chemo and all that can stop and spend as little as six months after that were she's cancer free. She's able to get this annuity hybrid long-term care. It's actually with the same company does this. And then she can purchase the extension writer once you qualify for one you qualify for the other.
And that's exactly what we sold and I appreciate your bringing that up so it's now some health conditions you can get there, but then we got something else for those folks. So if you give long-term care is of a concern. I don't care whether your monies in an IRA or it's just income that you could pay a premium or it's in something else. It's in a CD at the bank.
We can figure out a way to get your protected order to enhance that money for the use of long-term care because it in and it was interesting to me or I think it's really helpful that that one of the real callings that you feel like you have on your life, because I know you will is is to help people, out of denial of this of this situation coming into their life absent at an and then finding ways to help them protect themselves and their assets and him him in. From my standpoint, even more importantly protecting your family from a crisis. That bit of of guilt and shame that they're going to feel because they were unable to care for you. The way that they really would've liked to listen when people are in these crisis is on a minimum weekly okay just in there with the whole family. The adult kids are about my age a little younger and then mom or dad is in their 80s and a crisis. I'm telling you, if they don't have insurance even if they have a lot of money or they have middle money or they have no money. There, they're all complaining about money and they're arguing about money and they're worried about money when is it going to be great to just take money out of the equation and I guess that's why they're coming to me, but I'm thinking, how about we just worry about dad and how are you doing daughter that's bearing all the burden you get your tube, sorry brothers that just came into town for this meeting and it wouldn't be much good to your mother.
Anyhow, but your shoulder and the whole burden, and you get kids, how are you doing how's your mom doing and what's your care like and how much choice. Did you have in all that we we really need to shift this discussion in a crisis away from the money but they're all talking about money because money is the issue and so even if we get a small amount of long-term care.
The covers for a short period of time.
We can move money out of the issue in the crisis by using the insurance and then we can plan out the rest of the assets of the insurance runs out right so I'm afraid I can blame it. We've run out of time again before wrath, which extend III hope you can see this is this is clearly one of the areas that Hans really really has a heart for and and and wants to help you. Be creative. Whatever your situation is and is always good. Take all your different pieces of the puzzle in and help you put that together in order to come up with the plans that fits you and your family, your health needs and all in all that's going on with that and that's why he wrote the book the complete cardinal guide to planning for living in retirement, which is available cardinal guide.
You can find all this information, it cardinal guide.com thank you Hans once again thank you finishing well is a general discussion and education of the issues facing retirees cardinal guide.com cardinal advisors and Hans Schild, CFP some insurance this show does not offer investment products and more investment advice. We hope you enjoyed finishing well brought you by cardinal guide.com visit cardinal guide.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows to get Hans book go to cardinal guide.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guide.com cardinal guide.com this is the Truth Network