No. of Recommendations: 2
Hi Wendy,

On the other hand, it is possible that one or both of us will someday need long-term care insurance (LTCI). Last week, we set up LTCI which will be funded by the WLI policy in a tax-exempt exchange. We will pay the WLI premiums out of pocket and the LTCI premiums will be paid by the WLI, whose cash value will gradually decrease. The LTCI premiums generated by the WLI policy are about twice our out-of-pocket payment of the WLI policy.

Just curious; Have you looked at asset-based LTC (versus non-refundable premium based)?

I know of at least a couple carriers approved to offer it in WA;
OneAmerica & Sagicor

The 50,000 foot view of the differences in asset-based versus premium-based are;

Asset-based is built on a standard whole life chassis,
(This means you *could* do a straight 1035 exchange, if it made sense, instead of the cashflow transfer you are doing now with surrenders or loans,)

If it is surrendered prior to triggering benefits, you get a full return of your premium*,
(Minus the income taxation on the dividends/interest accrued on that premium... the dividends/interest having been used to cover the LTC coverage,)

The underwriting on asset-based is streamlined... much less stringent,

The benefits are directly paid, not institutional reimbursements,

The benefits are generally about 3:1 over whatever assets/premiums you pledge,
(If you pay $100,000, you get up to $300,000 of benefits,)

If you pay $100,000, and only need to use $50,000 of benefits (due to recovery or other funding sources becoming available,) you can get the unused premium returned (minus taxes on dividends/interest, yadda.)

If you do pass, the $300,000 death benefit remaining (minus the LTC benefits paid out) is still paid out to your beneficiaries.

It requires a pledging of significant assets up front, which really won't generate any rate of growth return from that point forward.... (or could be said to be losing the opportunity costs of those funds,)
It has zero "sunken premium costs" for the benefits.

If you haven't looked at it... its an interesting consideration, IMO.
Not a "no brainer" either way... just another alternative with a different risk/reward profile.

Dave Donhoff
Leverage Planner
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