Linda, now 58 years old, purchased a nonqualified annuity about 10 years ago. She originally purchased the annuity for income. However, due to the passing of Linda’s mother her inheritance has covered her future income needs. 

Now, Linda is very concerned about the financial impact of Long-Term Care seeing the cost pile up for her mother’s care. Luckily, her mother had the assets available to take care of the rising costs. Linda would the coverage to be on herself as well as her husband Mateo. 

The annuity she owns was one with a large up-front bonus and a two-tiered design. In order to retain the bonus and current interest credits, she was required to hold the contract for a minimum of 5 years and subsequently annuitize for 10 years or longer. The surrender value (and lump-sum death benefit) at any time would be 87.5% of the initial premium (without bonus) compounded at a low guaranteed rate.

As of her most recent statement, the annuitization value was $228,682 and the surrender value was $109,395. These numbers would grow even wider apart every year as the two accounts grew at different rates. 

When the agent called our office to ask about different annuity options for Linda, our Wholesaler had the perfect solution.

By annuitizing the in-force annuity, Linda received about $23,000 annually over 10 years. This included an immediate payment for a total of 11 years of premiums. 

We were able to take those payments and provide LTC coverage for Linda and her husband Mateo. The policy has several distribution options for the LTC benefit, including lifetime payments. Linda chose the option which would cover both her and her husband for 25 months each. This comes to a benefit of $613, 257. 

We were able to increase the after-tax inheritance to her kids by almost 100% while adding a significant LTC benefit by using “stagnant” dollars. 

The question came up of “what happens to the money if neither Linda nor Mateo end up using this money of LTC?” Here’s the good news, the policy has a growing cash value which is available if their needs change. Here’s the GREAT news, at the second death the immediate tax free death benefit on the policy is $313,257. Remember, the annuitization value on her current policy was only $228,682.
The lump sum death benefit was only $109,395.

Linda later commented, “With this new plan, I know Mateo and I are covered if either of us need care like my mother AND we’ve increased our kids inheritance if we do not need the money for Long-Term Care!”

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