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Estate Planning

How to Use Your IRA to Fund Your ROPLTC Plan

Many of our clients have qualified assets (IRA/401k, etc) they intend to use for retirement income. However there is one unknown factor that could unwind the best laid plans – Long Term Care (LTC) expenses.

The most prudent way to insulate these precious funds is to implement what we call The IRA Leveraged LTC Strategy (IRA LLTC Strategy). Simply stated, with the IRA LLTC Strategy you transfer a portion of your “Qualified” funds, like your IRA into a special income annuity known as a 10-year Certain Immediate Annuity. Then annually for 10 years, you transfer the Annuity income into the Return of Premium LTC plan. Fully funding guaranteed Long Term Care protection that will leverage your transferred IRA up to 10 times!

Because the income generated from the Immediate Annuity will be taxed annually as a “Qualified” distribution, income taxes will be due April 15th of the year following the distribution. However, considering that you would have had to pay taxes on the IRA distribution down the road at potentially higher tax rates, and the immense leverage you generate, the small conversion tax you pay to obtain the IRA LLTC Strategy today is well worth it.


Allison, 60, is in good health and married. She is concerned about Long Term Care after seeing how those expenses impacted her parents’ retirement plans. Allison’s parents thought they were all set, (and they were), until extended care expenses depleted their savings.

Allison’s father passed away first after a long illness. His extended LTC expenses significantly impacted her mother’s plans. You see she had hoped to travel with her friends after her husband’s passing, but because most of their retirement money was spent on his care, her plans took a back seat. Then to make matters worse, her mother had three years of LTC expenses of her own. The money she was hoping to leave her family evaporated. It was gone.


This was a wake-up call for Allison. After discussing her situation with us, she decided an ROP LTC Plan would best fit her needs. She really liked the flexibility and simplicity of the Tax-Free Cash Indemnity monthly payout. With no restrictions on how LTC benefits can be used, Allison will be able to use her tax free cash to pay for a variety of needs that may not be covered by the typical reimbursement LTC policy. Benefits such as using her monthly payout to cover the costs of informal care from an immediate family member, or hiring less expensive and potentially more accessible unlicensed caregivers.

After getting approval for her Return of Premium LTC plan, she transferred $100,000 from her IRA into a 10-year Certain Income Annuity that produced a taxable annual income of $11,014 of which she is now using to fully pay up her ROP LTC Plan without an inflation rider.

Allison decided to pay taxes due on the annuity distribution out of pocket to preserve more funds for her ROP LTC plan. Her premium is guaranteed to remain the same and the policy will be fully paid up in 10 years. Her 10 year IRA conversion will generate an immediate and perpetual leveraged LTC benefit totaling $475,188 ($4.75 to $1) – $6,600 per month, for 72 months. In addition, should Allison pass away without needing her LTC benefits, there is a life insurance benefit of $158,396 that will be paid tax-free to her beneficiaries ($1.58 to $1).

Had Allison decided to choose the 5% Simple Inflation Rider her immediate LTC pool would have been $293,666. In 20 years, at age 80 it would have increase to $541,650 or $7,070 a month for 72 months. Fully guaranteed!

Now that’s what I call leverage!

To receive your own personalized example of how the IRA Leveraged LTC Strategy could work for you call 1-888-892-1102 or complete the ROP LTC Request Form by clicking the button below.

By David T. Phillips, CEO, 9/17/19
Estate Planning Specialists

The other day I met new clients for the first time, Jim and Debbie. I asked them to bring, among other documents, their current insurance policies and their Wills to the meeting. Jim and Debbie are in their early 40s and have twin daughters, Dana and Donna, age 10. While reviewing their current life insurance policies, I noticed a huge hole in their estate plan: the beneficiary designations of their policies were a mess. A mistake that we immediately corrected.

Here is what I read:

Jim’s Policy Primary Beneficiary: Deb, spouse of the insured. Contingent Beneficiaries: Dana and Donna, children of the insured.

You should never name minor children as direct or contingent beneficiaries of your policies, since a life insurance company can’t pay out proceeds directly to children until the children reach the age of majority, typically 18 or 21 depending on your state law.
In most jurisdictions, to protect the interests of a minor, state law requires appointment of a guardian or trustee to administer proceeds payable to the child. Appointment proceedings will delay access to the death proceeds and generate unnecessary legal and administrative expenses. Furthermore, the fiduciary named by the court may not be the one the insured would have chosen if they had made this decision during their lifetime.

This is what Debbi’s policy read:

Deb’s Policy Primary Beneficiary: Jim, spouse of the insured. Contingent Beneficiaries: (none indicated).

You should always designate a contingent beneficiary in all of your life insurance policies, and in most cases, the beneficiary designation should be worded in a way that will best benefit your children.
Having no named contingent beneficiary is the same as naming your estate as the beneficiary. Is this a bad thing? It can be; in the absence of a Will designating a guardian or trustee, the courts will intervene, which may cause long, frustrating delays. The courts could also impose restrictions on how the proceeds will be spent or distributed, which may be contrary to what you would have wanted for your children.
While Jim and Deb have gone to great lengths to protect their children (that’s a major reason they purchased the life insurance), they needed proper advice when establishing their policy in the beginning. It is also important that the beneficiary designations allow for the distribution of the life insurance proceeds in the most disciplined manner possible to provide maximum benefit to the children when you are gone.
Okay—here are some practical ways to ensure that minors, through the people entrusted with their care, have access to the life insurance proceeds intended for them:

Option 1:

Make the contingent beneficiary of the insured’s life insurance policy a Testamentary Trust in your Will.

The terms of your Will can contain this trust, which does not spring to life until your passing. Referencing the trust in the Will is a precise way to ensure that your exact wishes for your children are followed. The trust, which is a legal document, names the person you choose as the Trustee, and describes how you would like to have the money managed and spent and for how long. An 18-year-old may be an adult under the laws of many states, but the client’s testamentary trust could be written to keep the newly-minted adult from blowing the money.

  • In this case, the contingent beneficiary section of the life insurance application should state: (Trustee’s Name) as Trustee under (Article X) of (Jim or Deb’s) Last Will and Testament dated (January 1, 20XX).

Option 2:

Taking advantage of the Uniform Transfers to Minors Act (UTMA)

is an excellent way to ensure that children receive proceeds from a life insurance policy, especially if you have not yet executed your Wills. Under the UTMA, you would name an adult custodian who is given the discretion to make distributions for the minor’s welfare. The UTMA account (which is essentially a statutory trust) allows parents to choose a custodian—a person they trust—who would manage the life insurance death proceeds, and other assets they might have in the account, as they see fit prior to the children reaching majority.

  • Some insurers have a specific form to assist in making a beneficiary designation with UTMA custodian the beneficiary or contingent beneficiary of a life insurance policy.
  • If no special form is available, the following wording would generally be accepted: (Custodian’s Name) as custodian for (child’s name) under the (State) Uniform Transfers to Minors Act. Note: you should confirm with the insurance company for the specific wording they would accept.

Option 3:

Designate a Revocable Living Trust (Family Dynasty Trust) as beneficiary or contingent beneficiary in place of the child directly.

This is similar to the testamentary trust referenced above, except that a Living Trust exists at the moment it is executed, whereas the trust in a Will (testamentary trust) begins its life only at the insured’s death. Like the trust in a Will, a Living Trust allows the insured to detail the terms and conditions of gifts and plan for every contingency. The only downside of this type of trust is that it will require some level of administration from the outset. If you have a child with special needs, you absolutely should have a living trust. If your net worth is in the tens of millions, it’s a no-brainer, and in that case, you might want to establish an Irrevocable Dynasty Trust as well.
Should you have any questions regarding your beneficiary designations, give us a call, 1-888-892-1102.


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By David T. Phillips, CEO
Estate Planning Specialists Because you recently asked me to send you our Special Report on the new Return of Premium Long Term Care Plan I wanted to share with you a conversation I had the other day with a client when telling her the good news that she was approved for coverage.

Bonnie (not her real name) is a single, 58 year old nurse from Michigan. She called us a few weeks ago, after reading about my firm and The ROP LTC Plan in Bob Carlson’s Retirement Watch newsletter. After a series of discussions and illustrations, she completed an application and the interview with the underwriter. She was now approved and it was time for her to transfer the funds to bind her coverage.

While these are not her exact words, this was the gist of our conversation:

“Thank you David for making this happen. With my ROP LTC Plan, I now have options. Before today, I really only had one option, and that was to hope my savings and retirement plans lasted through any long term medical situation I might experience. I mean, as I nurse I have seen it all. I know firsthand that anything can happen.Now with my ROP LTC Plan in force, I have options.

Let’s say, 10 years from now, I slip and fall on the ice and find myself disabled. Since my ROP LTC has an Indemnity pay out after 90 days, I will have plenty of tax-free cash to do as I please.If I want to have my friend Charlotte move in and take care of me, I can.
If I want to relocate to Florida so my daughter can watch over me, I can.  And in both cases I can pay them a tax-free salary, from the cash I will receive from my ROP LTC Plan.

If I want to stay here in my home in Michigan and have a professional care giver take care of me, I can. In that case I will be able to use the tax-free cash from my ROP LTC Plan to pay for my care and will not be forced to deplete any of my other assets.

If I want to move to “Friendship Village” and have them take care of me, I can use the cash from my ROP LTC Plan to pay for it.Point is David, I have options, plenty of them.  Before I talked to you, I really only had one option and that was to spend down all of my cash first, then sell off everything else.
Now I have endless options.  And what’s more,
it really isn’t costing me anything.
I just transferred $100k from a silly CD that was set aside to pay for a potential LTC event.  Now I am initially leveraging that $100k by a factor of 3, and because I have included an inflation rider that factor will increase as high as 6 times.

Furthermore, if I get lucky and am one of the 20% that miss the LTC train, all of my deposit is returned to my ultimate beneficiaries at my passing.  It is just like you said when I first called you.  I transferred my CD funds from my left pocket to my right pocket and the money is still on my balance sheet, but now I have options.
All it is costing me is the use of that CD money through the years and SO WHAT.  I was hardly earning any net after-taxed interest anyway.  And had I invested it in the market when it came due, chances are I probably would have lost it anyway.
Now I have options – so many options.
David, I can’t imagine why everyone else doesn’t jump on this opportunity while they can.”
Bonnie absolutely gets it and she is right!  Everyone should know about the leverage and benefits of the ROP LTC Plan and the peace of mind it creates.
With the ROP LTC Plan, Bonnie is confident in her future and doesn’t worry about tomorrow. Best of all, since every aspect of her ROP LTC Plan is completely guaranteed, she will NEVER have to worry where the cash is coming from to take care of her, should her LTC train arrive at the station.   

Your first step is for you to find out for yourself what your ROP LTC Plan would look like should you reposition some of your assets. For your convenience, simply complete the ROP LTC Analysis Request Form CLICK HERE to submit your Request online and we will send to you at no cost your personalized ROP LTC Summary.

Feel free to call our office if you have any questions – 1 888-892-1102

Estate planning is the act of preparing how your assets will be distributed at death. It is often touted as money planning. Who gets what and when do they get it? But the real issue is people and the problems they face at your death. Spouses, children, grandchildren, dependents, business partners, and others will suffer not only emotionally but also economically if you fail to plan. Taking care of people problems is the main objective in estate planning. Estate planning is people planning.

In our business we meet wealthy people daily. We’ve always had a difficult time understanding why a large number of affluent American’s with huge estate tax liabilities refuse to address planning their estates. But even if your estate isn’t as large as Michael Jackson’s, the last thing you want is to leave behind a frenzy of loved ones fighting over your estate. When done correctly, you can leave a clear, concise and well managed plan to distribute your assets so your family and loved ones can focus on bonding and start the healing process.

We spend a lifetime raising families, creating income, taking care of people, and planning for the future, and in an instant it can end. We lose our opportunity for a plan of continuation if we fail to plan before death. Estate Planning is really living planning. Generally, the planning takes time, thought, and guidance and can appear complicated and confusing. But take heart, it can be simplified.

We’ve spent years trying to make estate planning easy. Here’s how to get started:

  • Order your comprehensive Estate Analysis and complete our Personal Estate Profile form.

Americans can now exclaim “Eureka” when it comes to finding the cash to fund today’s top Long-Term Care solution, The ROP LTC Plan.

By David T. Phillips, CEO
Estate Planning Specialists

“Eureka” was a word of excitement that the California 49ers would shout out when finding a rare gold nugget. Americans can now exclaim “Eureka” when it comes to finding the cash to fund today’s top Long-Term Care solution: The Return of Premium Long-Term Care Plan.

Universally, everyone that honestly examines the new ROP LTC Plan concludes that it makes fiscal and logical sense. The one obstacle that seems to interfere in the acquisition process is one’s inability to find the cash resources to fund it.

Well now thanks to Uncle Sam and The ROP LTC Plan’s unique design, you can use “pre-tax dollars to fund it.” That’s right, tax deductible dollars can be transferred from a tax deferred account to fund a plan that generates a “Tax-Free” monthly long-term care benefit. It doesn’t get any sweeter than that.

Let me explain.

In 2003 Congress created The Health Savings Account (HSA). Recent favorable HSA amendments now allow for HSA funds to be used to pay for long term care insurance as a qualified medical expense. Since the ROP LTC plan is comprised of two parts: the life insurance and the tax qualified LTC portion, the LTC portion can be funded with non-taxed HSA dollars.

And that’s a “Eureka” moment for those that can qualify for the ROP LTC Plan but have been wondering where they can find the money to fund it. Let me give you an example: Howard is age 62, he currently has $35,000 in his HSA account. He qualifies for The ROP LTC Plan and decides he wants to deposit $15k annually for 7 years to fund his plan. He immediately creates a Long-Term Care pool of $284,717, 19 times the initial transfer. Because he includes the 5% compound inflation option, by age 80 his pool will increase to $685,205, payable TAX FREE over 72 months. He will also have a life insurance benefit of $105,000.

A closer look at Howard’s 7 year deposit of $15k finds that $7,364 is used to fund the paid up life insurance policy and $7,636 to fund the LTC portion which can come from his HSA account up to the age based maximum deduction of $4,220 set by the IRS, (see table). Howard will fund the $15k annual premium each year by writing two checks: one from his tax-deductible HSA for $4,220 for the 7 years, and the other for $10,780.

Over the 7 years Howard will fund his ROP LTC plan with 28% pre-tax dollars. Should he ever trigger the LTC benefit, it will be paid out with 100% TAX FREE dollars making it all the more reason for him to yell out…….Eureka!

To receive your own personal example of how the ROP LTC would work for you, and how much can be funded from your HSA account, call our offices today at 1-888-892-1102 and schedule a time to talk to Todd or myself.

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