LTC Alternative --- GUL + Reverse Mortgage

[J2727]

I am not sure this is a iron clad solution strategy as you point out, but maybe more of a sales strategy. Some might say it is "better than nothing". however, committing to a GUL that they later bail out on keeping might be worse than nothing. The carriers know the stats on people keeping UL or any product, so odds are in favor of the policy not staying on the books until payout because they forgot why they bought it & get a $5k bill & decide not to pay or have dementia or are institutionalized at the time the bill comes.

it is a possible solution for the right unicorn that hates LTC & hybrids but will like GUL & RM & can get approved for policies, etc

I already wen't over this with you before. You don't seem to understand the meaning of "alternative" strategy since you keep trying to polk holes in this.

So put the premium on autopilot with a direct draft, from the same account that SS is going into.
Or have the kids stay on top it too since it is their inheritance.

You don't just tell a client there's no way to handle LTC costs other than a regular or hybrid LTC policy.
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You keep making the same rebuttals.

I won't discuss this with you anymore.

 

[J2727]

This is a scheme, not a strategy. How do you help this person? some people can't be helped. The CPA and attorney representing my FIL convinced him that he had no need for LTC because his assets were sufficient. Over 250,000 was paid within the next 3 years to LTC out of those assets. He would have paid less than 10,000 in premium before the policy would have kicked in and covered those 250,000 long term dollars. I only hope that the CPA's family goes through their net worth before they die because, his words,"Insurance agents only want to sell policies"

OK "fed up", it's a scheme. You're right. I'm just trying to screw people over.

All agents and advisors are crooks and give bad advice like your FIL's CPA and attorney.

I won't discuss this with you anymore.

 

[Allen Trent]

Worst case scenario, if they spend all the money and don't have any other money, then they could go on Medicaid for LTC.

Is the GUL they buy an exempt non countable asset for Medicaid? If not, wouldn't they have consumed a exempt asset of the residence for the RM, then used premiums to buy the life policy that isn't an exempt asset.

Honestly not trying to be a jerk. really trying to understand this as I do give clients & people that need other "non product" strategies ideas on how to best plan for this or at least have some plan.

In my hundreds or possibly thousands of interactions with seniors discussing these topics, I have not sensed those that are against LTC and/or hybrids that are remotely interested in the concept of RM. However, I have had dozens of people very interested in LTC, hybrids, etc but 1000% against RM even when they should be looking at a RM. it is almost against everything they believe in

 

[J2727]

You asked this same question before. The "why use home equity when the home is exempt for Medicaid" thing.

Look at page 2 or 3 or something. I don't know what post I answered you in.

The home equity would be used and spent down like any other asset. That's what you're hung up on.

As I told you before, who cares if Medicaid pays for LTC? You have to go to a nursing home for that. Nobody wants to do that.
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For the millionth time... it's an alternative strategy.

If the client wants a regular or hybrid LTC policy, then use that.

I never said use this over a regular or hybrid policy.
Use one of the alternatives if a regular or hybrid can't be used.
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By the way, reverse mortgages are used in many different ways. It's not just for desperate people.
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And people who are vehemently against a reverse mortgage have no idea how they work. People think they're selling their home to the bank or they can lose their home by not making payments, etc.

 

[CALTCAgent]

You don't understand how reverse mortgages work. The housing market doesn't affect the RM line of credit growth. Read my previous posts. I;m not going to explain again.

Is the reverse mortgage at the time you get it based on the home appraised value ?

Are you not saying get a GUL early, before age 62, get the reverse mortgage at 62 when you can and who knows where the real estate market will be at that time ?

The strategy doesn't sound like there is much of a market for it. If you are going to float strategies that are very unlikely, maybe don't be so defensive and educate us as we don't know reverse mortgages like you say you do.

Some people do qualify for LTC, but just won't get it.

Those same people have spoken and they won't do a GUL years early and wait to do a reverse mortgage when they are older to cover their LTC risk.

 

[J2727]

Is the reverse mortgage at the time you get it based on the home appraised value ?

Are you not saying get a GUL early, before age 62, get the reverse mortgage at 62 when you can and who knows where the real estate market will be at that time ?

The strategy doesn't sound like there is much of a market for it. If you are going to float strategies that are very unlikely, maybe don't be so defensive and educate us as we don't know reverse mortgages like you say you do.



Those same people have spoken and they won't do a GUL years early and wait to do a reverse mortgage when they are older to cover their LTC risk.

Not being defensive. I already explained this alternative strategy many times over in this thread. I'm not going explain it again because you're new to the thread and asked a similar question as someone did before. Read the thread.
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Of course the RM is based on the appraisal of the home at the time. So?
And if they won't get LTC insurance, then who cares?

The RM line of credit will appreciate faster than the market will.

You can continue to polk holes in an alternative theory all day instead of seeing it for what it is... an alternative. Something is better than nothing.
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This strategy is unlikely?

You do know people use a GUL for legacy purposes all the time.
And a RM is used for many purposes in retirement, it's not just for desperate people.

So, combining the two as an alternative way to protect the legacy to the kids and use some leverage for LTC costs doesn't seem so unreasonable.
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Again, this is an ALTERNATIVE strategy. You guys are acting like I'm suggesting this over regular or hybrid LTC insurance.

It's just like using a FIA + income rider that doubles income for 3 - 5 years for LTC. That's not really LTC insurance either, but it is an alternative way to cover LTC costs (or at least some of the costs).

Or getting a GUL and using an acceleration of the death benefit to cover LTC costs. That's not really LTC insurance, but it is an alternative way to cover LTC costs (or at least some of the costs).
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How do you knwo they won't do a GUL and then a RM later?

Because they won't get a regular or hybrid LTC insurance policy?
The main reason people don't get LTC insurance is the "if I don't use it I lose it" philosophy. And they don't like hybrids either.

Getting a GUL to guarantee a minimum legacy to kids is commonly done.

Then suggesting a RM line of credit as a form of leverage that grows automatically regardless of market conditions as an alternative way to cover LTC costs is reasonable , especially if they won't have any other way to cover LTC costs.

Their legacy is set and they can use their growing equity as a spendable asset later on.
It's better than nothing.

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You have to have different tools to help people, especially someone who doesn't want regular or hybrid LTC.

Most people don't get LTC insurance. It's the most difficult insurance to sell.

So you suggest alternatives, which are not as good, but at least it's better than nothing.

 

[CALTCAgent]

Of course the RM is based on the appraisal of the home at the time. So?
And if they won't get LTC insurance, then who cares?

The point is a RM is based on the real estate market at the time you take it out. You said it wasn't based on the real estate market. If the bubble bursts, should you wait until it comes back ? I don't know but its something to consider is all. I get that this is an alternative. Great, I like alternatives.

The RM line of credit will appreciate faster than the market will.

Can you give an example to help understand ? This sounds really interesting and you know a lot about RM it sounds like.

Again, this is an ALTERNATIVE strategy. You guys are acting like I'm suggesting this over regular or hybrid LTC insurance.

I do understand this is an alternative you are suggesting, however we are discussing the pros and cons. Not saying one is better than the other.

 

[J2727]

The point is a RM is based on the real estate market at the time you take it out. You said it wasn't based on the real estate market. If the bubble bursts, should you wait until it comes back ? I don't know but its something to consider is all. I get that this is an alternative. Great, I like alternatives.



Can you give an example to help understand ? This sounds really interesting and you know a lot about RM it sounds like.



I do understand this is an alternative you are suggesting, however we are discussing the pros and cons. Not saying one is better than the other.

A RM is like a regular mortgage, but the interest accrues over time. You don't have to make payments while you're in your home.

If you sell the home, you pay back the RM (+ accrued interest) as you would with any other mortgage.

It's a way for people to tap into one of the biggest assets (if not the biggest) they have - their home equity.

When used correctly and responsibly, it's a great retirement tool for your toolbox.

RM's are non-recourse; you will never owe more than the house is worth (neither will your heirs who inherit the home when you pass away).

You can:

- refinance your current home to pull out equity
- buy a new home and take out a RM
- get a line of credit
- choose to receive payments every month for the rest of your life (tenure option)

You can also pay off an existing mortgage with a RM.​

The RM line of credit is not like a traditional line of credit. The unused portion grows over time no matter what happens in the real estate market. The market could crash and it doesn't matter, it still grows.

The rate it grows by is the same rate you would be charged if you pulled out money.

If the rate is 5%, then it grows 5% compounded every year. Will the real estate market do that? Depends on what time frame you're looking at.

10 years ago the real estate market crashed. If someone had a RM line of credit, it would have kept compounding at whatever the rate was at the time, even though the home probably lost 40-50% of it's value.
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Yes, if you get a RM right after a crash, then that's unfortunate.
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But if the plan is to get a RM anyway sometime in retirement, getting it at 62 is best because you don't get that much more as you age.

At 62, you can get around 50% or so. At 72, it's a little more. But you can never pull out all your equity; there has to be equity remaining so the RM doesn't go upside down.

So, for example, at 75, you would have a larger line of credit if you got it at 62 and let it grow than wait until 75 to get it.
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Are there cons to this strategy? Yes. But there are cons to every strategy.

But not having any protection for LTC is a huge con as well.

Let's say someone won't get regular or hybrid LTC for whatever reason (afraid if they don't use it they lose it, wasting premiums).

And even explaining partnership policies sometimes doesn't work either. They don't care if Medicaid will pay for LTC (it's in a nursing home).​

And they don't have enough reserves for an annuity option (either the FIA+income rider that doubles the income for a few years or the annuity that triples its base for LTC).

Then perhaps life insurance is an option (paid monthly).

- Either an acceleration of the death benefit for LTC (reduced death benefit) and they leave their home equity alone (and pass their house to the kids).
- Or they do the opposite and use life insurance for legacy purposes and use their home equity (via a RM line of credit) for potential LTC.

Premiums aren't potentially wasted as with LTC insurance.​

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If someone can qualify for Medicaid and doesn't care about being in a nursing home, then great. They can do that.

But if they don't want to be in a nursing home and/or don't qualify for Medicaid, then they need some way to cover LTC costs and using some form of leverage is best. Start with regular/hyrbid LTC, then go to the alternatives (or combine strategies).

LTC options
- regular LTC
- hybrid LTC; also has a death benefit (bigger LTC benefit, smaller death benefit)

LI alternative
- GUL/Whole Life policy with an accelerated death benefit or LTC rider (which I know most don't consider it true LTC coverage).

Annuity alternative
- FIA + income rider; can double the payout for several years, which would help in case of a LTC event
- LTC annuity; 3-4x the principal to be used for LTC costs if needed

GUL + Reverse Mortgage line of credit alternative

 

[CALTCAgent]

If the rate is 5%, then it grows 5% compounded every year. Will the real estate market do that? Depends on what time frame you're looking at.

Not trying to be adversarial but we are here for discussion and learning, so...........

One of my points was that the RM is dependent on the Real estate market at a particular time and the interest rate at a particular time. You clarified that it is dependent on the market when you take it out. Another statement was that it will beat the real estate market every time. You clarified with the above statement.

You also said nobody really understands reverse mortgages. The above 2 statement changes seem to indicate otherwise. Plus if you have a high level of understanding why not educate rather than put people down for not knowing something ?

​

 

[J2727]

Not trying to be adversarial but we are here for discussion and learning, so...........

One of my points was that the RM is dependent on the Real estate market at a particular time and the interest rate at a particular time. You clarified that it is dependent on the market when you take it out. Another statement was that it will beat the real estate market every time. You clarified with the above statement.

You also said nobody really understands reverse mortgages. The above 2 statement changes seem to indicate otherwise. Plus if you have a high level of understanding why not educate rather than put people down for not knowing something ?

​

I just wrote another long post about RMs and this strategy and you still have issues.
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Yes, and I agreed with your point about the RM is based on the time you take it out.
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I didn't say nobody understands, but when you and others make assumptions about RMs or ask the same questions, I'm not going to answer the same questions every time.

And if someone doesn't understand RMs, then why comment at all?

I'm not "putting people down" as you suggested. Seriously? As I mentioned, if I thought little of you and others posting, I wouldn't have taken the time to write all the posts I have.
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Do you really want to discuss about what point you brought up and whether or not I acknowledged that point?
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You're not trying to be adversarial, but you're being passive-aggressive, which is the same thing. It's like when someone says "with all due respect" and then disrespects you.
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You guys have had an incredibly difficult time with the suggestion of an alternative LTC strategy with the continuous nitpicking.

I'm tired of discussing this topic with you and anyone else.
And I'm no longer interested in anyone else's point of view on this.
Think what you like.

Better yet... you guys are right. This strategy is garbage and doesn't work.