Leveraging Assets into Insurance Related Products

Old barn set in a field

Written By: Leah Chester-Davis

Things were going pretty well for the Jones family. The farm had slowly climbed out of debt through the years and the family felt good about the legacy of their Century farm. For the most part they had done a good job of planning and weathering storms.

One thing that caught them by surprise, though, was how quickly the years go by. Suddenly, it seemed, Mom needed nursing care. The costs bowled them over. Now, the Jones family is faced with possibly having to sell off assets to afford care.

The national average for long-term nursing care in a semi-private room is a little over $82,000 per year. A private room is more than $92,000. A small room in an assisted living facility is a little over $3600 per month.

 “This scenario is all too common,” says Tom Haarmann, Money Concepts financial services manager with Carolina Farm Credit. “Unfortunately, the problem is that a lot of people don’t realize that Medicare does not cover these costs. If you’re sick and you wind up in the hospital and you’ve got Medicare, a lot of the costs are covered. But if you need help with what are called Activities of Daily Living – bathing and personal hygiene, transferring or mobility, dressing, meals, and maintaining continence – Medicare won’t cover it.”

While long-term care policies exist, the major objection and obstacle is cost.

“We don’t think about this until we are getting closer to retirement age but the longer you wait the more expensive it becomes. I’ve talked with people in their early to mid-60s who have begun looking at joint premiums and learn the cost is $5,000 to $6,000 a year,” says Haarmann. “A question they often ask is what if I live another 20 or 30 years and we’re lucky enough that we don’t have to use this either at home or in a nursing home? Does that mean we lose all that money?”

Haarmann acknowledges that selecting the right plan that is the right fit for your situation can be challenging. He adds that there are some good alternatives and some hybrid options that are affordable.

He shares an example where a husband and wife had set aside $100,000 in a bank CD. While the money isn’t making any interest, it is earmarked to be used for long-term care. When you realize, however, that one of them might end up in the nursing home with an average cost of $82,000 per year, you quickly see the money will last barely past one year.

Haarmann’s advice in this scenario is for the husband and wife to split the $100,000 and reposition the money into other insurance-related products that may leverage the amount of money they each put in by three times. “It immediately creates a bucket of money three times that amount so they each now have $150,000. They’ve taken that $100,000 and leveraged it to $300,000.”

The plus, says Haarmann, is that you basically can turn on the spigot, so to speak, and it will spit out income if you wind up needing care at home or if you need care in a nursing home. The only caveat is that you have to satisfy that you need assistance with at least two of the activities of daily living. A doctor has to certify that you indeed need help.”

The money can be used to hire a nurse 3 or 4 times a week, for example. You can hire who you need and pay them an hourly rate. You get to control the money. If you need to go into assisted living, the money can go toward the monthly fee.

While tax laws have changed, and for many it’s no longer advantageous to itemize deductions, it is possible to deduct a portion of the premiums for traditional long-term care policies. Based on last year, $780 can be deducted for those in the 41 to 50 age range; $4160 for ages 61 to 70; and $5200 for ages 70 and above.

The key is to find a trustworthy financial advisor to help you navigate the pros and cons of each option based on your situation. Arming yourself with knowledge also helps.


INDEPENDENT CONTRACTORS OF MONEY CONCEPTS INTERNATIONAL, INC. All Securities through: Money Concepts Capital Corp., Member FINRA/SIPC, 11440 Jog Road, Palm Beach Gardens, FL 33418-3764. (561)-472-2000

Not FDIC Insured, Not Bank Guaranteed, Accounts May Lose Value