Illustrating Qualified $

Thank you for everyone who joined me for my webcast yesterday where I discussed using qualified money to fund long term care.

My next webcast is Thursday, April 9 at 11:00 when I discuss how to get tax-free long term care funding from the tax-deferred accumulation of a deferred annuity or cash value life insurance.

One thing that was brought to my attention was that conceptually, people get it.  But, running an illustration is another thing.  (Thank you Jackie & Steve)

This week, I will share with you the basics for running an Asset Care illustration where qualified money will be the funding source.  

To produce this illustration, I will be using the Care Solutions Calculator found at oneamerica.com.  This system requires no login, just click that button that says you are a financial professional.

You will need to make sure that Asset Care is the elected product tab.  You will be required to select the state as that will determine the “rules” that will be enforced for plan design and will prevent you from illustrating something that is not available.

The illustration system is fairly straight forward.  Everything highlighted in yellow is a required field. If you are designing a joint illustration, the “joint life” radio button will open data fields for the second insured.

HERE IS WHERE IT GETS TRICKY

We are generating an Asset Care policy using qualified money as a funding source.  for product selection, you will elect “Single Premium Annuity” then select the “Qualified” radio button under tax qualification.

The AOB (Acceleration of Benefit) Duration represents the rate at which the policy’s death benefit will reduce to a zero balance assuming maximum monthly benefits are paid.  The options for a joint policy are 33 months and 50 months (individuals also have a 25 month option).

The IRA rollover amount should be entered into the Annuity Premium Amount field.  The is the rollover amount that will be used to fund the policy.

In almost every case, you will be electing to illustrate the COB (Continuation of Benefit)Rider.  Your choices here will be lifetime or a match of the AOB duration.  You will also have the ability to illustrate inflation on the COB for 20 years.

(For an illustration showing inflation on the base policy or for lifetime duration, you will need to either use the full illustration system behind the firewall, contact your BGA back office, or contact Justin Fox at OneAmerica.)

Click Calculate, and you will quickly have some numbers that will look like this:

To the right of the input fields, you will find a summary of the numbers.  In this scenario, we performed an IRA rollover of $150,000 into the policy.  This generated an annual distribution of $18,000 to fund the policy.  $14,748 of the annual premium funded the life insurance base policy and $3,252 was applied to the COB.

You will note the death benefit purchased is $172,728.  Remember, this is the minimum tax-free benefit from the policy.

To view the output, select “Create PDF” button and a pdf version of the output will be generated for you to save, print, or email.

Remember, my next webcast is April 9 at 11:00 (eastern) where I talk about turning tax-deferred accumulation into tax free long term care funding.

If you have any questions, please contact Justin Fox at (844) 658-3725 or via email at justinfox.isp@oneamerica.com