Thoughts on Reverse Mortgage Daily Post on LTCi and ILITs

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Dear Advisor,
 
I found this article (link below) this morning while doing some research for the collaborative RM/ILIT whitepaper.
 
Summarizing the author, James Veale CPA, MBT and SVP for Tax and Governmental Affairs at Security One Lending (a smaller Reverse Mortgage lender) 
 

  • He erroneously concludes that long term care insurance is only for the wealthy. First, how do you define welathy in terms of assets and income. Second, any long term care plan should begin with a discussion of the client's goals, current health conditions, family and caregiver situation, financial condition and more. Only after a thorough analysis of the client's situation is it prudent to discuss what long-term care insurance may or may not be prudent. 
  • He says that the use of an ILIT with today's reduction in estate values and coupled with the return to 2002 estate tax exemptions of $3.5 mill (presumably after Obama's one year repeal) makes this option an expensive and unnecessary tool in most smaller estates. (I don't think we are targeting smaller estates) He says that the administration expenses of the trust are a problem and they can result in needless and substantial gift tax liabilities ( What about the proper use of Crummey Powers?) 
  • He further opines that the proceeds available with an FHA reverse mortgage are just not enough to properly fund an ILIT but they may be able to provide a part of adequate funding. (Really?  $375,000 is not enough to generate a substantial life insurance policy that would benefit the trustor's estate?) I don't think we are proposing that Mrs. Jones who has a $300,000 home in an estate worth $500,000 use an ILIT.  He is thinking too small.
  • Guess what...smaller estates can benefit from the use of trusts and innovative thinking too! These strategies may benefit from the consideration of tools like reverse mortgages, life insurance, etc... The important thing is to serve the client's best interest by keeping all options on the table.

 
Properly used (and explained), ILITs is just one example of a tool that can help clients, and their heirs, benefit from thoughful, proper planning.
  
 
Shortcut to: http://reversemortgagedaily.com/2010/01/21/long-term-care-irrevocable-life-insurance-trusts-and-reverse-mortgages/?utm_source=Reverse+Mortgage+Daily&utm_medium=email&utm_campaign=9a2410a238-RMD+Email+RSS