Insuring Your Parents – Episode 100

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. We’ve got a real treat for our listeners out there today. We have Joe Pantozzi, I hope I’m pronouncing that correctly, who’s the founder and CEO of AlphaOmegaWealth.com and I got to tell you, this guy’s kind of an out of the box thinker and every time I’m around him, he challenges me to think a little bit differently and once again, I’m hoping he’s going to share that with us today.

[00:48] He’s going to talk to us today about ensuring your parents. So many times we think of buying insurance on ourselves, maybe on our children, maybe on our grandchildren, but this is a topic that just doesn’t come up that often and quite frankly, for the advisors out there listening, I think we have a responsibility to come up with it more. So Joe, welcome. Good afternoon, Todd. Thanks so much for that intro. That was pretty cool, I enjoyed that. Well, you’re an impressive guy and kind of tell me what made you think about this conversation of, you know, wow, we need to ensure our parents. Well, you know, I’ve been in this business for a long time, decades and decades and I love being around young people because they challenge me and my legacy to my clients

[01:40] and to the community and to the industry is my firm. So we have about 20 or 25 young agents, advisors, if they’re not young, they’re young at heart. OK, and we’re in we’re in several states. And my passion is teaching my young advisors how to love and serve our clients and help them advance their their need to create a wealth plan and to preserve their wealth and protect their wealth and build their wealth and do all those things that we all always talk about. And, you know, one of the one of the topics that I talk about all the time, they probably get tired of listening to me, is the need to talk about capital. Now, when most people think of the word capital, they probably think about money.

[02:25] But my friend, Tom McPhee, Dr. Tom McPhee mentioned that his definition, and I’ve adopted this definition of capital. You know, the definition of capital in my life is the ability to do good. And the more capital I have, the more good I can do. And so now let’s transition for a second and think about the dearest, sweetest, most loving people that you have in your life. Well, they’re your parents and your grandparents. Now, I consider those folks human capital. They’re they’re the foundation of the family financial engine. OK, and and those people, when they think about wanting to leave a legacy to their to the younger generations, they they think about money, but they also think about the stories, about the history, about the trials,

[03:14] about the about the obstacles they’ve overcome. They want to pour into us. Right. They want to teach us everything that they could possibly teach us so that we won’t necessarily repeat the same mistakes that they made. We’d like to avoid some of those mistakes. But but here’s the thing. At some point in the future, some maybe many of those older folks, older generations, the greatest generation, they will graduate. That’s the term I like to use for go to heaven. Right. They’re going to they’re going to die. They’re going to pass away. They’re going to become the hood ornament on a truck, however you want to describe it. They’re going to graduate. And a lot of those folks before they graduate are going to be

[03:58] in some kind of a long term care setting. Now, who is going to take care of those folks? Who’s going to pay those bills if they’re not completely flush with cash? Well, their kids are. And so when I’m sitting with my young agents and they’re working with their clients and I walk into the conference room, I say, have you talked about the necessity or the need or the desirability of having some life insurance on your parents? Because if they’re still healthy at all, they can qualify for anything. We should probably get a life insurance policy on them, because at the very least, our parents don’t want to be a burden to us financially in their older ages. And so if I’m going to pay out of my pocket

[04:44] for the elder care of my parents, they would probably want me to be reimbursed. They would want to replenish my savings account, right? And so at the very least, that life insurance policy will reimburse me for the money that I laid out. It’ll pay for final expenses. It’ll pay, you know, sometimes it’s $10,000 a month for long term care for a living, for a assisted living facility or for hospice care. Those bills mount up like crazy. My personal experience is my dad died a couple of years ago, just in 2014, at the age of 88, almost 89. And he was in an assisted living facility for 25 months. So number one, our parents, if they had the opportunity, would want us to be reimbursed. And number two, listen, if they’re blessed and they stay healthy,

[05:38] will they have the opportunity to leave us or leave their grandkids or their great grandkids in inheritance that could be used for graduate school or college or whatever? I think that, you know, some of our listeners out there are going to be thinking, well, surely my parents have planned and that kind of stuff. And, you know, number one, most of us probably did not properly plan. And number two, I don’t know of anyone who expected to live as long as our lifespans are right now. So all of a sudden, retirement years are starting to be almost as long as the working years. So even those folks who thought they had enough money really are finding out they don’t. And maybe they didn’t do so well in 2008 or something like that.

[06:22] And they’re just not where they’re supposed to be. And, you know, maybe they do have some money, but they’re holding on to it so hard and not enjoying those last few years of their life where this strategy that you’re talking about here would also free them up to enjoy the assets that they do have, knowing that there was a way to replenish that. Exactly. That’s very accurate. And it’s a very comprehensive assessment of what’s going on. You know, when people go into their older years now, I’m 63 years old and I consider that I’m heading into middle age. OK, so and that’s my story and I’m sticking with it. But but think about people who are truly older or elderly. They are heading into a perfect storm from the standpoint of finances,

[07:16] from the standpoint of opportunities, from the standpoint of income. If they’re still working, their income is probably dwindling. Their health is not getting better. Their their opportunities for investment or savings or are probably not getting better. They’re probably getting more limited because they want to be more conservative. Their their desire to leave a legacy is actually greater now than it was 40 or 50 years ago. And so they want to do something, but their but their choices are being are being limited. So that’s that’s one of the primary reasons. When I’ve spoken to the parents of our clients, they are 95 percent of the time totally in favor of allowing us to use their person to use their body

[08:04] to create that windfall, which, you know, whether whether you die with insurance or you die without insurance, you’re going to die anyway. So why not let that event, which is a foregone conclusion, create the windfall that can bless other people, that can create the seed money for college for the future, that could give the kids an extra shot in the arm to to propel their business or to create new businesses or to add some education. Elderly folks, parents, grandparents want to help their kids because they know that their kids are going to be there for them as they get older and as they need more help. We we want to get practical here for just a minute. And I’m going to ask you the question of how old is too old?

[08:52] Is there a target age for this strategy? But before you answer that question, I just want to remind our listeners that they can go to Alpha Omega Wealth dot com. Also, Joe’s phone number is 702-430-4400. He’s got a lot of agents. If this sparks something in your mind, you know, I’m thinking how nice it would be to have, you know, if you have two or three kids or something, you know, maybe even go together to to to fund this as a way to start getting prepared, because, you know, it is an investment. This is something that is definitely going to pay off. It’s not an if, it’s just a win. And like you said, having that life insurance does not change the win. So, Joe, what about that? Is there an age that’s too old?

[09:36] You know, we wrote a policy last year, 2015, on an 83 year old. And he passed the treadmill and then the physical exam with flying colors. So I would say up into the middle 80s, we’re OK. I’ve seen policies issued in the mid 80s, and that would probably be the upper end. But, you know, other than that, it would be a case by case basis. I’m always always kind of kind of confused or surprised when people say, well, you know, I I’m probably too old to buy life insurance. How old are you? Well, I’m you know, I’m 58, really. First of all, if you have someone that you’re obligated to or you have someone that you love and you can pass a physical, then you’re not too old. And at the very least that we can do is look at the opportunity,

[10:31] find out if you can pass a physical. Maybe the husband can’t and the wife can. Maybe two can can pass a physical as far as a joint. There are different types of joint life policies that will cover two people with one policy. So there are a lot of different variations and options that we can look at to create that that legacy and create that windfall. And I’m glad you brought up the point that the children can participate in creating their own legacy by contributing to that policy. And we’ve we’ve we’ve uncovered that that choice and that option for parents. And sometimes the parents will want to throw in some money and the kids will want to participate, too, because if the insurance is available, most of the time,

[11:16] the kids don’t want to pass that up. Is there one type of insurance that’s better than another for this? Or does that depend on the situation as well? Well, you know, term insurance is is something where you rent the policy. Term insurance is great when you’re younger, but you’re really not going to be able to have those temporary policies when you’re older, number one. And number two, you want a policy that’s going to be in effect on the day you die. That’s the most that’s the most valuable life insurance you could own. Right. One that’s in effect on the day you die. And typically we’re using the traditional whole life policy and we can we can design it and model it and can vary it in terms of funding.

[12:02] But I want my clients to have a guaranteed policy with guaranteed values, a guaranteed benefits that’s paid out to the beneficiary on the day that they die. And typically for that purpose, we’re going to use a whole life policy issued by a strong 100 year old mutual company that’s not going to have a lot of moving parts. That’s got a proven track record. You know, I would just point out to many of our listeners have listened to us talk about the life settlement market. And you’re actually creating a hard asset here that, if necessary, at the later years, when we start to know when that graduation date is getting close, these policies can actually be sold to use that as a benefit for the insured, couldn’t it?

[12:51] That’s true. And then that’s always an option. And, you know, it’s really not very much different than a reverse mortgage, because I come across people that that have run their assets down to such a point where they really have no choice but to start using their their own personal residence. As their last retirement fund. And so they set up a reverse mortgage. So in essence, they’re they’re having the mortgage company buy their house back by paying the client the mortgage payment instead of the mortgage payment going back to the mortgage company. So you can think of it in terms of life insurance is just another asset. And when I need cash, you know, I could cash it in. I could borrow against it.

[13:37] I can sell the policy to a company that’s set up for such a purpose. And typically when you do sell that policy, you’re going to get a much higher payout than just the cash value. You might get 20 or 30 or 40 percent more than the cash value if you’re going to if you’re going to arrange that type of a sale from yourself to a living settlement company. I think that’s an important distinction to think about, you know, even though your parents are the insured as the policy owner and the person who’s making the payments. This is as this asset actually belongs to the person who’s making the payments. Right. That’s right. Yeah. And so that that insured person has has all the options. And typically when we’re working with clients

[14:27] on this type of a program, we’re also getting their attorney involved because we want to make sure that the beneficiaries are correct. We do want to have an estate plan that’s looked at or at least considered. You know, I’m very I’m very big on having the entire professional team on the same page. I don’t want different professional advisors contradicting each other and actually advising the client to implement things that the client finds out down the road. We’re offsetting. So I want the whole team to be working together for the benefit of the client. Super. Well, listen, again, for our listeners out there, that was Alpha Omega wealth dot com. Again, the phone number is 7024304400. I encourage you to go on that website, take advantage of the free resources

[15:18] they have there. And again, this is kind of a specialized area. And I would think that it would be well worth having a conversation with Joe and his people about how your family might be able to sit down, come together and create a strategy that lets you comfortably know you’re going to be able to take care of your parents and let them really enjoy that time in your family. So, again, this is something we’ve never really talked about before. I so enjoy it. This is No BS Money Guy for the Prosperity podcast. Thank you for listening to the Prosperity podcast. To take control of your money and have it work for you. Visit us at Partners for Prosperity dot com. If you liked this episode, make sure you subscribe and leave a review.