Disabled & Broke No More !
I will share one with you that I completed this week. This one really demonstrates the creativity of true financial strategizing.
We had a couple similar to you guys, only the husband was disabled and could not work, and the wife had to stay at home with him because they could not afford in home nursing care.
That being said, they owned their home outright and the husband was receiving $1,000/month from Social Security Disability.
They have two children who are grown in their own careers and were contributing $1,000 and $800 respectively, per pay period to their 401(k)s. They had $27,000 credit card debt, and about $10,000 in car loans. Total monthly payments were $850 dollars per month for their debt. And they had $20,000 in a CD.
I advised them to sell their house to their children. Their children paid the down payment with the $20k from the CD making only 1.25% at their bank. They paid the new mortgage from re-directing the contributions they were making to their 401(k) plans and by paying off their non-preferred credit card and auto loan debt. This freed up $2,650 per month for them, and their mortgage payment was only $1,959 leaving them $691 free and clear.
The parents, my clients, used $100,000 to buy a $1,000,000 second to die permanent life insurance contract that the children will receive upon their passing. They had transferred the $100,000 to an Irrevocable Trust and bought the insurance inside the Trust so the children will receive the $1,000,000 income and estate tax free (which they would anyway because it is under the exemption limits, but better safe than sorry).
The parents then put the remaining $300,000 into a Medically Rated Single Premium Immediate Annuity to maximize their income. That turned out to be $1,850 per month for life !
So the parents still live in the house which they were going to leave to their children anyway. They now have an additional $1,850 per month for life. Their children no longer contribute to risky 401(k)s, and will now receive a fully tax free $1,000,000 upon their parents passing, for their own retirements. And by getting rid of their debt they now have an increased cash flow of $691 per month. Oh ! And I arranged a program for the house to be paid off in 12.3 years !
