Looking for advice on whether to maintain (or possibly sell) a life policy.

Parent Cafe
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Excuse me for how long this is, but I thought I’d answer as many potential questions now along with my thought process.

I have POA for elderly family members and handle all their finances now. Bills weren’t getting paid, tax returns weren’t being filed, etc., so I took over all those responsibilities because I’m seen by pretty much the entire extended family as “the responsible one” i.* :wink:

I’ve finally gotten them all caught up on the past tax returns, but it’s come to my attention that the wife has a life policy on the husband for $200K and the policy is some kind of hybrid term policy that builds cash value which can be used to pay all or part of the premium, so they have been using the cash value to pay most of the premium for some time, but the cash value is about to run out and the payments will skyrocket from about $350 a month to about $1250 a month. They have the money, but the policy runs out in 5 years, and that means about $75K in payments that could go toward nothing if he lives longer than that, and he’s very health (physically) so that’s a distinct possibility.

My concern is that they both have memory issues and I know the cost of memory care is very expensive. From my research, assisted living with memory care in the area can cost as much as $150K per year. They have long-term care insurance. I’m not sure how much it covers, but I know it doesn’t cover THAT much and has a max of 5 years, so I worry about how much they could burn through in a few years at that rate if they both end up needing it (likely IMO), then he could pass while she still lives several more years needing full time care.

I’ve brought up looking into a very nice, newer independent living facility in the area that’s like a fancy hotel with assisted living and memory care if needed. The larger 2 bedroom units start at around $9K a month for two people (more if they need assistance or memory care), so it is not cheap, but their home is paid off and worth maybe $1.5 million (guessing). They have no interest in selling it, though, and they couldn’t sustain those payments forever without doing so.

Then I brought up renting the house thinking that might go over better psychologically as something less permanent in case they wanted to move back. There’s also a waiting list of up to a year to get in, so it’s not like they’d have to make a decision right away. Between the rental income and their SS, it would probably cover most of the cost. Add in savings on food and horrendous utility bills (from having the heat turned up close to 80 all the time and forgetting they left the water on outside somewhere for days), and it might actually be close to a wash. The wife was initially mildly receptive, but the husband was unwilling to consider it and she backed off the idea after that.

Both would prefer full time, in home care for the remainder of their lives if it comes to that, but from talking to others who have done this, that can still cost $80K or more a year for one person. I spoke a neighbor whose mother has Alzheimer’s and hasn’t known who anyone is for years. Her very healthy father was taking care of her until one day he had a massive heart attack and died. She said he let his life policies lapse thinking he didn’t need them anymore, but if he’d just kept them current, that would have taken a lot of the burden off the 5 kids who now all pitch in for in home, 24/7 care. They will recoup when the house is sold, but this has been going on for more than 5 years with no end in sight.

After hearing that, I’m not sure what to do about the life policy. Neither have any life threatening illnesses, no high blood pressure, etc. and the husband takes no meds except for memory, but I’ve noticed the memory issues really accelerate in the last year for both of them. I’m just worried that at some point they could have no choice but to sell the house, so all financial decisions I make are to preserve as much money as I can for them so they never have to. I’ve brought up reverse mortgages just to make sure they never HAVE to leave, but they are against those, too.

Yesterday, I spoke with the owner of an insurance agency who is someone I trust. He said he has a similar policy where the payments jump in the last 5 years and plans on just letting it lapse at that point because he said those policies are really meant to protect assets when people are younger, but it seems to me that it would be better to try to sell it than just let it lapse and have all the money they’ve paid in for 25 years be out the window.

I found an on line calculator for people of his age in excellent health with policies like these and it looks like it could be still be worth up to 20% of the policy amount, so that would be $40K (plus a potential $75K savings in payments over the next 5 years). The husband goes back and forth between wanting to pay it and letting it lapse, but knows he’s not really capable of making the best decisions right now and would go with whatever I decided.

Does anyone have any advice, thoughts, or experience selling policies? The agency owner said he has no knowledge of selling policies, so he can’t help me there.

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I suggest consulting an elder-law attorney. Good ones will have experience dealing with assets such as life insurance policies and with long-term-care planning.

My former father-in-law bought a 20-year, $675,000-payout life insurance policy on his wife’s life almost 10 years ago. Premiums are $30,000 per year (no, that is not a typo). She has Alzheimer’s disease; former FIL thought she’d die in a few years and the beneficiaries (their children) would make out like bandits. It seems to me the $240,000 to $270,000 they’ve “invested” so far could have been better spent on other things.

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Who is the money in the policy supposed to go to when the policy holder kicks the bucket? Ask that question. My bet is that at this point, whoever it was originally set up to protect doesn’t need to be protected, and the premiums could go to more immediately useful things.

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@happymomof1 , the wife. As explained, that money could come in handy if she needs 24/7 memory care at some point, as was the case with the neighbor I mentioned where the kids are now all footing the bill for their mother’s care and wishes her father hadn’t let his life policies lapse thinking they didn’t need them anymore.

I realize it’s a gamble either way. I think the safest route might be to try to sell the policy (rather than just let it lapse) and hoping someone here has looked into this and might be willing to share what they learned.

@@rosered55 , thanks for the perspective. That premium doesn’t surprise me for a policy of that size. It’s more than 3 times the one I’m talking about.

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I don’t have an answer for you regarding the life insurance… But, have gone through having to put my Dad in a nursing home after a bad fall. He also had dementia and we were paying 3 people to be with him 5-6 hours a day, in addition to our going over. We keep him at his house longer than he should have stayed there because that is where he wanted to be. My opinion is to have them “try” the independent living facility and see how that goes. They may find the activities, 3 meals a day, housekeeping worthwhile and be willing to stay. Of course, that means tricking them into trying it and “fibbing” to the facility about it. Maybe make an excuse about repairs being needed a their house for a month or so and they have to leave. The other option is to find 24/7 care, but you run into the issues of help constantly turning over (thankfully we did not have that problem with the help we hire), the help not engaging or doing what you paid them to do, etc. And it is expensive. Best of luck whatever you decide.

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Thank you, @mamom

They are not at the point where I can trick them yet and they are insistent they do not want to leave their home. I know things are only going to get worse and I’m just trying to make the right decisions for them while also respecting their wishes if at all possible, but suspect I’ll be second guessing myself every time. Ugh.

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My mom cancelled her policy about 5 years ago when the premium went to $36k/yr. it was pretty reasonable cost before that, iirc. I don’t even know why she had the policy in the first place. She also has a very good long term care policy. They used it for my father and it worked out very well. 24/7 care and the aide lived in instead of having a day person and a night person. My mom needed to use it last year after a bad fall - but only needed the aide during the day, as I was staying with her during her two month recovery.

We just did the financials of 24/7 in home care for inlaws and it was about 85k/year, plus they kept firing the aides. We finally insisted they to go into an assisted living facility with a memory clinic for my MIL. It’s a little less expensive, plus better for my MIL. FIL is ok mentally, but has had several falls in just the last six months (including hip breaking.) They don’t have long term care insurance. It’s only been two weeks and all my FIL does is complain, but we are just not entertaining the option of them returning home. Now the next battle will be to get them to sell their house

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When the policy costs zoom, and the policy expires in a few years, and the insured doesn’t have a terminal illness, it’s time to let it lapse. If you can get something for selling it, fine. But maintaining the policy is making a big bet on long odds.

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@emilybee , sorry to hear, but thanks for sharing. I need to look into how good their long-term care is, as it may be very good, but I’m a worrier and always planning for worse case scenario.

I would love to “insist” they go into independent living - with some help with meds, and not entertain the option of them returning home. I think it would be much better for them and at least I’d know they were safe, but I get nowhere. Even if I could get them to hire someone, I’m afraid I’d have a similar experience with them firing them all the time.

@JHS , that seems to be the consensus and I think I’m coming to the same conclusion. I just don’t want to make a mistake, but I don’t know the future. Thanks for your perspective.

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H and I recently had term insurance “converted” before it expired. Of course, term insurance doesn’t expire, but after the term is over the rates skyrocket and you’re paying too much for whatever you might get. The benefits of conversion is that your insurance company has to legally let you continue and cannot ask for a physical. You pay a higher amount, but the money is there for you to take out, eventually, and also eventually, the balance will pay the premiums and still offer you the insurance. BUT, it takes about 15-20 years to build up and get to that point. Do your relatives have that much time? It doesn’t sound like it.

I would end the policy and if you can cash any of it in, that’s great.

I don’t have any advice about coaxing your relatives out of their big and expensive house. It seems to be an almost universal problem. Let’s all make a pact to not do that to our younger generation! Downsize, simplify, and move to a place where you can stay forever - and do it well before you are incapable of making those decisions.

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Most couples prefer the 1:1 attention they receive at home. I’ve known choosy people who fire, and others that do so for variety of reasons ( to get family members to visit more, some paranoi). I think I would be with them when talking to a new aide, help them with priorities. Let them know that they can’t fire without a discussion with you. Be clear that if they are being unreasonable, the alternative is a facility. Some people get more stubborn with age.

My dad was sick when I finally moved him into an ALF. I told him it was temporary, until he felt better. I kept his condo and would bring him over to it when he asked. It was a headache for me, as a/c broke and I had to find time to wait around for repairs. Not until my dad was really bad did I have him sign papers for a sale, and he died before the listing.

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@greenwitch, yes!

Unfortunately, they have been using the build up I believe you are referring to (cash value or whatever the correct terminology is) to pay a chunk of the premium for some time and it’s about to deplete to zero in another month or so. So I either pay the full rate or let it lapse (or keep it going and see if I can sell it.) If they’d stuck to the level pay premium plus a minimum or 4% interest paid on the surplus, they could have kept just paying that more reasonable amount for another 5 years.

At this point in their lives, I’m not sure it makes sense to pay the full rate of about $15K a year for another 5 years and I’m leaning against it, but I know I’ll be kicking myself if it turns out to be the wrong decision.

This is why I don’t gamble.

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@1Dreamer, and that’s the short version of the story!! It’s been like pulling teeth with them for years to get them to get their finances in order/POA’s/medical proxies, etc., with them being in denial the whole time. My parents took care of all that 20 years ago and I am so grateful.

If they’ve had the LTC policy for a long time (25+ years) they may be in luck. LTC policies benefits have been cut drastically and some aren’t worth the paper they are written on anymore - and they are much more expensive now, too.

@greenwitch, I never moved up from my starter home and it’s a ranch so no stairs, plus laundry room on the same floor and not the basement. We can stay here forever if we want.

We also need to start exploring putting our assets into a trust and all the other things so S won’t be burdened with a mess.

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@bookworm , unfortunately I’m not close by. I take care of things mostly remotely, visiting (flying) once a month or so to check in, stock up on necessities, go through mail and catch whatever I don’t have on auto-pay or can’t pay on the net for some reason, and set up meds in daily containers for several weeks ahead.

A sewer main broke recently and I arranged a couple of people to go by and give bids. I told them not to hire anyone without consulting me because I wanted to check with insurance, but they forgot and hired one of them at a cost of just over $10K. I switched their insurance less than a year ago and included sewer line coverage of up to $10K, but it would have been easier if I’d gone through insurance first instead of having to submit paperwork later and get reimbursed. Then when they got the check, they called and asked what it was for, and it was only about a week later. LOL.

I think the only reason they trust me so much is because I don’t try to force them to do anything. When I’ve tried to become more insistent about certain things, huge defensive walls went up and things seemed to go backward, so I stopped that. It’s difficult trying to figure out how to handle all this, but I’m doing my best while also trying to grant them their dignity.

@emilybee , I feel for you! I hope I’m never that stubborn. Yes, they’ve had LTC for a long time and policies like theirs aren’t available anymore. I need to delve deeper into what it actually covers. That may be all they need, but I’m a worrier and always coming up with a million “what if” scenarios planning for the worst and trying to be as prepared as possible. They have a medicare supplement plan through AARP that pays 100% of whatever medicare doesn’t pay and that’s helped a lot, as I never see a bill.

They also have a one story ranch, but had it custom built, not tiny, and in an expensive area so worth a decent amount. In home 24/7 would actually work for them if/when it comes to that.

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Would they agree to a guardian ad litem. My friend does that, after years running rehab centers. She hires aides, takes folks to important medical appointments, checks in frequently, etc.

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Best wishes for everyone in this journey. Had lunch today with a friend. She asked if our family would continue to get together after my folks died and I said that I was pretty sure they would, as I’m fairly close to several of my sibs and our kids are already flying to see and spend time with their cousins. She said she didn’t think her H’s family would stay in touch (right now they mainly just fight) and she and her mom are already estranged from her sister. It’s sad to me.

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Not yet. I have a friend who does that and I’d love it if they’d agree to it, but they really only trust me, and they think they don’t need anyone, but that’s only because I do everything! Before I stepped in, bills weren’t getting paid, their LTC had lapsed for non-payment (but I caught it just in time to get it reinstated before it was gone forever), and found that they hadn’t filed taxes in 3 years. I only discovered all this when I noticed piles of unopened mail when visiting and started going through it. It was out of control, but they still didn’t think they needed any help and said they’d start paying closer attention. Ugh.

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My FIL fought the move from their longtime home for years; we eventually all just chose to support them living their life the way they wanted, risks or not. But a couple of years before the end, he had some small strokes, which he hid from us, friends of theirs told us. After that we could not prove it, but we knew things were not going right. He began paying the previously 4/4 hours (AM & PM) agency aide cash to sleep there. We tried so many things, but he kept cancelling them etc., finally there was a sit down about the arrangements, the kids said, “if you don’t make X change, Y will happen” Three weeks later Y happened, that caused all four of us to go to the house, we stayed long enough that he could not hide his condition as he previously had. He had absolutely no business running that house, his memory was shot, he was weakening, etc. He was making bad decisions.
Had they both died in that 2+ years it took to see that he was incapable, that would have been best for all, they would have died in their home. But they lived too long, and waited too long to move to AL, neither was in good enough shape bu then to connect with anyone. MIL thought the entire time that she was just rehabbing and would go back home :frowning:
It’s really sad when people are so obstinate, at some point, something may happen which will be far enough over the line that you must overpower their objections and move them. Hopefully it’s done in time.
Can you say anything more about the insurance policy? What company? What is the name of the product? Was it issued before or after 1987 tax act changes?

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@somemom , thank you (and everyone else) for their perspective and sharing their experiences. I know it may not be easy for some of you to do so and relive some of these memories. I also know things are going to get more difficult and hard decisions are going to have to be made at some point, and it helps to hear from people who have gone through it. I was hoping other family members might step up and help more, but the few that are up to the task don’t really want the responsibility and I can’t say I blame them. I took it on, so it’s up to me.

From what I can tell, the policy was issued in 1992 and is called a “Flexible Premium Adjustible Life Insurance Policy.”

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You might consider posting the policy specifics on Bogleheads, they have a lot of posters with opinions about this sort of decision.