By David M. Kopyc, CRPC®
As life expectancies increase, retirement planning now involves preparing not just for an individual’s final years, but for a potentially decades-long period of health and financial needs.
For the growing number of blended families, this reality brings unique challenges in legacy planning. Ensuring fairness and security for both a current spouse and children from a previous marriage requires careful foresight. Fortunately, new linked-benefit products—which combine life insurance with long-term care (LTC) coverage—offer a versatile and tax-efficient solution that addresses both needs simultaneously.
Navigating the complexities of blended families in retirement
In a traditional family structure, asset division is often straightforward, with the surviving spouse typically inheriting the bulk of the estate. For blended families, however, this approach can inadvertently disinherit children from a prior marriage. For example, if a parent leaves everything to their new spouse, that spouse could later change their will to leave all assets to their biological children, leaving the first-marriage children with nothing. This can cause significant rifts and legal battles, especially with larger estates.
Even without overt family conflict, a blended family’s financial security is more complex. A couple may be focused on providing for their current spouse, while also wanting to leave a meaningful inheritance for their respective children. In the event one spouse needs long-term care, the substantial cost can quickly deplete the couple’s shared assets, including the very inheritance they intended for their children.
The modern solution: Linked-benefit life insurance
For those seeking to secure both long-term care and a guaranteed legacy, linked-benefit products have emerged as a strategic solution. These hybrid policies integrate the dual benefits of life insurance and long-term care coverage into a single contract. By repurposing an asset, a policyholder can leverage it to provide income tax-free long-term care benefits. The key advantage is the “no use, no lose” proposition: If the LTC benefits are never used, the full death benefit is paid out to beneficiaries. This removes the risk of paying premiums for a traditional LTC policy that could go unused.
