Explaining LTC need by the numbers

Couple #2: This quote was sent to Tom, 58, and Carolyn, 55, a wealthy couple who were considering self insuring. Her letter explained: * Assuming you were both "average" in your needs and began receiving care at age 85 and costs only increased by 5 percent per year between now and age 85, the total out-of- pocket expenses would be:

Tom $495,788 ($617.42 x 2.2 yrs)
Carolyn $685,986 ($507.95 x 3.7 yrs)
Total $1,181,774

These are the questions you should consider:

1. What assets will be liquidated to pay for care?
2. What are the tax consequences of liquidating those assets? a) Will you lose the "stepped up at death" tax benefit? b) Will you need to liquidate an additional 25 percent to 40 percent in assets to pay the income tax and capital gains tax on investments sold?
3. What if we are in another bear market and stocks/bonds are down 20 percent when you need to sell?

If you don't purchase the insurance and neither one of you ever needed care, will the $2,700 a year you saved really make a difference when the inheritance is divided among your loved ones? Will the extra money make a significant difference in anyone's life?