Want to get Long Term Care protection but don’t want to buy a traditional, USE IT or LOSE IT type Long Term Care (LTC) health insurance plan? What about if you could just take some of your existing assets and “reposition” them so that you didn’t have to worry about ongoing, increasing premiums and if you didn’t use the benefits…you could pass them on to your heirs. Asset Based Long Term Care is an easy way to accomplish this goal. Let me give you four quick examples of how that could be done.
Cash Value Life Insurance: If you have some existing cash value life insurance, the IRS allows you to do what is called a “1035 tax-free exchange”. This basically allows you to roll from one company to another without any taxation. You can take that existing life insurance policy or policies and roll them into a Life Insurance Based LTC plan. Not only will you still have the life insurance but now you also picked up some LTC benefits at no additional out of pocket cost. It is a paid up life policy, so it will also eliminate any premiums you were still paying. A couple items to be aware of…(1) has to be a “like to like” exchange. Same person for both the old and new policy (2) any existing loans need to be paid off before the exchange (3) you may receive more of less death benefit on the exhange, so you need to keep that in mind when making the decision. (4) In most cases you want to be out of surrender charges before you make the exchange.
Annuities: If you have existing Annuities that are out of the surrender charge period, you can do the same type of “1035 tax-free exchange” as we did above. The Pension Protection Act of 2006 provides Annuities that have certain wording to be used for LTC protection TAX FREE. If you have an Annuity that you aren’t using for income that has a lot of gain that will eventually be taxable to either yourself or heirs…here is a way to still own an Annuity but be able to take all the funds out Income Tax Free if used for Long Term Care. You just have to make sure it goes into an Annuity with the proper wording!
IRA’s/401k Funds: This is a unique approach to LTC planning that most folks don’t know about. If you have “Qualified” funds such as IRA’s, 401k’s, etc…you can use those funds for LTC protection. It involves the use of an IRA Annuity and 20-Pay Whole life combination. You will still have to pay your taxes on the IRA distributions over a 20 year period but by doing that, you will receive Long Term Care benefits, some extra Income Tax Free Life Insurance benefits, takes care of your Required Minimum Distributions (RMD’s) that you have to do anyway and it is a great Wealth Transfer Tool. It will gradually move your assets from a tax-deferred IRA to a tax-free Life Insurance policy over a period of 20 years. This would be for funds you don’t need for day to day income.
CD’s/Money Market Funds: Many of you will have funds stashed away in either CD’s or Money Market’s. As you are well aware, these type of accounts are paying very, very little in the way of interest. Most people have them in these accounts mainly for the safety and knowing the funds will be there when they need it. These funds could be put into a Life Insurance based LTC product that has an UNLIMITED FREE LOOK provision. If you change your mind for any reason at any time, you can pull your funds out and will be guaranteed to get back no less than what you put into it. This would provide you with LTC protection, extra Life Insurance protection, access to your cash if need be and best of all, you always know you can get all your funds back. Basically a very low risk appoach to LTC planning. It is a WIN-WIN approach no matter which way you look at it.
Hope these ideas help you. Please feel free to contact me at 309-297-0297 or email me at firstname.lastname@example.org for more information or to get some quotes based on your situation. If you were referred to this site by another agent, please give them a call.