The Single Biggest Threat
Long term care insurance expenses are the single biggest threat to your client’s estate. The cost of care is growing by approximately 5.8% annually. This means that care costs which currently average $151,476 per year will be about $454,428 per year in 20 years!
Preserve Your Client’s “Step-Up” in Capital Gain Basis
Long term care insurance can help preserve the tax “step-up” in capital gain basis that otherwise would be lost. Without this insurance, it is very likely that additional taxes would be owed to the IRS if those assets such as a home or stocks had to be liquidated to pay for long term care.
Protect Your Client’s Qualified Funds
Very often, clients have to liquidate qualified funds such as IRA’s and 401(k)s to pay for long term care. When this occurs, your client will be hit with significant taxes. Additionally, your client may be forced to liquidate investments in a less than favorable market. A long term care insurance policy can prevent this from happening.
Advantages for Business Owners
Your self employed clients should be educated on the tax advantages of purchasing long term care insurance through their business. Long term care insurance can be purchased for the owner, spouse, dependents, or key employees only. This benefit is allowed to be offered on a discriminatory basis.
Hybrid (Combination Policies)
In response to consumer and agent demand, insurance companies have designed what can be best described as hybrid or linked policies. These policies combine the benefits of a life insurance policy with a traditional long term care contract. With hybrid policies, the consumer has the guarantee of long term care benefits or, if no care is needed, the promise of tax free life insurance benefits to the beneficiaries. In addition, many of these policies offer a full return of premium money back guarantee.
Take, for example, a healthy 60 year old non-smoking woman with $400,000 in liquid assets. If she deposits $100,000 into this hybrid program, she would get up to $98,712 every year ($8226 per month) for six years to pay for long term care costs. The total reimbursement could be up to $592,269 income tax-free – nearly 600% of her original premium. However, if she never needs long term care, her beneficiaries would receive a $197,423 income tax-free death benefit. Additionally, at any time, she can request a full return of her $100,000 single premium payment – no questions asked.
Coverage amounts will be different for each person depending upon age, health, gender, premiums and benefits requested. Consumers who utilize hybrid policies can avoid self-insuring against catastrophic long term care related expenses and have the peace of mind associated with a comprehensive plan.
Circumstances Where Long Term Care Insurance is not an Option
If you have a client or a spouse who cannot purchase insurance due to poor health, or a couple with one spouse already receiving long term care services, there are alternative solutions or strategies that we may be able to implement. We have successfully worked with advisors and their clients in bringing creative solutions to the table, often times saving them tens of thousands of dollars.