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A Creative Way to Use Annuities to Fund LTCi

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"A lot carriers today offer life-based long term care plans, but this is an annuity-based long term care plan. So, on top of the dollars going in that are your dollars, there's also a long term care insurance component, basically an extension of long term care benefits. By moving $175,000 from a non-qualified annuity with gains, it would allow those dollars to come out tax-free...and if long term care would be needed we'd turn $175,000 into $500,000 of long term care benefits."

Mike Padawer

Marc Glickman welcomes Mike Padawer, a long term care insurance expert, to discuss the less commonly known annuity-long term care (LTC) hybrid marketplace. In this video, Mike and Marc discuss a case study where the client effectively moved an asset they no longer needed to create a larger pool of LTC benefits.

Traditional LTC and life insurance-LTC extension hybrid products are used broadly by agents and advisors to create LTC plans with significantly more insurance leverage in the event of a lengthy LTC need, sometimes two or three times the amount of the single premium deposit.

Situations where annuity-LTC plans might be explored along with traditional LTC or life-LTC plans:

  • In certain health underwriting situations where someone might not otherwise qualify for the more traditional LTC insurance solutions.
  • For older clients, who have accumulated significant assets where the annuity-LTC solutions provide similar advantages to traditional LTC or life-LTC plans.
  • For clients who own existing non-qualified deferred annuities with gains who no longer need the asset for growth, yet do not want to take a taxable distribution. The Pension Protection Act (PPA) permits eligible annuities to be 1035 exchanged into a new annuity-LTC (or traditional LTC) product without incurring taxation on the gains. The advantage is that the LTC benefits received under the new policy may be tax-free and provide a significantly greater amount of long term care dollars than could have been earned otherwise.

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