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

In this episode, Mike and I focus on the less commonly known Annuity-LTC Hybrid marketplace. 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. However, Annuity-LTC Hybrid plans can also create insurance leverage, usually 2 or 3 times the single premium deposit for LTC needs, and may be useful in a variety of client-specific situations.

Here are some use cases where Annuity-LTC plans might be explored along with Traditional LTC or Life-LTC plans:

  • In certain health underwriting situations where the client might not otherwise qualify for the more leveraged solutions.
  • For older clients, who have accumulated significant assets where the Annuity-LTC solutions provide similar leverage to Traditional LTC or Life-LTC plans.
  • For clients who own existing non-qualified deferred Annuities with gains that no longer need the asset, 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 a multiple of the protection that could have been earned otherwise.

In the video, Mike and I discuss a case study of this variety where the client effectively moved an asset they no longer needed to create a larger pool of LTC benefits.

BuddyIns is a community of long term care insurance specialists. We are dedicated to helping families across the country with customized LTC planning solutions.

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