Presented by David Corwin
The Need:
Let’s say you have evaluated the possibility that you will need long-term care at some point in the future and concluded that purchasing long-term care insurance to cover at least a portion of long-term care costs might make sense in your situation. You are, however, concerned about paying premiums for insurance coverage that you may never need. Alternatively, you may have several needs competing for the dollars you have available to invest.
A Possible Solution:
You may be interested in a newer generation of long-term care insurance that blends several types of insurance coverage in a single contract. These “hybrid LTC” policies, also known as asset-based plans, combine the benefits of an annuity with the availability of long-term care benefits should you need them in the future.
Annuity/LTC Hybrid Plan:
With an annuity/long-term care plan, you purchase a single premium deferred annuity, usually with a lump sum deposit. You choose the amount of long-term care coverage you want (generally 200% or 300% of the amount of your lump sum deposit) and how long you want the coverage to last (usually two to six years). You must also decide if you want to include inflation coverage for the long-term care benefit.
If you never need long-term care services, the annuity can be redeemed for its accumulated value at its maturity date, or it can be left to accumulate at interest and the long-term care benefits will remain available. When you die, your beneficiaries may inherit all or some of the accumulated annuity value, depending on any long term care benefits paid during your lifetime.
Assuming you have the liquid assets available to purchase a single premium deferred annuity, your financial advisor can assist you in designing an annuity/LTC hybrid plan that fully funds at least a portion of future long-term care expenses through an annuity that has the potential to increase in value for the future benefit of you or your heirs.
Taxation of LTC Hybrid Plans:
New tax rules that went into effect on January 1, 2010, clarified the taxation of LTC hybrid plans, including:
Tax-Free Payment of Long-Term Care Benefits: The cost of any long term care benefits charged against the cash value of an annuity contract will not be includible in gross income, but will reduce your investment in the contract.
Tax-Free Exchanges of Existing Annuity Contracts: If you have an existing
annuity contract that you do not need for other purposes, you can exchange it on a tax-free basis for an LTC hybrid plan. Tax-free Section 1035 exchange
requirements can be complex. In order to avoid unforeseen and/or negative tax consequences, you should seek professional tax advice before implementing a Section 1035 exchange.
Annuities
Presented by Brian Leising
Do you have senior clients? Did they purchase only one product from you? Was it a Medicare Supplement, annuity, long term care or final expense policy? If you were able to uncover the need for one insurance product, could you uncover another? What if you had six simple questions to ask your clients that would uncover additional sales?
“When did you last review your life insurance policies?” You should ask this question of everyone, whether you think they have a life insurance policy or not. Many people have never reviewed their old life insurance policies and they may be paying too much or not enough. Their coverage could be too low or missing key features. I often see older universal life policies that have not been funded properly to keep them in force for the client’s full life expectancy. I have also seen cash rich whole life policies that do not offer enough leverage for the client’s dollars. Newer universal life plans with a no-lapse guarantee can help in both cases. Find an annual review fact finder you like and start filling it out at every appointment. You will help your clients and uncover more new business than you have in the past.
In part three, I will review one of the newer added features that can give your clients more than just death benefit protection.