Tax-free funding for long-term care

You should be showing your clients how they can protect themselves from the high cost of extended health care. Show them how to pay the premium for assisted living long-term care (LTC) with tax-free dollars. An existing non-qualified annuity or a new non-qualified annuity purchased with money from a CD or other low-performing asset can be used to generate tax-free money to pay the premium on long-term care insurance (LTCI). Remember, LTC is as much a retirement issue as it is a medical issue.

LTC costs run between $5,000 and $10,000 per month, depending on the area of the country where your client lives. This high cost will eat into the assets being used to fund the comfortable retirement your client plans to have. As these assets drain away, the family will question your judgment as to why Mom and Dad don’t have insurance to pay these high costs. Do I smell trouble?

To prepare people for retirement, you should show the various plans available to protect the funds they have accumulated to provide income for the rest of their lives. Some of your clients will choose a single-pay combination policy consisting of either LTCI or an annuity or life insurance policy.

Others may choose the traditional approach of monthly or annual payments. Some may choose 10-pay policies. Any of these can be funded with payments from a non-qualified annuity. Let’s look at an example of how these contracts can be put in force on your clients.

Bob and Mary want to buy a five-year plan that pays $200 a day to each. Bob is 58; Mary is 54. The proposal includes compound inflation, and the premium is $3,074.10 for both. An annuity of $62,400 with joint and survivor payout will provide tax-free premium dollars to provide protection for life. The benefit pool available for LTC claims will equal $730,000.

Review your book and call prospects who did not buy. The government wants to help people buy this coverage. Let’s take advantage of the new tax provisions. And don’t forget the business client!  Now that you have shown them how to find the premium to fund this important coverage, your sales will increase!

Mary Ann Lacey-Gray, CLTC, is president and CEO of Underwrite

rs Marketing Service Inc., a national marketing organization offering sales and marketing support to insurance professionals in the areas of life, annuities and long-term care.



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