Financial Planning and Long Term Care Insurance

Long Term Care Insurance is the best way to prepare for your future medical care costs associated with aging. The most cost effective time to purchase it is in your 40-50's while you're healthy. There are many diffeent types. Traditional Long Term Care Insurance Plans- Plans that have a multitude of options including 1 year of coverage to lifetime of coverage. Daily benefits can run from $50 per day to $300 per day, inflation options and more typically covering care at home, adult day care, assisted living, respite care and facility care. Benefits are received income tax free. Premiums are deductible to the extent the premium contributes to your medical expenses and total medical expenses exceeds 7.5% AGI. These plans do require a certain level of good health.

Indiana Partnership Long-Term Care Plans - The Partnership for Long-Term Care is a public/private alliance between the Indiana State Governments and insurance companies. The idea of the partnership is to provide a way for the Medicaid program to work together with private long-term care insurance to help those people who are caught in the middle: they can't afford to pay the cost of the care or even the cost of a long-term care insurance policy with unlimited benefits, yet their assets are too high to qualify for Medicaid to pay their long-term care expenses. There are two types of asset protection plans in Indiana. One provides dollar-for-dollar asset protection. In other words if I purchase a plan that will provide $150,000 worth of benefits and I exhaust those benefits on claim then I can qualify for Medicaid to pay for my care and be about to keep $150,000 in assets. The second type of plan will protect all assets from Medicaid spenddown. How the program works is once the insurance plan pays out all benefits then the client can go to Medicaid and qualify for care without spending down their accumulated assets. There are two important reminders when working with partnership plans. Medicaid does not typically pay for home care or assisted living. So if you qualify for Medicaid after spend down you will be forced to receive your care in a facility. Secondly, even under total asset protection plans your asset will be preserved but you will be required to use your income toward your care less $52.00 (2006) monthly allowance.Premiums paid toward a partnership plan are fully deductible for Indiana State income taxes and benefits received are income tax free.

Short Pay Long Term Care Plans- Many are unaware that long term care insurance can be paid in a 5 or 10 pay plan (and other options). This is great for pre-retirement planning so that when you retire you do not take the LTC premium expense into your retirement. This is also ideal for business owners who prefers to use income from the business to pay for this benefit for themselves and then later transfer/sell the business to another owner or adult children. Again the greatest advantage is allowing you to walk into retirement with a paid up coverage.

Return of Premium Plans- Many plans exist that allow for every dollar spent in premiums to be returned to your estate or named beneficiary. Some will even allow a return after a claim. Benefits are income tax free and the return of premium to your named beneficiary pays income tax free as well in most circumstances.

Life Insurance-LTC plans- An alternative to traditional long-term care coverage with the benefit of a duel purpose plan. This is life insurance that can be use, if needed for long term care coverage. These plan typically are purchased with an added rider to provide up to guaranteed lifetime coverage. If you never need the health care coverage then the death benefit returns to your heirs' income tax free. This plan is typically purchased with a one-time lump sum deposit that has a money-back guarantee. Annual pay options are also available.

Deferred Annuity-LTC plans- Another duel purpose plan where assets continue to accumulate within a tax deferred annuity or IRA but purchase and attached a long-term care plan that will cover your cost of care for up to lifetime benefits. This is especially unique because a portion of your qualified plan dollars can be use to fund this valuable multi-purpose annuity, if desired. This plan can also set up to cover both spouses. Very minimal underwriting, simply pass a telephone interview. Another benefit, premiums for the long-term care coverage are guaranteed never to have any rate increases.

Immediate Need Plans- Ideal for the person or family member who is already receiving care and the family is concerned with the liquidation of the estate. This planning option will limit the overall reduction to the estate and provides a guaranteed stream of income that cannot be outlived.

Business Owner and Executive Carve Out Plans- Finally, a benefit that you can discriminate with legally plus deductibility to the company. And the premiums are non-taxable to the individual employee/owner. Combine this benefit with a return of premium and short pay discussed above and you have an extremely beneficial plan. C-Corporations have full premium deductions regardless of premium size; S-Corps and other forms have age related deductions limits unless we use a special business trust. These plans can also be run through a Medical Saving Account (MSA) & (HRA) Health Reimbursement Arrangements and the newly approved Health Saving accounts (H S A).

Family Gifting and /or Charitable Giving LTC plans are also available that allow charities to benefit, give personal LTC protection and provide premium deductibility. In addition purchases can be made for other family members including adult children with a return of premium option to the grandkids.

Provided by: Julie Hurst, Wealth Preservation Strategies, LLC

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