The provisions of the Pension Protection Act (PPA) of 2006 permits tax-free distribution of life insurance or annuity cash value to pay for long-term care. With Long Term Care Linked Life Insurance & Annuities, the consumer maintains asset control, receives more long term care benefit for their dollar, and retains benefits whether or not they use their LTC benefit.
Annuity Based LTC: A Long Term Care Linked Annuity functions just as a fixed annuity would - the policyholder earns a fixed rate of return, earns tax-deferred growth, and can be converted to a source of income or passed to a beneficiary. If an LTC benefit is needed, the company would use the initial deposit amount to fund the Long Term Care for one to two years. After that, the built-in multiplier of about 200% or 300% of the aggregated policy value would continue to pay the remaining years of the policy. The month benefits are received tax-free. In the example below a client has an existing annuity valued at $100,000 (although it could easily been a $100K CD) but with a low basis of $25,000. Using a tax free IRC 1035 exchange, the client transfers the annuity value to a new annuity that is compliant under IRC 7702(b). If the client is in need of long term care, he can receive up to 300% of the annuity value completely tax-free! .
The information found on this website is gleaned from readily available public sources and is for educational purposes only. It is NOT to be considered financial or legal advice. Consult with an appropriate professional before making important financial or legal decisions .
Life Resource Planners of the Treasure Coast (772) 567-7970
Copyright © 2022 Life Resource Planners