The Unique Tax Advantages on Annuity-Based Long Term Care


Have you considered getting an annuity-based long term care policy? It is always a good idea to have long term care insurance. You may never need it, but if you or one of you loved ones ever do need it, you will be glad you got LongTermCarethe policy. Without a long term care insurance policy, your savings could easily be wiped out quickly by an assisted living or nursing home stay.

So how does the annuity-based policy work? First, you put money into an annuity. The minimum is usually about $50,000, which is less than what it costs to stay in a nice assisted living facility for a year in most places. You can fund the annuity with cash, another annuity, or a universal life insurance policy you don’t need anymore.

Once you’ve funded the annuity, you choose how much long term care insurance coverage you want to purchase. It will usually be around 200 or 300 percent of the value of the annuity. You can also decide if you want inflation protection on the policy, which is always a smart idea. Then, choose how long you want the policy to be in force. The longer the better is true for most people.

The money in the annuity is pre-tax money, so you aren’t taxed on it until you withdraw it. If you never need to use the insurance, you can cash in the annuity for its entire value plus interest when it matures. If you pass on before the annuity matures, your heirs will inherit more of the money in the annuity because of its pre-tax status.

It is always a smart idea to have long term care insurance. When you couple it with an annuity, you have a sound investment vehicle that can protect your financial interests and those of your heirs in many important ways.