No LTC Monthly or Annual Premiums
Reposition Assets into a Single Premium Life or Annuity Contract and retain the money if you don't have any long-term care expenses.
Setting up a designated long-term care fund may be just as important as setting up a trust. People create trusts to ensure that their assets go to who they want, how they want. By stating your wishes when it comes to paying for long-term care, a designated fund takes a great strain off your family. Your children will never have to argue over what to do, what to sell, or how to pay for long-term care expenses.
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Life Contract - This is an approach to long-term care that combines life insurance, cash accumulation, and long-term care insurance into a single package. These specially designed life insurance plans allow you to use 100% of the death benefit for long-term care expenses. Companies are offering Single-Premium Life Insurance policies that will fund Long Term Care expenses in a fashion similar to the annuity contract below, but in addition:
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Depending on age; your life insurance benefit is, immediately about double the amount of the single premium that you put into the policy.
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If you don't use the policy for long term care expenses, then your beneficiary is guaranteed the amount you put in as a single premium plus any growth in cash value during the period that you hold the policy. It also passes to your beneficiary tax-free as insurance proceeds.
Annuity Contract - Companies are now offering annuities designated for long-term care expenses, which can include lifetime long-term care protection with premiums that never increase. These annuities provide value if you never need long-term care, and if you do the annuity will fund your home health care or facility care. You get guaranteed asset growth and long-term care protection. These products have been designed to singles and couples aged 50 to 85.
The annuity will provide a tax-deferred interest rates that's guaranteed for a period of years, usually five. You can access these funds only seven days after qualified long-term care begins.
An existing annuity contract can fund, via a tax-free 1035 exchange, one of these Annuity/LTC products and the owner can request LTC withdrawals for his or her spouse's qualifying expenses. The spouse will be called an "eligible person" for the purpose of the contract even if the spouse was not an owner of the original annuity.
Frequently Asked Questions:
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How does the Annuity Work? - From your initial premium the annuity grows your money at two distinct rates: one rate for LTC benefits and one for cash value. The LTC rate is guaranteed for a stated period of years, usually five. The cash value rate it guaranteed to be no lower than 3% for the life of the annuity. This allows you to build money for LTC protection, if needed, while still providing cash value growth if you do not need LTC. There are riders that can be added that kick in to provide either lifetime or an additional amount of time (i.e., 36 months) to draw benefits after the benefits from the annuity would have been exhausted. These rider rates are guaranteed and the premiums can never be increased.
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At what rate will the funds grow after the first five years? - Typically, after the fifth year, the interest rate for the LTC Fund will be determined on an annual basis depending on the market rate of interest at that time.
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What is required in order to make LTC Fund withdrawals? - To take withdrawals from the LTC Fund of this annuity, you must be unable to perform two of six Activities of Daily Living (ADL's) or be cognitively impaired. ADL's include bathing, continence, dressing, eating, toileting, and transferring. An example of cognitive impairment would be Alzheimer's disease. After meeting the qualifications, there is typically a seven-day waiting period for LTC withdrawals to begin;.
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How long can I receive funds from my LTC Fund? - When you qualify for withdrawals from the LTC Fund, your LTC Fund will last for a minimum of 36 months (if no other withdrawals have been taken from the Cash Fund) before the optional riders will kick in for an additional 36 months or if optionally chosen at the start - lifetime benefits.
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Are there any hidden expenses or policy fees? - There are no policy expenses or fees. All of your money goes to work for you on day one. There are surrender charges applied to any surrender of you Cash Fund. However, all surrender charges are waived upon death of the annuitant and for qualifying LTC Fund withdrawals.
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What happens if I pass away before using all of my LTC Fund? - If you pass away before the full LTC Fund balance has been withdrawn, your named beneficiary would receive the balance of the Cash Fund (not the LTC Fund). A full surrender or annuitization of you policy will be based on the Cash Fund Value. The LTC Fund will no longer be available if you select either a full surrender or annuitization of your policy.
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How powerful is tax-deferred growth? - As an example, if you were in a combined 30% tax bracket, and the annuity was crediting 7.5% interest to the long-term care fund, you would have to earn 10.7% in a taxable investment in order to equal 7.5% tax-deferred.
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Expand your rainy-day fund and guarantee lifetime LTC protection