Use the deferred annuity to fund LTC

Let’s take a look at a funding idea this week.  I’ve talked about the use of nonqualified deferred annuities as a funding source often.  Well, I am dipping back into that well because it is (in my not so humble opinion) one of the most overlooked long term care premium and benefit funding resources available.

You heard me right.  Nonqualified deferred annuities are both a premium AND a benefit source for funding long term care.

I’m going to bypass the whole premium part of the comment since you’ve heard me over and over talk about transforming tax-deferred accumulation into tax-free long term care benefits with a simple 1035 exchange. 

What I do want you to focus on is using that nonqualified deferred annuity as a funding source for long term care benefits.  Of course, there is a catch.  There is the easy way or the smart way.

What’s the easy way?

It is pretty simple.  Do nothing and plan to liquidate the annuity and pay taxes on the gains as you distribute them to fund long term care expenses.

What’s the smart way?

Do what I mentioned earlier and exchange the existing annuity into an annuity that will provide money for long term care expenses tax free.

Either way, the annuity will provide some resources to fund an extended care situation. But, not every annuity can provide benefit tax-free.  In fact, there are only 4 carriers that offer annuities that can produce tax-free LTC benefits.

Here is why you should consider moving that annuity.

• It allows your client to designate the bucket of money that should be tapped to fund a care situation. (More control for the client, their family, and you.)
• It reduces the unintended consequences of a taxable distribution.  Remember that increases in taxable income may impact “means tested” programs like Medicare premiums.
• It presents an opportunity to magnify the value of the annuity beyond the tax play.  Adding the continuation of benefits rider can double, triple, or create an unlimited source of funds for long term care expenses.
• It may be your last opportunity to provide your client with advise that can protect their retirement plan.  The Annuity Care products are available to age 85.

So – what are you waiting for?  Consider all of the funding options available any time a long term care discussion occurs.  And, don’t forget about improving the deferred annuity that the client is holding onto.

Please contact either Justin Fox or me for mor information about using nonqualified deferred annuities as a solution for long term care funding.