Pay for It With Pre-Tax Dollars?

For those who are willing to take a deeper look at the opportunities and benefits available, the rewards can be significant.

Specifically, with the Pension Protection Act of 2006, and its provisions coming fully into effect in 2010. We discussed that some on the “Meeting LTC Costs” page. Of course, there is more to it–for those serious about their likely need, and how best to prepare.

The problem is that most people will need one or more types of care and services which will exceed their ability to perform for themselves. The types of care necessary are quite varied, and may occur in different surroundings, such as:
  • Home
  • Adult Day Care
  • Retirement living communities
  • Assisted Living Facilities
  • Nursing Homes
The one thing they all have in common is that they are costly. Depending on type, duration, geographic location, and other factors, a realistic range is from $5,000 to $10,000 per month. Per person (married = x 2). And can be much higher in the more expensive areas of the country.

The ways people have met these large costs:
  1. Hoping that it would not happen to them (“Well, approximately 30% don’t need LTC. Maybe I am in that group.”)
  2. Paying out of pocket. Until they ran out of pocket
  3. “Spending down” and going onto Medicaid. And then hoping a bed would be available, and that they would get along with their new roommate. And still get to see some of the TV shows that they liked (or listen to their preference of music sometimes)
  4. Watching their intended gifts to family members, loved ones, churches and charities simply disappear.
And even if able to meet the costs entirely with their own assets (that is, after all, why we save and invest, isn’t it?), the cost . . . . Taking care of ourselves to the extent possible, opening up the bank account or retirement account and paying 100 cents on the dollar–each and every dollar–is draining.

IF ONLY THERE WERE A BETTER WAY  .  .  .  .

There is. Back to the Pension Protection Act. Congress addressed the problem with some very specific legislation–legislation which provides some significant income tax advantages to encourage people with assets to help themselves before their need is at their front door, knocking loudly and insistently.

Just “any ol’ annuity” won’t do.

Part of the Act focuses on our Long Term Care funding, and receiving income tax and other benefits. To do this requires the use of carefully constructed and approved annuity types and life insurance:
  • Annuities and life insurance policies with large cash value gains may be transferred income-tax free to specially-designed and approved policies. Funds later withdrawn to pay for qualified LTC expenses may be paid out/received income tax free!
  • A spouse often may be covered at the same time, with the same funds
  • Typically, one can have access to the funds for other uses
  • Depending on the issuer, one may even have the ability to pay for family members and friends to provide the care–at home in your preferred surroundings
  • Allows for the use of presently existing assets, so that an asset may be re-purposed and satisfy the funding need. No more writing monthly or annual checks
  • Options exist whereby a fund may be multiplied, so that a transferred dollar may do the work of $1.35, or $2 or $3 or $4
  • And, “use it or lose it” is gone. Unused funds may be paid out to others as you direct!

​And, many times there is the opportunity with specially-constructed life insurance policies to coordinate their features and benefits into your plans, not only giving you more flexibility, but enabling unused benefits to return a sizable sum, perhaps replacing much of the amounts expended, so that beneficiaries are provided for also.

Obviously, LTC is a “big-ticket” item. It requires caution and experience to make sure you have a most favorable outcome. We will be delighted to discuss things and work with you to that end. Let us help!
(314) 260-7917
St. Charles, MO 63303​
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