ryeates1
Expert
anyone familiar with an annuity and long term care rider policy? who sells these? and does this policy qualify for tax free withdrawals as is cited in the new regulation. this is a really interesting concept
Annuity with Long Term Care Rider
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- 924
Pretty much everybody has annuities with long-term care riders. They come in every flavor and with every conceivable nuance of schemes for indexing.
Yes, if long-term care payments are turned on they would considered tax free income.
There are so many variations on the theme that you can spend a lifetime trying to sort out exactly which plan does what and then which would be most suitable for a particular situation.
One that I like allows either or both spouses to turn on doubled income if one of the spouses needs long-term care -as long as the spouse who becomes ill is the primary beneficiary. This is ideal for IRA situations.
Yes, if long-term care payments are turned on they would considered tax free income.
There are so many variations on the theme that you can spend a lifetime trying to sort out exactly which plan does what and then which would be most suitable for a particular situation.
One that I like allows either or both spouses to turn on doubled income if one of the spouses needs long-term care -as long as the spouse who becomes ill is the primary beneficiary. This is ideal for IRA situations.
State life, Forethought, and Lincoln have policies that fit what you're describing. Most products just really provide an income doubler and in a lot of cases, only until your money runs out. The three I mentioned provide much more LTC and qualify for preferential tax treatment (typically up to the per diem HIPAA max).
Are you writing much annuity premium right now?
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ryeates1
Expert
yes, a lot, most of my clients are near or in retirement, guarantee income stream you can not outlive is the feature i point out to them. for years i didnt recomend annuitizing , but for part of a portfolio, a guarantee income stream they cant outlive is a big plus. they already have that with social security, which i mention
Can you recommend one that does it?
Lincoln, American Equity and almost everyone else. IMO it is much more difficult to leverage qualified money for LTC costs than it is with non qualified funds.
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I didn't stop to think that the particular one that allows both spouses to double income if one spouse needs LTC is sold only through a particular FMO. Maybe other companies are doing it now as well, but I haven't seen any.
But still, as I said, pretty much every company that sells annuities has income riders and also, to stay competitive, most big players include various ways to increase income for LTC situations. Same with many life policies -Lincoln is a good one, as stated above. The guaranteed return of premium rider Lincoln offers makes it interesting for a LTC vehicle that is still also liquid. Not a good return on it for a death situation, however.
Income and/or LTC riders are great if income down the road is the major consideration and the person does not have LTC insurance. The downside that has to be explained is that riders are not free. The rider costs typically do not come out of the income bucket, but if there is a good chance the person may want to walk one day and take the money, then they could always end up with less than planned because of the rider costs. I think there will be some ugly situations coming up in the next dozen years as folks use up the money Junior thought he was going to get because LTC costs ate up all the money.
Yes, the money went to provide Ma and Pa some decent care, but from experience I can tell you that Junior won't care about that. I always get the clients to sign a CYA letter that they understand Junior may get zip and they are very OK with that. Otherwise Junior is going to sue and say that poor Ma and Pa were taken advantage of.
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That is what is perfect about doubling for both spouses if either needs LTC, it is perfect for qualified money. I think more companies may start offering that option.
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Charpress is correct, most annuities that offer an income rider come with some sort of LTC rider also. Typically it will provide double whatever the income stream amount is for a specified period of time, usually 36 months or until there's no value left in the account, then it would revert back to the specified income stream amount. There are many products out there that offer this.
I know most companies offer this, but I never heard of the one Charpress was talking about, I wonder what the rates, caps, and payout % looks like on that product...
