NQ Annuity and buy LTC insurance

[walthamny]

Client has a NQ annuity with a cost basis of 50K and it is worth about 240K. He is 62 years old. If he uses the earnings and buys a LTC policy his withdrawals from the annuity will be tax free. Now if he were to buy a LTC with return of premium rider, how will it be taxed at death if he never uses the LTC policy. If the LTC return of premiums get treated like life insurance, then technically you can take the unrealized gain inside of an annuity and pass it on to the next generation tax free.

Does any one have any thoughts?

 

[Tahoe Ray]

Client has a NQ annuity with a cost basis of 50K and it is worth about 240K. He is 62 years old. If he uses the earnings and buys a LTC policy his withdrawals from the annuity will be tax free. Now if he were to buy a LTC with return of premium rider, how will it be taxed at death if he never uses the LTC policy. If the LTC return of premiums get treated like life insurance, then technically you can take the unrealized gain inside of an annuity and pass it on to the next generation tax free.

Does any one have any thoughts?

Super grey area...you're technically right from my understanding.

 

[scagnt83]

From my understanding, you are correct. ROP is not taxed.

The company issuing a 1099 (or not) for the ROP would be the LTC carrier, not the annuity carrier. How are they even going to know where it came from in the first place? Even if they do, as I understand it, the law is still on your side here.

 

[Tahoe Ray]

From my understanding, you are correct. ROP is not taxed.

The company issuing a 1099 (or not) for the ROP would be the LTC carrier, not the annuity carrier. How are they even going to know where it came from in the first place? Even if they do, as I understand it, the law is still on your side here.

Very similar to the old saying: "everything is deductible until you get audited"

 

[fed up]

Why sink all of the annuity into the LTC plan if you can get a monthly premium with a ROP on the LTC.

 

[Tahoe Ray]

Why sink all of the annuity into the LTC plan if you can get a monthly premium with a ROP on the LTC.

Taxes? I don't know any carrier that will take monthly 1035s.