Stacking Policy's with One Insurance Company

[Arthur Rudnick]

originally posted by goillini52

No need to make it easy to understand...I'm not stupid. I guess things have changed since I sold LTCI. I'd think that UW would've caught that and not issued the 2nd policy.

My response was not intended to accuse you of being stupid.
I thought my explanation would end the confusion of the 2 issues brought up in the original post.

There is no limit (nor has there ever been a limit) on the number of policies that a policyholder can own. That can mean multiple policies from the same company or more than one policy from multiple carriers.

Obviously the total benefits should not be in excess of today's cost of care, nor future costs of care if the policy has an inflation rider.

The error here is not the UW who originally issued the policies. It's with the people in the claims department who are paying the claim incorrectly.

In fact, technically, the amount of payments over and above the actual cost of care should be reported to the IRS as taxable income. Either from a 1099 issued by Bankers or by the policyholder.

But..........
That's a story for another day.

 

[Mr_Ed]

originally posted by goillini52



My response was not intended to accuse you of being stupid.
I thought my explanation would end the confusion of the 2 issues brought up in the original post.

There is no limit (nor has there ever been a limit) on the number of policies that a policyholder can own. That can mean multiple policies from the same company or more than one policy from multiple carriers.

Obviously the total benefits should not be in excess of today's cost of care, nor future costs of care if the policy has an inflation rider.

The error here is not the UW who originally issued the policies. It's with the people in the claims department who are paying the claim incorrectly.

In fact, technically, the amount of payments over and above the actual cost of care should be reported to the IRS as taxable income. Either from a 1099 issued by Bankers or by the policyholder.

But..........
That's a story for another day.

The excess benefits are not taxable.
In 2015 you can receive up to $330 per day in LTCi benefits tax-free, regardless of how much the care actually costs.

 

[Arthur Rudnick]

originally posted by Mr_Ed

In this case the excess benefits are not taxable.
In 2015 you can receive up to $330 per day tax-free, regardless of how much the care actually costs.

I don't believe that's the case in this situation Scott.

That only applies to an Indemnity policy.

This one (or 2) are Reimbursement policies.

Therefore any excess payments above the actual cost of care are considered taxable income.

If it ever came to an IRS inquiry or audit and the policyholder was able to prove that that he actually spent $300/day on Qualified LTC services (with bills and/or receipts) you would be correct, but he can't do that.

 

[Mr_Ed]

originally posted by Mr_Ed



I don't believe that's the case in this situation Scott.

That only applies to an Indemnity policy.

This one (or 2) are Reimbursement policies.

Therefore any excess payments above the actual cost of care are considered taxable income.

If it ever came to an IRS inquiry or audit and the policyholder was able to prove that that he actually spent $300/day on Qualified LTC services (with bills and/or receipts) you would be correct, but he can't do that.

All of the benefits are tax-free up to $330/day regardless of whether or not the policy is an indemnity or a reimbursement policy.

Here's the link to the IRS form:

http://www.irs.gov/pub/irs-access/f8853_accessible.pdf

 

[Arthur Rudnick]

originally posted by Mr-Ed

All of the benefits are tax-free up to $330/day regardless of whether or not the policy is an indemnity or a reimbursement policy.

Here's the link to the IRS form:

http://www.irs.gov/pub/irs-access/f8853_accessible.pdf

I think I'll stand by my previous post.

The IRS laws as it relates to LTC payments have not changed since it's inception on 01/01/1997.

You failed to post the instructions for form 8853, which says the following:

Section C—Long-Term Care (LTC) Insurance Contract

In general, amounts paid under a qualified LTC insurance contract are excluded from your income. However, if you receive Per Diem Payments (defined next), the amount you can exclude is limited.

Per Diem Payments
Per diem payments are payments of a fixed amount made on a periodic basis without regard to actual expenses incurred. Box 3 of Form 1099-LTC should indicate whether payments were per diem payments.

If you look at 1099-LTC, there are 2 boxes to check:
1) Per Diem
2) Reimbursement.

Form 8853 also requires you to declare whether the filer has either a Per Diem or Reimbursement policy.

So, as has been the case for the past 18 years for reimbursement policies, any money paid over and above the actual cost of care will be considered taxable income.

Per Diem Policies that pay a set amount each day (or on any periodic basis, regardless of the cost of care) is considered non-taxable income up to $330/day and no proof is required for the expenses.

If the payment is in excess of $330/day, the extra money will be considered non-taxable only if the policyholder can prove that the cost of care was over that amount.

So, if a policyholder had a per diem policy that paid $400 and claimed $400 in expenses, the IRS would want to see proof of the extra $70/day.

But again, we're talking about a reimbursement policy............

 

[ltcadviser]

Arthur is correct.

 

[Mr_Ed]

Arthur is correct.

Arthur is incorrect.

 

[Arthur Rudnick]

originally posted by Mr_Ed

Arthur is incorrect

What you really mean is that Scott is ALWAYS correct!

Normally when you're proven wrong, you walk away from the discussion, never to come back and defend yourself.

Here, it seems you're doubling down.......

I'm not going to get into a pissing contest with you, but you obviously haven't read the instructions for form 8853. It specifically says that there are 2 types of LTC policies; One is a Reimbursement and the other is a Per Diem.
A Per Diem policy is an indemnity or 100% cash policy where the full benefit is paid regardless of the cost of care. Just like a DI policy.

If they aren't handled differently why would they ask which one the policyholder owns?

Please explain why Form 8853 asks which policy is owned and also answer me why form 1099-LTC has 2 boxes that requires a check mark from the carrier whether the policy is a Reimbursement or Per Diem?

You can certainly believe what you want.

Personally, I would tend to believe the rules & regulations of the IRS, before I believe the rules & regulations of Mr_Ed.

This has been the way the IRS has handled LTC tax issues since January 1st, 1997.

For some reason it seems you'd like to rewrite the book.

 

[Mr_Ed]

originally posted by Mr_Ed



What you really mean is that Scott is ALWAYS correct!

Normally when you're proven wrong, you walk away from the discussion, never to come back and defend yourself.

Here, it seems you're doubling down.......

I'm not going to get into a pissing contest with you, but you obviously haven't read the instructions for form 8853. It specifically says that there are 2 types of LTC policies; One is a Reimbursement and the other is a Per Diem.
A Per Diem policy is an indemnity or 100% cash policy where the full benefit is paid regardless of the cost of care. Just like a DI policy.

If they aren't handled differently why would they ask which one the policyholder owns?

Please explain why Form 8853 asks which policy is owned and also answer me why form 1099-LTC has 2 boxes that requires a check mark from the carrier whether the policy is a Reimbursement or Per Diem?

You can certainly believe what you want.

Personally, I would tend to believe the rules & regulations of the IRS, before I believe the rules & regulations of Mr_Ed.

This has been the way the IRS has handled LTC tax issues since January 1st, 1997.

For some reason it seems you'd like to rewrite the book.

where does it say in the IRS regulations that benefits from a reimbursement policy will be taxed as income?

 

[Arthur Rudnick]

originally posted by Mr_Ed

where does it say in the IRS regulations that benefits from a reimbursement policy will be taxed as income?

Weren't you ever taught that a question shouldn't be answered by another question?

(Guess not)