[ad_1]
In 2011, the average cost for a room in a skilled nursing facility cost more than $70,000 for a semi-private “shared” room and a private room cost more than $90,000. That was the cost for just one year of care and for just one individual or spouse. Considering that many will need care for 3 or 4 years (or longer) and it becomes painfully obvious why seniors are so concerned about the future cost of care.
With this kind of financial liability, middle class families are at greatest risk, but even families with significant assets can find themselves in a long term care liquidity trap. It’s not a matter of whether high net worth families can afford to pay for these expensive services, because clearly they can. It’s about creating the liquidity needed to pay for these services in a tax-efficient manner.
Families with significant assets typically own a diversified portfolios of securities, government and corporate bonds, annuities, real estate, or other assets. Unfortunately these assets are either illiquid or selling them at an inopportune time could lead to substantial investment losses. As a result, a long term care event can cause a significant liquidity trap. Paying taxes on capital gains or withdrawals from qualified retirement accounts to pay for care only adds insult to injury. Because of this, long term care insurance still makes a lot of sense even for those that can afford to pay for care out of their own pocket.
It’s with good reason that financial advisors sell life insurance to their clients to pay for estate taxes; it’s not because they can’t afford to pay the taxes, it’s to provide their estates with liquidity. LTC insurance provides a similar liquidity benefit and, like life insurance, provides a number of tax advantages.
To begin with, the insurance premiums may be deductible on individual tax returns. Secondly, qualified long term healthcare expenses that would normally be paid from other sources of income are reimbursed tax-free. For high income families, this can translate into thousands of dollars in savings. Furthermore, if government policy continues to favor future tax increases on the nations’ wealthiest families, these tax advantages may become even more valuable in the future.
Today, those with significant assets can buy linked-benefit policies that combine LTC insurance with life insurance. This unique plan design provides a long term care benefit along with premium liquidity. Many of these hybrid policies can be cancelled for a full refund at any time and for any reason and if the policy holder dies before utilizing their policy benefits, the full premium is paid back to their beneficiaries through a guaranteed death benefit. If you don’t use it, you don’t lose it.
For high net worth families, a linked-benefit LTC plan provides the liquidity necessary for future care and protects their investment principle at the same time.
[ad_2]
Source by Kevin W. Jackson
