Plan Funding Options
Most people don’t realize how many different ways there are to fund an extended care plan.
Depending on the insurance company and the product
premiums can be paid on an ongoing basis, paid for a limited period of time or paid all at once. In some cases, future premium obligations can be avoided altogether by exchanging – on a tax-free basis – funds from an existing investment.
Here are some common funding options:
• From current income
Including interest on savings or dividend income
• Using the cash surrender value of an existing life insurance policy
• Annuities
New or existing annuities can be a great way to fund the purchase a long-term care policy. Non-qualified (paid for with after-tax dollars) annuities are especially attractive sources because they can be utilized in a tax-favored way. Depending on the type of plan you are looking to fund, an annuity can be exchanged in full or you could choose to have annual distributions from the annuity pay the premiums for your extended care plan.
• From an IRA or 401(k) Plan
There is a creative, tax-favored way to use assets in a qualified retirement plan to fund a long-term care insurance plan.
• From a Health Savings Account (HSA)
Assets from an HSA can be used to pay premiums for “qualified” long-term care policies. IRS age-based limits will apply.
• Re-positioning of a low performing asset to purchase a single-premium policy
• Business-paid
Depending on the tax-structure of the entity, current tax law allows for certain premiums for certain long-term care policies to be tax deductible for a business.
• Sale of a life insurance policy
A little-known tax law allows owners of permanent (whole life or universal life) life insurance policies or even convertible term policies to sell their policies. This approach is only advisable if the policyholder is otherwise considering surrendering the policy. This can be a viable option in the case of “Point-of-Need” situations.
We attended one of Pat’s seminars where we learned that we could use our annuities to fund a long-term care plan tax-free through a 1035 Exchange. His knowledge and patience helped us choose the right plan for us.
Pat, I want to thank you for the assistance you have given our mutual clients in securing peace of mind in facing the very real problem of nursing home costs. You are instrumental in having our clients obtain the best defense to this problem - long-term care insurance.
I have worked directly with Pat Stopulos for my entire 30-year career as an estate planning attorney. He has helped many of my clients with long-term care planning issues. He has been an invited speaker to workshops we sponsor to educate consumers on various important issues. I am extremely comfortable introducing my legal clients to Pat. He always provides a thorough, independent and professional analysis.
Pat, I wanted to take a moment and again thank you for your long-term care services to many of our clients and also members of my family. Your prompt communication, clear outline of possible coverages and excellent follow up is appreciated.
I have received calls and comments from clients thanking me for my suggestion to call you. The expense of long-term care is a frightening issue for many. Your compassionate yet “to the point” style and your thorough knowledge of this important protection is appreciated.
Professional, knowledgeable and patient describe Pat Stopulos. Without his guidance and explanation of policy details, we would have been at a loss as to the best choices to fit our specific desires for a long-term care plan. I would highly recommend him to anyone.
Pat, thank you for helping our clients navigate through the maze of long-term care products. We appreciate you taking the time to help them understand how long-term care insurance can protect them and their families from possible financial destruction. We are grateful for the opportunity to work with you.
Contact Us
If you wish to learn more about long-term care solutions, we invite you to contact us. If you are an attorney or financial advisor and have a client who you believe could benefit from a conversation about long-term care strategies, we would welcome the opportunity to work with you.
