WHAT IS LONG-TERM CARE?
Long Term Care is the type of care you may need if you have a prolonged physical illness or disability, or a severe cognitive impairment that prevents you from living independently. Referred to as the ADLs, the Activities of Daily Living are used to gauge one’s need of LTC, these activities include; eating, bathing, dressing, toileting, transferring and continence. If you are unable to independently complete two or more of the ADLs you are in need of long term care. The assistance referred to as long-term care is not necessarily “long-term”; an individual may only need assistance for few months or as long as a few years. The care provided by LTC is typically referred to as either “custodial care” or “skilled care”. Custodial care provides assistance with the ADLs but not with any skilled medical assistance. While skilled care provides assistance with nursing, medical, or rehabilitative services such as, taking medication, completing testing, or other such services.
SHOULD I BUY LONG-TERM CARE INSURANCE?
Every individual’s long term care insurance needs will vary depending on their financial situations, state of residence, and availability of assistance from loved ones. It is important to consider all of these factors when determining whether to purchase LTC insurance or not and in determining how much LTC insurance is needed. For instance, if you plan on having very limited funds available for LTC you may instead qualify for your states Medicaid program. If you do in fact qualify of Medicaid, which is designed to provide benefits to the very poor then you may not need a LTC insurance policy or be able to purchase one. On the other hand if you plan on having a large enough amount of funds so that you would not qualify for Medicaid than LTC insurance policy is probably a good idea. It can help prevent you from diminishing all of your assets prior to death and ensure that you can obtain the quality of care you need. If it is realistic that you will not be able to afford the cost of LTC ($2,000-7,000/month) for a period of time of a year or more then you should consider buying long-term care insurance. The amount of coverage purchased can provide a comprehensive benefit amount or a partial or supplemental benefit amount while you pay the rest of the costs out-of-pocket. The purchase of a LTC policy will also provide yourself and your loved ones the peace of mind that your future living is secure.
HOW CAN I SAVE ON LTC?
Every individual’s long term care insurance needs will vary depending It is important to purchase your LTC policy with an insurance company who has a good track record in the industry. You may not be receiving your benefits for decades to come and because of this you want to be with a carrier who is most likely to have set well founded premium levels, indicating that premiums will not increase during the time you are paying premiums. Also, make sure your agent is presenting you more than one option and pricing your application with more than one carrier. It can also be beneficial to look at other insurance and financial products that include LTC benefits. Many Life Insurance and Annuity products offer LTC riders to the base policy. This is many times a very affordable way to achieve LTC protection is in addition to your Life Insurance or Annuity needs
ARE LTC BENEFITS RECEIVED SUBJECT TO TAXATION?
No, typically the benefits received from a LTC insurance policy are receivable tax-free. However under special conditions benefits received may be subject to taxation. *This is for information purposes only and is not to be taken as tax advice. Please consult a tax professional.
CAN A FEDERAL INCOME TAX DEDUCTION BE TAKEN FOR LTC INSURANCE PREMIUMS?
Yes, if you itemize your deductions, than the premiums paid for a tax-qualified LTC policies can be deducted as medical expenses. Any such premiums are referred to as eligible premiums and are taken into consideration with all other deducted premiums and medical expenses, and as a total cannot exceed 7.5% of your adjusted gross income. *This is for information purposes only and is not to be taken as tax advice. Please consult a tax professional.
ARE THERE STATE INCOME TAX INCENTIVES WHEN PAYING LTC INSURANCE PREMIUMS?
Some states do offer small tax credits or tax incentives but this is generally minimal in amount. *This is for information purposes only and is not to be taken as tax advice. Please consult a tax professional.
HOW ARE LTC INSURANCE PREMIUMS TAXED WHEN PAID THROUGH A BUSINESS?
The employer can generally deduct the entire premium for their employee’s LTC premiums as reasonable compensation. The employee as a result of this is not taxed on LTC premiums paid by their employers but owned by the employee. *This is for information purposes only and is not to be taken as tax advice. Please consult a tax professional.
WHAT ARE THE GIFT TAX IMPLICATIONS OF PAYING LTC INSURANCE PREMIUMS?
Any premiums designated as gifted are not taxed as long as they are not larger than the eligible premiums (See Above). Any gifted premium amount larger than the eligible premium may be subject to taxation. *This is for information purposes only and is not to be taken as tax advice. Please consult a tax professional.
CAN A LTC INSURANCE POLICY BE OWNED BY A TRUST?
Yes, a LTC insurance policy can be owned by a trust if the language in the contract does not require the owner and the insured to be the same.