LTC Insurance
My wife and I read your article on creative funding of LTC insurance with great interest. We actually have such policies [i.e., life ins with LTC riders] that we started 4-5 yrs ago when we were 63-64 yrs old. We are currently paying monthly premiums that will continue for the rest of our lives, or until we need LTC. Yet, our monthly LTC benefit will be far lower than in the examples you gave. My questions are:
1. Why is it necessary to have an annuity pay for the premiums? Is it because an IRA is not allowed to invest in a life ins policy on its owner whereas an annuity is allowed?
2. Under your plan, would the annuity own the life/LTC policies, or would we still be the owners?
3. Is your funding plan workable with policies that are already in existence? If so, would the payouts still be tax-free or only partially tax-free? If not, would we have to cancel the existing policies and start new ones, or can they be rolled over?
Terry Says
This column was designed to buy a new type of “combo” policy and the idea was to use the annuity to defer taxes on the withdrawals from an IRA necessary to fund the insurance policy. Here’s a link to that column: Long Term Care Insurance – A Creative Way to Pay – Terry Savage
That’s a completely different question than how to pay for an existing policy. I suggest you contact my LTCi experts, Brian Gordon at Gordon Associates 800-533-6242 and ask if it makes sense to adjust your current policy.