Tax Law Encourages Long-Term Care Planning

You are hearing a lot about long-term care these days. Public officials, financial professionals, and even people at church are discussing the issue since it impacts so many American families. There is a good chance you know someone who needs help with daily living activities or supervision due to memory loss. 

With the aging population in America, the need for assistance with essential daily activities such as personal hygiene, mobility, and dressing has become increasingly important. While some individuals require supervision, others may require specialized health care services. This goes beyond short hospital stays and extends to ongoing skilled and custodial care, addressing the effects of illnesses, accidents, and the natural process of aging.

Long-Term Care is Expensive - Options Help with Affordability and Asset Protection

The cost of long-term care services and supports can be prohibitively expensive, and traditional health insurance plans, Medicare, and supplements obtained at age 65 generally do not cover these costs. This puts the long-term care's financial burden squarely on individuals and their families. Either you will have to bear the cost of care yourself, or the responsibility of caregiving will fall on your family. 

Fortunately, Americans have an alternative solution that allows them to access quality care of their choice, whether it be in their own homes or in a specialized facilities such as assisted living, memory care, or nursing homes. This solution typically does not involve government assistance (except for those with little or no income or assets.)

Tax Benefits & Special Policies Make Planning Easier

While many individuals may anticipate a federal government solution for long-term care planning, it is important to note that a viable plan already exists. Federal tax laws offer incentives and advantages to those who invest in qualified Long-Term Care Insurance. Moreover, numerous states participate in the Long-Term Care Partnership Program, which grants additional asset protection to policyholders who meet the program's requirements.

Jesse Slome, director of the American Association for Long-Term Care Insurance, a national consumer education and advocacy group

One of the most significant IRS-approved tax advantages is the tax deductibility of tax-qualified Long-Term Care Insurance premiums.  

Tax breaks are the most significant indication that the federal government is trying to motivate individuals to do something about planning for the costs of long-term care. There are already a number of Internal Revenue Service or IRS-approved tax deductions and tax incentive programs available for consumers.

He says it is a tax-smart way to plan the real risk of one day needing long-term care.

Not all plans marketed today as providing potential long-term care benefits are deductible, but those that provide some enormous incentives for consumers.

Not all Long-Term Care Insurance products are tax-deductible. Generally, you must have a traditional tax-qualified plan to be eligible. Many "hybrid" or asset-based plans have limited or no tax benefits. A Long-Term Care specialist can explain the differences.

• Long-Term Care Tax Benefits Guide

Benefits from a qualified Long-Term Care Insurance policy are always tax-free. If you own a business or are self-employed, a Long-Term Care Insurance deduction makes a policy even more affordable.

Business Owners - Including Self-Employed - Have Huge Tax Benefits

For self-employed individuals and owners of various business entities such as S-Corps, LLCs, and C-Corps, the premium for Long-Term Care Insurance can be deducted as a business expense. Additionally, there is no obligation to offer this benefit to other employees, giving you flexibility.

You have the option to obtain coverage for yourself and your spouse without extending it to others, or provide it exclusively to key employees or managers. Notably, Long-Term Care Insurance premiums are tax-deductible for the company and tax-free for the employee.

Plan Younger When You Qualify for Low Premiums

Most people purchase in their 40s and 50s before retirement when premiums are low. Experts suggest planning before you retire as you can take advantage of these lower premiums and perhaps qualify for preferred health discounts.

If you own a Health Savings Account (HSA), you can use the pre-tax money in that account to pay for Long-Term Care Insurance premiums. 

• Using a Health Saving Account to Pay Long-Term Care Premiums 

Many American families are experiencing long-term care events in their families. Today's Generation X and Late-Boomers see parents, aunts, and uncles require long-term care services. They see the repercussions of long-term care and its impact on the family and finances.  

Partnership Long-Term Care Insurance - America's Great Retirement Secret

Most states offer Partnership Long-Term Care Insurance with additional assets protection. A partnership policy allows you to shelter part of your estate in the event of a longer long-term care situation where you use up all the money from your policy. These partnership policies provide additional peace of mind and asset protection. 

• What Is the Partnership Program in Long-Term Care Insurance?

See if your state is one of the states that offer these outstanding asset-protection products - click here. 

Protect Retirement Savings and Prepare Your Family

Affordable Long-Term Care Insurance has become a big part of retirement planning for American families so they can safeguard their future retirement savings from the financial costs and burdens that come with longevity. 

Addressing long-term care in advance will protect your 401(k), IRA, SEP, 403(b), and other assets from the high expenses of extended care.

Health Insurance - Including Medicare - Won't Pay for Most Long-Term Care

People require long-term care services and support due to illnesses, accidents, or the impact of just getting older. Health insurance, Medicare, and supplements, including Medicare Advantage, will not pay for most long-term care services outside of a limited amount of skilled services for up to 100 days.

The consequences of ignoring this risk will place tremendous pressure on your family as they either will serve as caregivers or must manage your future care by selling off your assets to pay for the costs of paid care services. 

Start your research by finding the current and future cost of long-term care services where you live.

• LTC NEWS Cost of Care Calculator - Find Your Location

Quality Care and Asset Protection

Having a plan for the future costs and burdens of aging is more than just about money - it is about family. Be sure your retirement plan includes a way to address long-term health care. For many people, an LTC policy is an affordable solution.