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AGS
FINANCIAL SERVICES |
Gary
F. Restall |
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Taxes, estate planning, businesses and Long-Term Care insurance? by Gary
F. Restall |
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"What
does Long-Term Care
insurance have to do
with taxes,
businesses, and
estate
planning?"
you may be asking
yourself at this
point.
Excellent
question. Glad
you asked.
Actually, the four go
together very nicely
in many
instances. You
may want to consult
with your CPA and
your attorneys
(business AND estate
planning) for precise
details.
However, this article
will provide some
thoughts for you to
discuss with them and
your Long-Term Care
(LTC) insurance
expert.
And if you, the reader, are not a business owner/manager, please continue reading as you may want to give this article to your employer for a mutual "win-win" situation. To start, as a business owner you might also want to ask yourself.... 1) Would I like to move money out of my business and pass it on to my children tax-free? 2) Would I like to use pre-tax business dollars to protect my personal assets? 3) Am I interested in taking retained earnings out of my corporation? and 4) Do I want to purchase Long-Term Care Insurance for myself, my spouse, my employees and/or their spouses? Assuming you have answered "YES" to ANY of these questions, then you may want to consider purchasing Long Term Care insurance. Recent changes in the federal tax code have created an excellent opportunity for C-Corporation owners to take advantage of valuable insurance benefits, while providing generous tax incentives. In this article I will not address the common knowledge of how important addressing the long-term care issues is, nor all of the potential solutions in paying for that care. Those issues may be left for another article. This is tax season so an article on taxes is appropriate. Let it suffice to briefly say that Americans are living longer today. No one, however, is immune from the effects of aging, living, and longevity - effects that often result in reduced physical or mental ability. And contrary to perhaps most people’s awareness, according to a recent shocking study, as many as 40% of all patients in long-term care facilities are under the age of 65. Many are due to unexpected accidents, sports injuries, and other issues such as strokes, MS, brain tumors, etc. No one hopes to need care, but all too frequently, it happens. Long-Term Care is the kind of assistance that may take place in a variety of settings: a home, an adult day care center, an assisted living facility, or a nursing home. Nursing home care in our local area already averages $70,000 to $146,000 per year as Massachusetts joins Connecticut, NY and parts of California in being the expensive areas of the country. And if you plan on moving to another area, the national average is around $50,000 per year. Purchasing a Long-Term Care insurance policy is one of the only potential viable options to adequately cover that high cost that bankrupts many families for an "unplanned experience". Now, with the very brief overview of the need having been stated, what about those tax incentives I was talking about? Here are some highlights to using Long-Term Care insurance inside of a C-Corporation: * Premiums are 100% Tax Deductible as a business expense (IRC. Sec. 162). * Return of Premium Options may be available so that the premiums can be returned upon the death of the insured to a named beneficiary. * Limited Payment Options are riders that pay the policy up in 10 years, or in one single payment to provide a guaranteed paid-up policy. * Coverage can be offered to yourself only, key employees, selected employees, OR ... all employees and/or corresponding spouses. * Spousal Coverage may provide up to a 50% joint discount. By creating tax incentives, the government is now encouraging business owners to take personal responsibility for their long-term care needs. The reader may not realize that the federal government - the nations largest employer - also endorses Long-Term Care insurance for their employees as they understand the importance of the critical health care situation now and in the future. For those businesses and employees that are not C-Corporations, you’ll be happy to learn that the IRS has even offered the public tax incentives to purchase LTC insurance. And in addition to the tax benefits, you can still possibly use this vehicle as one of your key tools in your own estate planning process while protecting your assets. And, as an additional bonus, with the new LTC plans that are now available along with structuring everything appropriately, you may never need to stay in a nursing home to reap the benefits. ___________________________________
When this
article was
written and
published, Gary F. Restall of
AGS
FINANCIAL SERVICES
was an
independent
full-service
Registered
Financial
Planner, Registered Investment Advisor, Insurance
Broker and
Long-Term
Care
Consultant.
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Excerpts
from published article
(April
12th, 2001)
with
The
Jewish
Chronicle
on
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