The need in favor of planning for long-term care becomes more evident with each government report. One, by the U.S. General Accounting Office, says that nearly 40 percent of people age 65 will spend some time in a nursing home. Furthermore, additional studies claim that costs continue to rise and now average $66,153 a year (WSJ 08/05/2003, MetLife survey).
To offset the effect of these potentially devastating expenses and protect their assets, many seniors have purchased long-term care insurance policies. Some people though, have postponed making plans because they don’t like the thought of paying premiums for the rest of their lives, or they feel that the money will be wasted if they don’t go to a nursing home. If you are in this latter group, there are some alternatives for you to consider.
You could make a one-time payment and the long-term care policy would be paid up for life. Or you could buy a policy that would be paid up for a specified term, such as 10 years, with no additional payments required.
Life insurance policies with long-term care insurance built in will let you make tax-free withdrawals from the death benefit to pay for your long-term care. (Note that withdrawals will decrease the policy’s cash value and death benefit). Any portion of the death benefit that is not used would be left to your heirs. The plan can cover you or you and your spouse. Generally, a single premium is used to fund the policy, and once inside the life insurance policy, the cash will grow tax-deferred.
And with additional planning, the death benefit can be removed from your taxable estate.
Do you have an older life insurance policy with a substantial cash value? You might be able to do a tax-free exchange (section 1035) into a life/long-term care policy without spending any money out-of-pocket. But be sure to understand the surrender charges on your old policy and the new one. Another choice would be a partial, tax-free surrender for the amount of money that you had put into your old life insurance policy. You could then use that cash to buy a standard long-term care plan.
You don’t need to pay annual premiums to have long-term care protection. For more information on the alternatives to writing one check, or even many checks, and have coverage for life, return the enclosed coupon.