Piggy Bank Saving Money

How to Pay

Deciding how to pay for your future long-term care is important. Some may opt for out of pocket funding, hybrid policies, or traditional long-term care insurance options however, it is best to understand the tax implications of each.

Out of Pocket

When covering your own long-term care needs from your out of pocket income, you would first pay taxes on that income at the time it was initially earned. Additionally, if you are using any sold assets to cover the cost of your long-term care you would have to ensure you have paid taxes on any of those taxable gains as well.

Traditional Long-Term Care Insurance

These policies usually involve an annual premium paid for life in exchange for coverage. These benefits are usually received tax free to policyholders and may even be tax deductible to individual taxpayers given they meet certain parameters. Certain business entities may also qualify for a full tax deduction of premiums. Tax qualified policies are typically categorized as medical expenses. There is a limit on the amount at which can be considered tax qualified per person and it varies by age. A self employed business entity individual may deduct 100% of their premuim up to. certain amount per age as follows below;

40 and under         $430

41-50                     $810

51-60                     $1630

61-70                    $4350

71 and up             $5430

Hybrid Long-Term Care

A Hybrid life insurance policy with feature long-term care riders is another feasible option for funding your future care. These types of policies typically feature a death benefit that is paid out to your beneficiaries federal income tax free. These policies may also feature long-term care benefits that income tax free up to a certain amount. Additionally, these policies feature a cash value that can grow tax deferred.

If you or someone you love is interested in Long Term Care or Long Term Care Insurance be sure to visit: LTC TREE for more information.