“What if you never need long term care?” is the biggest objection people have to purchasing Long Term Care Insurance (LTC).
People don’t want to buy it because they view LTC as a “use it or lose it” proposition according to most financial advisors. The premiums are completely lost if they never file a claim. The money is kept by insurance company.
The insurance industry has responded with the creation of Hybrid Long Term Care Policies. These are the fastest growing product in the marketplace. Sales of these policies grew 500% in the six years ending in 2016. In comparison, traditional LTC policies sales fell 19% in 2015 according to Financial Advisor Magazine, Feb 1, 2016.
In exchange for a single one-time upfront premium, you receive 3 guarantees:
For the first time in the life insurance industry, we can tell our clients something they’ve never heard before: “If you don’t die prematurely, you may be able to spend your entire death benefit on virtually anything you want.”Read More
When an employee becomes disabled, disability insurance payments are typically taxable. However, there is a little know provision that can change it from taxable to tax free. Most insurance carriers, however, do not promote it.
Here’s how it works. The “Gross Up Plan” adds a clause to the Group Disability Policy. The clause changes the premium structure for a certain class of employees, usually the executives. By recognizing their share of the premium as taxable W2 income, the benefit becomes tax free at claim time. See 104(a)(3) of the Internal Revenue Code or go to https://www.irs.gov/irb/2004-26_IRB/ar06.html.
The result to the executive is a much higher after tax disability payment for the cost of a very minimal tax. For the employer, the cost is very low, if any. We can explain how.
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Several recent court decisions highlight the consequences of mistakes most people make when purchasing life insurance. The errors generally have two things in common. First, each has potentially serious consequences in terms of expense and aggravation. Second, each can be avoided or, if found in time, corrected quickly and inexpensively. Here they are:Read More
Sure, there is some extra work involved to set up an Irrevocable Life Insurance Trust (ILIT):
- The attorney fees
- Finding a trustworthy and reliable trustee
- Establishing a bank account for the trust
- Premiums that are paid each year, must be paid out of that trust by the trustee
- The increased Unified Credit Exemption means you need to have a very high net worth to make the trust worthwhile.
But, if you are in the right situation, an ILIT owning your life insurance can be very powerful.Read More
The possibility of estate tax repeal has become more likely with the election of Donald Trump and the Republican congress. If in fact, repeal takes place will it be permanent? Will something else take the place of estate tax in order to replace the government’s lost revenue?
First, the likelihood of permanency is unlikely. The democrats will probably gain control one day. Even if they don’t, many experts agree that the estate tax will be replaced with other taxes at death. One in particular is the repeal of the step up in basis. Carry over of basis to the next generation will create a good amount of revenue for the government. Second, the government may also be considering the elimination of the stretch IRA. This will not allow the next generation to defer taxes on inherited IRA’s.
If you work for yourself, you probably own an individual health insurance policy. Unfortunately, starting in 2017, the popular hospitals and doctors will no longer be included in those networks. Should you seek care outside of the PPO network, deductibles increase to surprisingly high amounts. HMOs are an alternative, but typically do not provide out of network coverage.
Consumers are reluctant to buy Long Term Care policies. They have seen how the industry raised premiums unexpectedly on new and inforce policies. Other folks dislike the “use it or lose it” type of product, where the premiums paid will never be returned unless a claim is made.
If you have decided not purchase a LTC policy, you may want to consider a life insurance policy with a Chronic Illness Rider or Long Term Care Rider. Different riders, but similar goals: providing financial relief to policyholders hit with chronic illness expenses.Read More
The number of insurance companies offering Long Term Care policies has dropped dramatically in the last four years. Many of them increased premiums in order to account for high loss volume, causing consumers to stay away from the high premiums and “use it or lose it” design.Read More
What is a good vehicle to generate retirement income in this low interest rate environment? Believe it or not, maximum funded Life Insurance.
Kiplinger Magazine published an article in late October, 2016, “5 Ways Life Insurance can Pay Off before you Die.” The article says, “Life insurance can provide more than just a death benefit. I believe it’s an underutilized asset class, and its potential is especially important in today’s weak-interest- rate environment when it’s difficult to generate much of a return without taking risks.” The article goes on to say, “Some policies even allow access for long-term care needs.”