How it relates to the financing of long-term care and planning

As a result of the Pension Protection Act of 2006, which came into force on January 1, 2010, long term insurance with specially designed incomes have the ability to take cash withdrawals for qualified expenses value of long-term care, tax-free income, regardless of the cost base. Benefit payments to insurance brokers and cash withdrawals LTC value to pay for LTC insurance premiums are not taxable.

The Act clarifies that, as of January 1, 2010, LTC insurance benefits paid out of these plans (although some of that serves to reduce the values underlying the annuity account) are paid under free LTC insurance taxes. This is unprecedented in the world every year, before that date there was no mechanism that allowed profits in a contract to be paid on tax-free basis. In addition, the 1035 Act provides for exchanges in the combined plans.

The law specifically allows annuity and life insurance contracts to contain or be combined with features LTC. The new rules also grant favorable tax status to certain characteristics of LTC contracts, which are so close together. An important limitation to note is that the new rules are generally applicable to contracts held by qualified retirement plans.

The Act establishes new rules on the use of a combined contract value of cash in general to finance the long-term care of the contract. The charges are assessed on life or annuity contract value of cash that fund a pilot long-term care are excluded from gross income. Under previous law, these distributions were treated as passive. In short, the LTC insurance law authorizes to be paid from the cash value of life insurance and annuities on a pretax basis. Payment made in this way, however, reduce investment in the contract. Moreover, this payment will not be deductible under Code Section 213. These limitations do not change the fact that the new rules allow for significant tax advantages method of paying for LTC.

Section 1035 of the Code was amended to allow tax-free exchange of life insurance contracts, annuity contracts, funding agreements and contracts qualified for qualified LTC LTC contracts. The law also clarifies that the life insurance and rental contracts with indications of long-term care will be eligible for the treatment of tax-free exchange.

The Pension Protection Act also allows the insured annuities to existing trade policies in the 1035 combination.

Many new combination products are available to consumers to provide for the LTC. Consumers are intrigued by the concept of car insurance that can provide protection against the risk of needing this care, but can also provide cash values if services are not long-term care are all necessary. This overcomes one of the main concerns of consumers in LTCI independent relationship, fear of a "use-it-or-lose-it" propositions.

As a result of the Pension Protection Act of 2006, the consumer has multiple ways to meet their financing of long-term care and planning. It is important to consult a specialist in long-term care financing and planning, as not all combination products are equal. annuity rates of interest, the cost of the riders and the methods used to determine payments vary from carrier to carrier complaints. Those in poor health, however, can not qualify for independent coverage of long-term care, but may be able to get coverage through an LTC annuity hybrid product. See also Definition of Life Insurance.

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