There usually aren't many opportunities to say "good news from Washington, D.C.," but recently, a piece of legislation was signed into law that may greatly affect how you plan for potential long-term care expenses, and for that matter, your retirement.
In 2006, the Pension Protection Act was signed into law. This was a wide-ranging piece of legislation involving various aspects of the tax code, but one area that may be important to you involves annuities and long-term care coverage.
Specific sections of the Pension Protection Act provide unique tax advantages for deferred annuities used to fund long-term care expenses. A deferred annuity is a contract where taxes are deferred until withdrawal. Before the Pension Protection Act was signed, you paid tax on the annuity when you withdrew funds to pay for expenses like long-term care.
This new legislation defines long-term care payments as non-taxable income (as a reduction of tax basis). This means that when you withdraw cash from non-qualified annuities to pay for long-term care expenses, or specifically designed long-term care insurance, those withdrawn amounts will no longer be considered taxable income!
While this tax-advantaged feature takes effect for long-term care withdrawals after December 31, 2009, we know it is never too early to plan. That's why Annuity Care® may make sense for you. It is a deferred annuity that already has long-term care provisions in it. If you ever need to use the money for qualifying long-term care expenses, you can have it set aside. And if you never have long-term care expenses? Your accumulated cash value can be passed to your named beneficiaries.
Annuity Care also has a beneficial option available that can provide lifetime long-term care coverage with premiums guaranteed never to increase (there is an additional premium for the lifetime coverage option). You could pay a single premium and receive lifetime long-term care coverage – and after 2009, receive these benefits in a tax-advantaged manner.
If you like the idea of using your existing "just in case" funds to protect your assets against unexpected health care expenses, Annuity Care may be right for you. And because you may be able to enjoy new tax advantages, there's never been a better time to decide.
Now that you know more about how the Pension Protection Act can help you with your retirement and long-term care planning, contact us for more information.