You are here:
LTC Insurance Blog
Simplifying the process of understanding Long Term Care, and helping you decide if Long Term Care insurance is right for you.
Using your Life Insurance or Annuity to Pay for Long Term Care Insurance
Have you ever looked at your Life Insurance or Annuity statements and wondered if you could be using the gains from these policies more effectively? One option you may have is to transfer some of that money to fund a Long Term Care policy through a 1035 Exchange. Not only would you be purchasing a very valuable tool for protecting your financial future, but you may also be relieving yourself of a hefty tax burden.
Many types of Life Insurance policies build cash value. Believe it or not, an excess of cash value in a Life Insurance policy can become a problem. The Federal Government has rules about how much cash value can be kept in a Life Insurance policy. If the cash value in your policy is over the limits they have set, you will be required to remove some of that cash value from the policy. The money taken out is considered a taxable gain. By using a partial 1035 Exchange to fund a Long Term Care policy, you can avoid paying taxes on that money and also provide yourself with the assurance of knowing you will have the ability to pay for senior care expenses in the future.
If you have an older Life Insurance policy, it may be worth considering a 1035 exchange to a policy with updated features. A total 1035 exchange allows for the removal of all of the cash value from a current Life Insurance policy to be transferred tax free to a new Life Insurance and Long Term Care Hybrid policy. These policies allow you to use a portion of the death benefit to pay for Long Term Care costs should the need arise. If you never need to use the Long Term Care benefit, your heirs would receive the entirety of the death benefit. These types of hybrid policies are becoming very popular because of their convenience and flexibility.
We can help you determine which company and type of policy will best address your needs. Long Term Care policies can be funded with 1035 exchanges from both the cash value in Life Insurance policies and the gains from Annuities. If you would like more information about 1035 Exchanges or Long Term Care insurance, please give us a call at 1-800-432-0091 or fill out our online form to receive a free rate comparison from several top Long Term Care insurance companies.