• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+
You’ve worked hard to build up a nest egg to leave to your heirs. But have you considered the possibility of an extended stay at a nursing home? Despite your best intentions, your life’s fortune could be sucked dry by nursing-home costs that can approach $100,000 a year or more!

Strategy: Investigate the advantages of long-term care (LTC) insurance. If you can stomach the premiums, a well-designed policy can guard against a full-scale erosion of your assets. Plus, you can potentially write off a portion of the cost as a medical expense.

Naturally, this type of policy can be pricey, depending on your age and circumstances. So, LTC insurance isn’t for everyone.

Here’s the drill: Based on your current age, you can treat part of the LTC policy cost as a medical expense. That allowable amount is added to your other unreimbursed medical expenses, which are deductible to the extent they exceed 7.5 percent of your adjusted gross income.

Your medical deduction can also include amounts paid for LTC insurance for a relative. If you provide more than half of the relative’s annual support, you can generally add this cost to your medical deduction, even if he or she isn’t your tax dependent. The deductible portion is still based on the insured’s age.

You may also be able to claim a state income tax deduction or credit (or both) for LTC insurance (see box at right). And if you’re self-employed, you can deduct the appropriate share of LTC premiums above-the-line, whether or not you itemize medical expenses.

From a tax perspective, LTC insurance can be a good deal. But how much does it cost? That depends on several factors, including your age when buying the policy, the maximum daily dollar benefit, the nature of events triggering payment and how long the policy lasts (a certain number of years or your lifetime).

Can your company offer qualified LTC insurance as a tax-advantaged fringe benefit to selected employees (meaning fully deductible to the company and tax-free to the covered employees)?

Yes! That’s something to think about if your company wants to deliver more tax-advantaged fringe benefits to targeted employees. You can choose to provide the LTC benefit to certain employees and not others.

Online resources: Here are some of the major life insurers offering LTC insurance:

• Met Life: www.metlife.com (click on Individuals)
• Prudential: www.prudential.com (click on Insurance under Products tab)
• Unum/Provident: www.unumprovident.com (click on Individuals)
• New York Life: www.newyorklife.com
• Mutual of Omaha: www.mutualofomaha.com/products

Leave a Comment