With an asset-based plan, both your
long-term care insurance benefits
and your life insurance benefits are
paid income tax free

Owning an asset-based plan that combines life insurance with long-term care coverage offers you several tax advantages:

• Generally, your life insurance death benefits are payable to your beneficiary income tax free under subsection 101(a)(1) of the Internal Revenue Code.
• Your long-term care insurance benefits are paid to you income tax free based on Section 101(g) and Section 7702B of the Internal Revenue Code, depending on the type of plan you purchase.
• Your cash value (i.e., premium plus interest) accumulates income tax-deferred based on Subsection 72(e) of the Internal Revenue Code.
• The monthly charge for your long-term care insurance – which is automatically deducted from your policy’s account value each month – is not taxable thanks to Section 844 of The Pension Protection Act of 2006, which became effective in 2010. Under prior law, these withdrawals were treated as distributions of interest earnings, or gains, and therefore were taxable as ordinary income. However, it is important to also note that any such payment will not be deductible under Code Section 213.
• The guaranteed residual death benefit – the amount left if you exhaust all your long-term care benefits – is paid to your beneficiary income tax free based on Internal Revenue Code 101(a)(1). This amount is usually five to 10 percent of the total amount of your original death benefit.
• If you have an existing cash value life insurance policy (either universal life, whole life, or variable universal life) or an annuity (either fixed-rate or variable rate), you can exchange it tax free for a new asset-based plan under Internal Revenue Code Section 1035. Tip: In evaluating a 1035 exchange, due diligence should be performed on the existing contract to ensure you are not giving up any benefits or features that are not available in the new contract.

For more information on tax free policy exchanges afforded by IRC Section 1035, please click here.

For more information on the sensible, tax-efficient, risk-management strategies now available to you thanks to recent improvements in the federal tax code, please call 800-341-0297.

For a free, no-obligation quote, please call 800-341-0297 or complete and submit the FREE Quote form on this page.