by Richard Schlueter, Vice President – Insurance Services, Wealth Enhancement Group

Last month I began a discussion about linked benefit solutions as a way to address long-term care planning. Simply stated linked benefit products are products that can serve multiple purposes. These products are often considered by people that feel traditional long term care insurance is not necessary because they will never use it. Others consider linked benefit solutions because they feel they can self insure against a long term care event and still others forego traditional long-term care insurance in favor of linked benefit strategies because of cost.

Last month I focused on products that provide life insurance and/or long-term care benefitsThis month I’d like to discuss linked benefit products that have benefits related to long-term care costs, but that come in the form of non-qualified annuity.

On August 17, 2006 President Bush signed the Pension Protection Act of 2006 into law. On January 1, 2010 one piece of that legislation germane to this topic will go into affect. Beginning on January 1, 2010, distributions from qualifying non-qualified annuities can be tax free if they are used to pay for long-term care expenses or long-term care insurance premiums. Typically any non-annuitized distributions from a non-qualified annuity are made on a gain first basis. This will no longer be the case if you own a qualifying annuity and you use those distributions for long-term care expenses and/or premiums. This can be especially powerful if you have an existing non-qualified annuity with a substantial gain, or if you have a non-qualified annuity that you don’t expect to draw from, at least in the short or mid-term.

If you would like to learn more about this opportunity we invite you to call the Wealth Enhancement Group team.