Are you paying for a life insurance policy you don’t need anymore? Or perhaps you have money in a variable annuity, but you aren’t sure what to do with it?
Well, good news on both fronts: you can use a friendly little IRS rule, called a 1035 exchange, that allows you to trade the cash value of a current life insurance or annuity policy for something new and not pay any tax on it.
If you haven’t finished your retirement health care planning yet, then consider exchanging that unused policy for an asset-based long-term care policy.
This is not your typical traditional LTC policy with all of its inherent drawbacks.
This is a policy you fund once, with the 1035 exchange, and there are no further premium payments. It provides you with an enhanced pool of tax-free LTC dollars that you can use for home health care, assisted living or full skilled care.
If you don’t ever need it for LTC costs, it has a death benefit that passes to your heirs. It solves the “use it or lose it” premium payment of traditional LTC insurance.
This exchange process has lots of tax advantages. Normally, the cash value of a life insurance policy and the accumulation value of an annuity has interest that is taxable if you take it out. But when you exchange it for an asset-based LTC policy, the LTC benefits are tax-free and the death benefit is tax-free. Voila. No more taxable interest.
Note that this strategy does not apply to term insurance, which has no cash value. You can also purchase this type of LTC policy with savings or even pay for it over a period of time.
Beyond the tax benefits, an asset-based LTC policy truly solves retirees’ most vexing dilemma: how to provide themselves protection from the financial catastrophe of health care costs.
A 2018 Genworth study found in Knox County the average monthly cost of home health care is $3,575, assisted living is $4,000 and full skilled care is $7,000. These costs can drain your life savings quickly, so if you haven’t made a plan yet, now’s the time.
Peace of mind is priceless.
Marsh Wealth Management, LLC, 504 Ebenezer Road; call 865-622-2162; e-mail email@example.com or visit www.marshwealth.com/. Financial Planning & Investment Advisory Services are offered through Marsh Wealth Management, LLC, an independent investment advisor registered with the State of Tennessee. Yvonne Marsh is an Investment Advisor Representative of MWM. Marsh Professional Group, LLC, is a state-registered public accounting firm and a separate legal entity from MWM.