The value of ABLTC has been well-established:
- Tax-Free LTC
- Tax-Free death benefit
- Guaranteed premiums
- Guaranteed Liquidity
What isn’t as well understood is the tax-deductibility of a portion of the ABLTC premium, essentially giving clients a “discount” on their premium. Who doesn’t love a discount?!
- Mike | Age 55 | Nonsmoker
- Paying $10,000 annual premium for 20 years
- OneAmerica Asset Care, Lifetime Benefits, 3% compound inflation
Mike’s $10,000 annual premium is broken down into two parts:
- Life insurance premium: $5,773
- LTC premium: $4,227
LTC premiums are made up of three components:
- Premium to accelerate the death benefit for LTC,
- Premium for the Continuation/Extension of LTC benefits, and
- Premium for inflation protection.
After applying the IRS Age-Based Limits, Mike can deduct a total of $69,958 of his $200,000 premium over the course of his 20-year premium schedule. Assuming a 25% tax rate, Mike would see a tax savings of $17,250…or an 8.5% “discount”!
The key to making this work is using an ABLTC product that makes a distinction between life insurance and LTC premiums. We currently work with three products that accommodate this: OneAmerica Asset Care, Securian SecureCare, and Nationwide CareMatters II. Each of these products offers its own unique competitive advantages outside of this similarity… but offering the tax deduction could be the factor that moves client from thinking about ABLTC, to putting pen to paper and signing the application.
This is a simple example for an individual able to itemize his taxes. The conversation can become a bit complex when working with different types of business owners.
If you’d like to learn more, please call Levon Justice at 1-877-844-0900 or schedule a quick chat.
Jaime Mueller, CLTC
Head of Long Term Care Solutions