Long-Term Care Insurance — Is it for You?
The
Henssler Financial Group Position Paper
With the average American Baby Boomer reaching retirement age, long-term care should be on the minds of many people today. As we Boomers age, it is likely that we will need:
- Assistance with daily activities such as bathing, eating, dressing;
- Skilled nursing care or rehabilitation training either in a nursing facility or at home; or
- Care related to cognitive impairment such as Alzheimer's Disease.
Long-term care insurance offers a means to offset the long-term care costs that are not covered by a traditional health insurance policy or by Medicare. This coverage potentially preserves assets for loved ones rather than having them used for your medical expenses.
Generally, long-term care insurance contracts are treated as accident and health insurance contracts for income tax purposes. Additionally, amounts you receive from them, other than policyholder dividends or premium refunds, are excludable from income as amounts received for personal injury or sickness. Premiums paid for a qualified long-term care insurance contract are a medical expense, but the deductible amount of the premium is limited by the individual's age at the end of the tax year. The inflation-adjusted maximum deductible amount for 2008 is:
- Age 40 or younger: $310
- Age 41 through 50: $580
- Age 51 through 60: $1,150
- Age 61 through 70: $3,080
- Age 71 or older: $3,850
Long-term care insurance does not make sense for everyone. However, it should be considered by those who have assets, such as investments or property, that they do not wish to consume, and those who have the ability to make premium payments for the policy. In reviewing your financial goals, it might be beneficial for you to evaluate whether such insurance should be a part of your overall financial and retirement planning. If you would like any further information regarding this issue as well as any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.