Compare Annuities Linked to LTC Insurance

While a new law went into effect this year allowing for great tax benefits for linking your annuity to long term care insurance, there is only one available product in the state of Ohio currently.  J. Brendan Ryan of wrote about the new benefit in his article “Linking long-term care insurance to annuities” this week.  Tax benefits when you compare annuities used to pay for long term care insurance and those which do not are great.  When you begin receiving payments on a deferred annuity, the money is taxed as ordinary income traditionally.  If you desire to take the money out before you are 59 1/2 however, you usually get taxed an additional 10%.  But if the money is used to pay for long term care costs that qualify under this new law, the withdrawals are free of taxes.

If you have purchased a deferred fixed annuity, the growth from your guaranteed or the current interest rate is included under these tax benefits.  The product currently being offered in Ohio grows at the current interest rate, or your guaranteed rate in the lowest scenario, to accumulate what the author calls Balance A.  It also has the potential to grow a Balance B for added long term care expense accumulation.  Once you start taking the funds out, Balance A is used first and then Balance B will be used if remaining payments are due to cover the eight years of payments eligible under this annuity.  Similar annuities linking to long term care insurance are expected on the market soon, but the challenge of getting the products just right are causing many companies to delay putting them on the market.

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