LTC Insurance Has Potential as Wealth Management Strategy, Too

BY SUSAN J. BRUNO

Thank you for your very informative article, “Long-Term Care Insurance and Tax Planning” (Aug. 08, page 44). As a CPA/PFS, I believe that every financial adviser should help their clients make an informed decision regarding long-term care insurance, given the ever-escalating cost of long-term care. We have found time and time again that the main goal of our older clients is to ensure that they are never a burden on their family, especially a financial burden.

I would suggest involving the family members, and even if they choose not to purchase the coverage, at least they all made the decision with their eyes wide open. This can be an expensive purchase, especially if made later in life, but the cost of not transferring this risk may be more expensive, and likely one that may fall not only on the aging client, but also on the entire family.

Transferring this risk is why most people buy long-term care insurance, but there are other motivating factors for the least likely long-term care buyer: the ultra high-net-worth individual. These factors are wealth replacement and estate tax reduction. There is an increasing trend for the very wealthy, who can likely afford not only the coverage but also the best of care in their later years, to purchase long-term care policies. And many are purchasing policies with almost double the premium by adding the benefit of a return of premium rider. After all, the worst-case scenario is the opportunity cost on a relatively small amount of their funds.

And here’s the twist: Although they are the insured party, they are not the owners of the policies. Instead, the benefit and/or return of premium will be going to their children or a trust for their children’s or grandchildren’s benefit, outside of the aging client’s taxable estate! Yes, there are gift and income tax considerations, but this strategy is certainly worthy of exploration!

Susan J. Bruno, CPA/PFS
Rowayton, Conn.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.