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					 Long Term Care
Insurance Taxation

       Health Insurance
        Portability and
     Accountability Act of
             1996

      Presented By: Timothy Kelly
      Individual Commercial Brokerage, Inc.
   Long Term Care Insurance Taxation
           Health Insurance Portability and
          Accountability Act of 1996 (HIPAA)
 Signed into law by the President on August 21, 1996
 Defined a “qualified” long term care contract (IRC 7702B(b))
 Provides that a “qualified” long term care contract shall be treated as an
  accident and health insurance contract (IRC 7702B(a)(1))
 QLTC benefits are not considered taxable income (IRC 7702B(a)(2))
 QLTC premiums may be deductible by an individual subject to certain
  limitations (IRC 213 (d)(1))
 QLTC premiums may be deductible by a corporation subject to certain
  limitations (IRC 7702B(a)(3))
 All LTC contracts issued prior to January 1, 1997 will be considered QLTC
  contracts


   Presented By: Timothy Kelly
   Individual Commercial Brokerage, Inc.         Long Term Care Insurance Taxation
  Should I sell Tax Qualified or Non-Tax Qualified LTCI?

                                    NTQ vs. TQ

     Non-Qualified LTCI                          Qualified LTCI
 Unable to perform without                Unable to perform without
  assistance 2 activities of daily          substantial assistance 2
  living                                    activities of daily living for a
 Require supervision due to a              period of at least 90 days
  cognitive impairment                     Require substantial supervision
 Medical Necessity                         due to a severe cognitive
 Premiums are not deductible               impairment
 Treasury Department did                  Premiums are deductible
  not rule on the taxability of            Benefits are not considered
  benefits                                  taxable income

   Approximately 92% of all new policies sold in 2002 were tax qualified.
  Presented By: Timothy Kelly
  Individual Commercial Brokerage, Inc.          Long Term Care Insurance Taxation
                                   HIPAA
                     Qualified LTC Contract

 Guaranteed Renewable
 Provides coverage for qualified LTC services required by
  a chronically ill individual.
 Chronically ill – unable to perform without substantial
  assistance at least 2 activities of daily living for a period
  of at least 90 days or requiring substantial supervision to
  protect from threats to health and safety due to severe
  cognitive impairment

 Presented By: Timothy Kelly
 Individual Commercial Brokerage, Inc.     Long Term Care Insurance Taxation
                                    HIPAA
                      Qualified LTC Contract
                              Benefits
 Every LTCI benefit recipient will receive a 1099-LTC from the
  insurance carrier
 Reimbursement contract benefits are excludable from income
 Indemnity (per diem) contract benefits are excludable from income to
  the extent they do not exceed the greater of $230 (2004) or the cost
  incurred (IRS Form 8853)
 All taxable payments are listed on IRS Form 1040 line 21 (Other
  Income)



  Presented By: Timothy Kelly
  Individual Commercial Brokerage, Inc.     Long Term Care Insurance Taxation
                                   HIPAA
                     Qualified LTC Contract
                            Premiums

 “Eligible” Premiums paid by individuals for
  QLTC contracts are treated as medical care
  expenses
 A deduction is available to the extent medical
  care expenses exceed 7.5% of adjusted gross
  income (Schedule A of IRS Form 1040)
 Presented By: Timothy Kelly
 Individual Commercial Brokerage, Inc.     Long Term Care Insurance Taxation
                                  HIPAA
                    Qualified LTC Contract
                      Eligible Premiums
                                        2004
                     Age                           Limitation
                     40 or less                    $ 260.00
                     41-50                         $ 490.00
                     51-60                         $ 980.00
                     61-70                         $ 2,600.00
                     71 or more                    $ 3,250.00

These amounts are adjusted annually tied to the medical care component of the CPI.

Presented By: Timothy Kelly
Individual Commercial Brokerage, Inc.               Long Term Care Insurance Taxation
                                    HIPAA
                     Qualified LTC Contract
                    Employer Paid Premiums
 Employer paid QLTC premiums are deductible if the covered
  individual is an employee, spouse, or dependent. Benefits are not
  considered taxable income even if employer pays the premium
  (unlike disability insurance)
 Employer paid QLTC premiums are deductible to a certain extent if
  the covered individual is an owner
 QLTC contracts can not be used in cafeteria plans or flexible
  spending arrangements
 Distributions from a Medical Savings Account may be used to pay
  premiums for a QLTC contract

  Presented By: Timothy Kelly
  Individual Commercial Brokerage, Inc.     Long Term Care Insurance Taxation
                                    HIPAA
            Qualified LTC Contract
       Employer Paid Premiums for Owners

 Owner is considered anyone with a 2% or more stake in the company
 C-Corp is allowed a 100% deduction for any QLTC premiums paid
  for owners
 All other corporate structures and self employed individuals are
  allowed a deduction subject to the Eligible Premium chart (not
  subject to the 7.5% AGI rule)



  Presented By: Timothy Kelly
  Individual Commercial Brokerage, Inc.     Long Term Care Insurance Taxation
           T.R.E.A.T
                                     Tax
                                   Reducing
                                   Efficient
                                    Asset
                                   Transfer
       How to Transfer Assets to your Heirs using
    Federally Tax Qualified Long Term Care Insurance

Presented By: Timothy Kelly
Individual Commercial Brokerage, Inc.          Long Term Care Insurance Taxation
                    T.R.E.A.T
              Employer Sponsored Long Term Care

 Use corporate dollars to pay for Limited Pay LTCI for the owners or
  key employees
 Write-off the premium as a usual business expense
 Premium is not considered taxable income to employee
 Benefits are tax free
 Provide lifetime protection from the devastating cost of long term care
 Transfer those dollars to the recipients heirs at death income tax free
  using the Enhanced Return of Premium benefit (IRC 7702B (b)(2))


  Presented By: Timothy Kelly
  Individual Commercial Brokerage, Inc.                        Long Term Care Insurance Taxation

      **Please consult with your accountant or tax attorney before implementing this strategy.**
                T.R.E.A.T
                                                                                          Taxable
 10 Pay with EROP Total Premium Tax Savings     EROP       Total Return Rate of Return Rate of Return

 $        12,393.00 $ 123,930.00 $ 43,375.50 $ 123,930.00 $ 167,305.50          6.53%        10.05%


Custom Care II, Age 50, $6,000 per Month, Lifetime benefit, 90 day elimination period, Waiver of
HHC Elim, Enhanced Return of Premium Rider, 10 Pay, spousal discount, 5% group discount,
Preferred Rate, 35% tax rate.
Example – No claims and dies at age 80.




     Presented By: Timothy Kelly
     Individual Commercial Brokerage, Inc.                      Long Term Care Insurance Taxation

				
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