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June 22, 2003 at 08:00 PM
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Asset protection is an important part of retirement planning today and will continue to be in the future. But often, retirement funds are not protected from the potentially high expenses associated with long term care. The extraordinary cost of LTC can decimate the investments built up by an individual after a lifetime of saving.
The need for LTC touches eight out of 10 families in the United States every year, and the risk is higher than destroying our car in an accident, or even having a fire at home. Statistics also show LTC is not only for the elderly–more than 35% of LTC benefits paid in 2001 were to those under the age 40.
Long term care insurance can be integrated into a comprehensive executive benefit plan. By designing a LTC contract with a guarantee issue amount of monthly benefit, executives can use the benefit when necessary–saving significant dollars that would otherwise have come out of their pension, deferred compensation or 401(k) plan. Without a long term care plan, expenses for nursing home care or professional 24-hour home care would greatly erode the retirement accounts of these executives.
Also, by making this unique benefit available, an executive is able to cover more of his or her income with a catastrophic disability plan, as LTC insurance does not have income requirements to qualify.
Putting The Plan In Place. A C-corporation receives the most comprehensive tax advantage, as the IRS allows this corporate structure to pay the individual premium on LTC insurance and deduct the full amount as a business expense. Furthermore, when executives receive benefits under the plan, they are received income tax free.
Long term care insurance does not have to be offered to all employees of a corporation. Even with todays “select executive” atmosphere, this benefit can be passed to a key employee without discrimination or compensation conflicts. Groups or classes of employees can be selected and companies can offer the benefit to highly compensated employees as “golden handcuffs,” an incentive to remain with the company.
