Leon Mehl

This example shows the impact of using an IRA-based long-term care plan for a married couple. Both Beth, 60, and her husband Bob, 65, are concerned about long-term care but up to this point have not wanted to commit to the annual premiums for traditional long-term care (LTC) insurance. While they do not need additional income from Beth’s IRA, they would like to help their children avoid paying taxes on the IRA account when both Bob and Beth have passed away. In the case of a married couple, this is when the taxes on an IRA are due. (Assuming no inherited IRA options are exercised).

By taking advantage of a tax-free, trustee-to-trustee transfer, Beth can transfer $200,000 from her IRA into a 10-pay whole life insurance policy with an accelerated death benefit for qualifying long-term care expenses. As a result, Beth and Bob have secured $6,500 of monthly long-term care benefits for qualifying health conditions for both of them, to be used to pay for home healthcare, assisted living, adult day care, or even skilled nursing care. If they do not begin using the long-term care benefits, their children will receive a tax-free death benefit in the amount of $217,924* in this example.