"Just the Fact Mam" Who need LTCi Services

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For years I have used the Nursing Home Statistics provided by the CA Partnership for LTC.  to support the planning for long-term care, Which is: 

Of the People who reached age 65: Men 1 out of 3, Women 1 out of 2 will need a Nursing Home before death.  The average stay will be 2.5 to 3 years.  For everyone who needs a Nursing Home 4 will be taken care of at home.

I have said it so many times it has lost it's meaning.   So hear are some new stats that I hope will bring back into focus the growing long-term care need.

According to the U.S. Department of Health and Human Services, in 2007, about nine million men and women over the age of 65 will need long-term care services. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home. In fact, an agency study revealed that family and friends are the sole caregivers for 70 percent of all elderly Americans needing long-term care. The research also showed that people who reach age 65 have a 40 percent chance of entering a nursing home during their lifetime. About 10 percent of the people who enter a nursing home will stay for five years or more.

A research project concerning the likelihood of needing long-term care services was conducted by Milliman USA, (an actuarial consulting firm). The results of the study were published in the December 2005 edition of LTCi Sales Strategies magazine:

Out of every 1,000 65-year-old policyholders:

- 449 will need LTC services
- 106 will need LTC for > 2 years
- 59 will need LTC for > 3 years
- 34 will need LTC for > 4 years
- 20 will need LTC for > 5 years

The length of stay also varies significantly depending on the policyholder’s gender and whether the policyholder is married or single. The two “extremes” for a 65-year old are shown (that for a married male (lowest) and a single female (highest)):

Out of every 1,000 married 65-year-old males:

- 302 will need LTC services
- 20 will need LTC for > 2 years
- 12 will need LTC for > 3 years
- 7 will need LTC for > 4 years
- 4 will need LTC for > 5 years

Out of every 1,000 single 65-year-old females:

- 555 will need LTC services
- 70 will need LTC for > 2 years
- 51 will need LTC for > 3 years
- 35 will need LTC for > 4 years
- 23 will need LTC for > 5 years

Joe Friday on Dragnet always said "Just the facts mam."   

These are the facts.  So what? Facts mean little unless accompanied with "Personal Experience".    Again emotion triumphs  logic.   Facts don't motivate-real life experiences do.

 It is Life that occurs while weighing the facts. 

2013 LTCi TAX Limits

2013 Tax Limits for LTCi Announced

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THE IRS has released the 2013 limits  (Rev Procedure 2012-41)

Attained Age Before Close of Taxable Year
      40 or less                                                   $ 360         (2012 is $350)
      More than 40 but not more than 50     $ 680          (2012 is $ 660)
     More than 50 but not more than 60     $1,360       (2012 is $1,310)
      More than 60 but not more than 70      $3,640      ($3,500)
      More than 70                                             $4,550      ($4,370)

For calendar year 2013, the per-diem limitation under Section 7702B(d)(4) for periodic payments received under a qualified long-term care insurance contract is $320 (the 2012 limit was $310).
    

2012 LTC TAX GUIDE

NOTE I have add the color (red) comments, bold, and Italics.  

Please note that the tax information provided is an interpretation of federal guidelines.  Client/Agents should consult with their tax advisor regarding any tax-related issues.

2012 Tax Advantages of Qualified LTC Insurance

Understanding the tax advantages and benefits of qualified LTCi can be a benefit to you when working sales in both the individual and employer group markets. 

                                                                                              2013 Update

Attained Age Before The Close Of Taxable Year	Eligible Annual LTC Premiums
40 or Less	$350     2013   $360
More than 40 but not more than 50	$660                $680
More than 50 but not more than 60	$1,310              $1,360
More than 60 but not more than 70	$3,500              $3,640
More than 70	$4,370              $4,550

   

 For calendar year 2012, the per-diem limitation under 7702B(d)(4) regarding periodic payments received under a qualified LTC insurance policy is $310.

INDIVIDUALS

Qualified Long Term Care insurance (LTCi) premiums and expenses are deductible personal medical expenses for those who itemize. For additional information see Section 213 of the Internal Revenue Code. Only unreimbursed medical expenses in excess of 7.5% of adjusted gross income are deductible based upon the government age-based table.  This must change.  There should be an above the line deduction of LTC.  Tax credits would also make it more affordable.

PASS THROUGH ENTITIES

Self-employed Individuals

Under Section 7702B(a)(3), a self-employed person may deduct 100% of premium paid for the individual, as well as the individual’s spouse and dependents, up to the maximum eligible allowed as indicated in the above chart without regard to the 7.5% limitation.

 LIMITED LIABILITY CORPORATIONS, PARTNERSHIPS & S-CORPORATION 2%+ OWNERS

The above entity business owners are all treated as if they are partners. LTCi premiums have been classified as health insurance under Section 7702B(a)(3) and when the business pays the premium, it is 100% tax deductible by the business entity. The LTCi premium becomes taxable income to the business owner as “guaranteed” income. IRC Section 707(c); IRC Section 162; IRC Section 61. From the business owner’s tax return and applicable schedule used for business income and expenses, the eligible premium for long term care will be an above the line tax deduction.

C-CORPORATIONS, PC CORPORATIONS & TAX-EXEMPT ORGANIZATIONS

The above businesses may deduct, as a business expense, all qualified LTCi premiums paid for its employees, employees’ spouses and dependents, as well as retirees and their spouses. This includes the business owner, who is considered an employee of the corporation. The employer’s contributions toward the cost of the premium are not included as imputed income to the employee. IRC Section 162(1); IRC Section 106.

CONTRIBUTORY ARRANGEMENTS

When the employer and the employee share the cost of the LTCi premium, the company may deduct all premium it contributes for qualified LTCi plans as a business expense. Premiums paid for spouses and dependents of employees and retirees and their spouses, are treated similarly. For federal income tax purposes, the employee’s portion of the premium is treated as if paid by the individual, and is deductible – subject to the age based limits for individual taxpayers – if the employee’s total unreimbursed medical expenses, including qualified LTCi premiums, exceed 7.5% of the employees adjusted gross income.

PER DIEM CONTRACTS

For 2012, the tax-free receipt of benefits under a per diem policy is limited so that policyholders will be taxed on the amount of benefits which exceeds the greater of $310 per day or the amount of qualified long term care expenses incurred by the insured.

Source: http://www.irs.gov/pub/irs-drop/rp-11-52.pdf   This is not providing tax or legal advice. You should consult your own tax, legal or other professional advisor before promoting these products to your clients. To ensure compliance with requirements imposed by the IRS in Cir. 230, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.