Corporate MoneyGuard


Long Term Care Insurance as a Selective Benefit Plan

 

You can offer business owners and selected key executives a fringe benefit that pays for eligible Long Term Care expenses. The benefits are tax-free to them and tax-deductible to the C corporation.

In simple terms, assuming an insurable executive male age 50, if the single premium is $100,000 then….

The total potential Long Term Care Benefit is $680,955 ($9,458 monthly maximum)

The amounts are smaller for older executives and larger for younger executives. Eligibility is subject to insurability though a simplified underwriting process (phone interview).

No premium deduction? No problem, the Long Term Care benefits will be tax deductible to the business when paid by the carrier to the participant. In this example that deductible medical expense is potentially as much as 6.8 times the premium paid by the employer! Oh, and the benefits received by the participant are tax free.

Guaranteed Return of Premium* – The company can get the premium back (less any withdrawals, outstanding policy loans or any LTC Benefits already received). As the policy features liquidity and cost recovery through guaranteed return of premium, the policy can be classified as a cash asset. The premium can therefore be paid from “lazy money” on the balance sheet.

Death Benefit – A death benefit (1.5 to 3 times premium) can provide full cost recovery to the company in the event no long term care benefits are paid from the policy. Even if some or all of the long term care benefits are paid, a residual death benefit will supplement tax savings the company receives from deductible long term care payments: The combined effect is likely to far exceed the premium paid. Optionally, the death benefit can be split between the company and the participant’s beneficiaries.

This concept is invaluable to family businesses where the parents, who have not yet planned for their long term care needs, are transitioning the business to the kids.

Contact us to learn more about how to design and implement these plans. For the technical details, click here for the corporate-money-guard-position-paper-8-17-2011.

* This feature was recently updated. Please read Five Year Vesting Change for more information.