Using an IRA to Fund Long-Term Care Planning

Here is a case study of a 60-year-old couple with the following assets:

Home: $425,000 – (all paid for)

Savings: $150,000

Husband’s SEP-IRA: $1,400,000

Recommendation: Purchase a 2nd -to-Die Hybrid Policy. The policy is made up of two parts…a qualified Annuity and a Life / LTC policy.

Payment:

The clients made a one-time $200,000 transfer from the husband’s SEP-IRA into the Annuity. There is no taxable event created by this transfer. Each year, for 10 years, $24,000 is paid from the Annuity to fund the Life-LTC contract. Each year, a 1099 is sent to the client for the $24,000 withdrawal from the IRA annuity.

Benefits:

The plan provides Unlimited - Lifetime LTC benefits of $7185 per month for each client.

Upon the 2nd death, a $239,500 death benefit (less any LTC benefits paid) will be payable to the beneficiaries.