GOOD MONEY: LONG TERM CARE INSURANCE RATE INCREASE LOOMING; TAX DEDUCTION UPDATE

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Your guide to financial planning & socially responsible investing

By: Judith L. Seid, CFP ®
 

President, Blue Summit Wealth Management

 

July 9, 2010 (La Mesa) -- We have just received notification that two of our top-rated carriers, John Hancock & Metlife, will be raising rates for new policies. If you have already secured your long term care policy, CONGRATULATIONS…you made a great decision! If you have been considering taking out a long term care insurance policy, please contact an independent Long Term Care Insurance (LTCI) agent right away for quotes. (See below for tips on what to look for.)

 

Update on Tax Deductible Premiums:

The Internal Revenue Service (IRS) recently announced a three percent increase in deductibility levels for long-term care (LTC) insurance policies in 2010, and for the first time, the maximum deductible limit for an individual exceeds $4,000.

 

This is an especially great deal for business owners, as the premiums are deductible as a business expense. If your business is a C corporation, you do not have to use the age-banded limits shown below. All businesses can include spouses.
 

 

The tax rules signal that the federal government, as well as more and more states, are recognizing that individuals need to make provisions for long-term care.

 

The deduction limits under IRS Section 213(d)(10) for eligible long-term care insurance premiums are as follows.

 

LTC Insurance Tax Deductions for 2009 and 2010

Age Before Close of Taxable Year 2010 Deduction Limits
40 or under                                    $330
Over 40 but not more than 50        $620
Over 50 but not more than 60     $1,230
Over 60 but not more than 70     $3,290
Over 70                                     $4,110
Source: AALTCI, IRS Revenue

Procedure 2008-66 (2010 limits)

 

How to shop for long term care insurance

 

When looking for a LTCI agent, it’s important to note his or her experience and knowledge. The industry has changed a lot over the years and is evolving rapidly as the Baby Boomer generation begins utilizing their policies and adding strain to the health care system. The following is a checklist of services you should look for in a LTCI provider:
 

1) Quotes from most major carriers
2) Policy comparisons
3) Education on the state partnership for long term care
4) Comparison of any group plans you might have access to, and
5) Help in determining the best LTCI choice for your personal situation

 

 

Judith L. Seid, President and founder of Blue Summit Wealth Management, Inc, is a Certified Financial Planner who has actively used Socially Responsible Investing (SRI) for her clients since 1992. She firmly believes that “We can influence corporations to change their policies by avoiding investments in irresponsible companies and by seeking investments in companies with positive practices and products.” Socially responsible investing (SRI) exists for investors looking to use the power of financial investment to create sustainable social change.

 

For more information on Sustainable Investing, contact Judith at
Blue Summit Wealth Management in La Mesa, (619) 698-4330; www.BLUESUMMITWEALTH.com
Securities offered through Pacific West Securities, Inc. (Pacific West) Member FINRA/SIPC. Advisory services provided through Pacific West Financial Consultants, Inc. and Blue Summit Wealth Management, Inc. (Blue Summit), Registered Investment Advisors. Blue Summit and Pacific West are not affiliated.

Comments

At present, long term care

At present, long term care plans are eligible for some tax advantages, which are great for consumers. Depending on the type of business, a large portion of the premiums may be tax deductible. In addition, the benefits in most cases may be tax free.

Comments about Met life Long term care

I have almost the exact same comment as the first posted responder. It is a carbon copy of what was told to us. Same Met life policy and same increase when we were told it would never go up. I just talked to the agent--a personal friend and I told him how upset I was. He said all the agents who sold policies were upset to. I am wondering whether or not a class action suit can and should be pursued against Met Life? Also are the premiums tax deductible as I was never informed of this-- and if so that may lighten the load of the 42 percent increase in premiums.

MetLife LTC Premium Increase

You mentioned that John Hancock & Metlife would be raising rates for new policies, and congratulated on those who had aready made a great decision to secure the LTC policy. This is not what is happening precisely. Here is our experience.

My wife and I purchased the LTC policy from Metlife 6 years ago. The reason we purchased the policy was because the agent who sold us the policy informed us that Metlife would never increase the premium. However, recently we got letters from Metlive that the LTC premium will be increased by 42% in October, 2010 for each of us if we want to keep the same benefit as stipulated in our policy.