Many financial advisors look at asset based long-term care plans as a financial product that competes with your financial investments. Otherwise, what is the rate of return the financial advisor can get on your money versus depositing it with the insurance company? The truth is, asset based long-term care plans are not like your other investments. Instead they are insurance products that guarantee a tax-free stream of income to pay for long-term care costs and protect your entire estate including your other investments. They also protect you from shrinkage to your estate due to market timing and paying unnecessary taxes when you are forced to liquidate assets to pay for care.
Remember, most asset based plans offer a return of premium if you never use it. The best plans return the premium in the form of a tax-free death benefit so the estate does not pay tax on the excess returned over the initial premium. However, this is not why you put an asset based long-term care plan in place. The reason to put a plan in place is for the ongoing tax-free benefit should you or your spouse need care. This is where the real value of the plan lies.
The goal of long-term care insurance is to provide you with the resources you need should your health become compromised to a point where you need help from others. The benefits are tax-free and don’t count as income and prevents you from having to convert your other assets to income paying taxes along the way. Not only does long-term care planning protect your family, it protects your capital assets so they can continue to work for you and generate income for you and your family when you need it most.
