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Hybrid Long-Term Care Annuities

Skyrocketing healthcare costs. People living longer lives. And a population that owns annuities, but usually doesn’t turn them into an income stream.

If you’re not familiar, a hybrid LTC annuity can stem from an existing, non-qualified or qualified annuity that creates an LTC plan; offering the potential for significant tax advantages, LTC benefits, and even death benefits. A new annuity with these benefits can also be purchased, particularly beneficial for those who can't qualify for other types of plans due to medical issues.

The Annuity Marketplace


As you probably know, most people tend to buy annuities due to the tax-deferral, or because they can become an attractive income rider later on. On the other hand, many people that own annuities have no intention to turn them into an income stream.


According to a Gallup survey of non-qualified annuity owners:

  • 73% intend to use their annuity as an emergency fund in the case of a catastrophic illness or for nursing home care

  • 79% intend to use their annuity as a financial resource to avoid being a financial burden on their children


Why Consider Hybrid LTC Annuities?

Sounds like a pretty nice setup to turn those annuities in LTC coverage. The Gallup survey results alone argue a case for hybrid LTC annuity policies.

But, factor in these health- and LTC-related statistics, and the hybrid LTC annuity really distinguishes itself:


Related: Turn Stagnant Assets into Tax-Advantaged Care Planning Solutions

Use Hybrid Long-Term Care to Engage Your Book of Business


Here comes the best part.


In theory, income that you won’t outlive is massively important in retirement, right? It’s critical to have contingency plans in place in the event that your income goes down, or your expenses, up.


However, the largest and most concerning retirement cost is extended health care. And, without any additional income to counteract these expenses, the consequences put on you and your families can potentially be disastrous.


Two Ways to Offset LTC Expenses

Funding for extended care can be a hefty expense; and one that many may not be willing to pay. It all depends on the route you take to get that funding. Here are two main ways:

  1. Buy a traditional LTC insurance policy. This route will require you to pay hundreds of dollars each month now, only to possibly receive benefits later if they need care.

  2. Convert a current, non-qualified annuity to create a tax-advantaged LTC plan. This hybrid LTC annuity is payable for your entire lifetime, and provides a death benefit if needed. Sounds like the more useful offer, don’t you think?


The hybrid LTC annuity may sound too good to be true, but thanks to the Pension Protection Act (PPA) that went into effect in 2006, it’s a real option.


The PPA allows any non-qualified annuities to move from tax-deferred to tax-free status when used for LTC insurance. Most likely, the annuity being used is your “rainy day fund” and it’s not going anywhere. Essentially, it’s a “dead annuity”. So, why not make it live again?


Now, you have a compelling and suitable reason to move this annuity to a better spot. To learn more or to receive a personal quote based on your situation and objections, please contact us to schedule a convenient time to talk.

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