qualified long term contract

Posted: Fri Oct 14, 2011 10:24 pm Post Subject:

I'm assuming that you're referring to Tax-Qualified LTC, or TQLTC contracts.

TQLTCs are only available for those who meet the definition of "chronically ill" under section 7702(B) (b) of the internal revenue code. A chronically ill individual is a person that has been certified by a health care practitioner as:
(1) Being unable to perform at least 2 of the ADLs for a continuous period of not less than 90 days;
(2) Requiring substantial supervision to protect the insured from threats to health and safety due to severe cognitive impairment (the cognitive impairment
trigger), and;
(3) having a level of disability similar to the above levels of disability.

The policy must contain three types of consumer protections:
(1) Conformity with Model Law, Regulation;
(2) Disclosure Requirements, and;
(3) Nonforfeiture benefits in the event of lapse.

Under HIPAA, a qualifying LTC insurance policy is eligible for the same federal income tax treatment given to medical expense policies.

With regard to benefits paid out by an individual TQLTC policy:
• reimbursement benefits for QLTC services are not taxed.
• per diem or indemnity benefits are not taxed except those benefits that exceed the greater of:
* total QLTC services charged, or
* $300/day in 2011, and adjusted annually for inflation.

The LTC insurance premium amount deductible for individuals, owners of sole
proprietorships or S corporations (2% or more owner), partners, partnerships, LLPs and LLCs is limited to the lesser of the premium paid or the amount on the age-related table of maximum deductible premiums (which is adjusted every year to reflect inflation) shown below.

Insured’s age before the end of the year (Maximum Premium Deduction 2011)
Ages 40 or less $340
Ages 41 – 50 $640
Ages 51 – 60 $1270
Ages 61 – 70 $3390
Ages over 70 $4240

After adding the following amounts, a policyholder who itemizes deductions can claim a tax deduction of the amount which exceeds 7.5% of his adjusted gross income (AGI):
• The age-related maximum premium deduction shown in the table
• His paid medical insurance premiums
• His deductible out-of-pocket medical expenses

Hopefully, this help!

InsTeacher 8)

Posted: Sun Oct 16, 2011 12:04 pm Post Subject:

I believe that over 99% of the policies now being sold are tax qualified. In fact, I don't even know of a carrier selling a policy that isn't one, but I assume that there is.

The advantage of a tax qualified policy is primarily that the government has said that if a policy is tax qualified, it qualifies for some tax benefits as mentioned by Insurance Teacher.

All of the Partnership policies are tax qualified. A partnership policy will allow a person to qualify for Medicaid without spending 100% of their assets.

Posted: Sun Oct 16, 2011 12:11 pm Post Subject:

The LTC insurance premium amount deductible for individuals, owners of sole
proprietorships or S corporations (2% or more owner), partners, partnerships, LLPs and LLCs is limited to the lesser of the premium paid or the amount on the age-related table of maximum deductible premiums (which is adjusted every year to reflect inflation) shown below.