Long-term care annuities get a break

Sales of long-term care annuities, a kind of insurance against long-term care, have been declining this year. But industry watchers expect that trend to reverse in 2010, when new federal rules kick in. Starting next January, no federal income tax will be due on the proceeds of up to two to three times an annuity’s account value if used to pay for long-term care, thanks to the Pension Protection Act of 2006.

“The message in favor of combination plans is simple, and to many buyers more compelling,” says Carl Friedrich, Milliman consulting actuary and principal. “There are potentially significant tax advantages to the pay out of annuity values, including gains in those contracts, as tax-free long-term care benefits, as allowed under the Pension Protection Act of 2006. In addition, people don’t like the idea of paying level premiums into a standalone long-term care insurance policy and never getting money out of the contract if they don’t need long-term care...

Registered Rep: Long-term care annuities get a break