There has been a growing frustration among individuals searching for new long-term care insurance. The issue? Premiums have grown tremendously over the past few years.
One solution that has become increasing popular is a tax-free 1035 exchange of the cash value from a life insurance policy into a paid up long-term care policy. This becomes more practical for some individuals as they near retirement and the need for life insurance becomes smaller.
Example - $500,000 life insurance policy
- You have paid $60,000 in premiums
- You have $100,000 in cash value
- You no longer have a need for the policy.
Instead of withdrawing the $100,000 in cash and paying taxes on the growth, you could do a 1035 exchange directly into a paid up long-term care policy and avoid the taxes.
As with any financial decision, you should evaluate whether this strategy is right for you through the lens of a larger financial plan.
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
All examples or estimated numbers are hypothetical in nature and solely used for illustrative purposes. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.