Wealth Preservation Series May 2009
The Tax Deductible Long Term Care Insurance Plan for Partners
It is possible to create a base long-term care insurance program for partners and their spouses where nearly 100% of the premium is tax-deductible on the Federal return. Additionally, partners, attorneys and staff in New York can receive a 20% tax-credit. A key advantage is that 100% of the insurance benefits can be tax-free – a perfect example of maximum tax-leverage.
The Key Personnel Long-Term Care Insurance Plan
Today’s competitive market requires that Law firms attract, retain and reward top talent. Providing long-term care insurance as a component of overall compensation creates a unique and comprehensive tax-advantaged package: The premium is tax-deductible to the firm; it is not taxable to the employee; and the insurance benefits will be generally income tax-free. For more advantages, a Return-of-Premium feature can be added so that the sum of the premiums paid by the firm will be payable to the personal beneficiaries of the key personnel when they die – making the plan a “can’t lose” deferred compensation benefit.
How to Reduce Estate Taxes and Transfer Wealth with LTCi
An effective tax planning strategy could entail (1) paying the cost of long-term care by liquidating assets – thus reducing the taxable estate and (2) having long-term care insurance benefits payable to an irrevocable trust which, when invested, creates an asset for family members that will not be subject to estate taxes. Further, the Return-of-Premium feature assures that – even if insurance benefits are never received – the ultimate value of the estate will not be diminished.
If you would like to receive a detailed memorandum on these concepts call Philip Davis at 203.792.7300 or email him at ptdavis@corpcompinc.com.
