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Last Updated: Jul 2nd, 2008 - 21:15:22 |
(NAPSI)-Long-term care-whether it's in a nursing home, assisted living facility or even in your own home-is expensive. Without careful planning, you may exhaust your accumulated assets paying the bills.
How much does long-term care cost?
New reports say the average cost for a one-year stay in a nursing home is $75,190 (that's $206 a day), and in some areas it can be much more than that.
Won't Medicaid pay for long-term care charges?
Qualifying for Medicaid requires having very low assets and income, or depleting personal resources to pay for care. Because of this, more people are turning to long-term care insurance policies to protect their assets and give them the ability to choose the care they want when they need it. Services such as extended stays in nursing homes or assisted living facilities or care provided at home are not generally covered by Medicare or private health insurance.
Are long-term care insurance (LTCi) benefits tax deductible?
For federal income tax purposes, benefit payments received under a tax-qualified long-term care insurance policy are generally tax-free. Most LTCi policies are tax qualified, meaning they conform to the definition set forth in the 1996 Health Insurance Portability and Accountability Act (HIPAA).
Do long-term care insurance policies have any other tax benefits?
In some cases, yes. Premiums paid for a tax-qualified LTCi policy are considered medical expenses and may be deductible for federal income tax purposes. If you itemize your deductions, you could be entitled to deduct all or part of your LTCi premium payments. In addition, some states seek to encourage the purchase of LTCi by offering limited deductions for LTCi premiums.
What about state sponsorship long-term care programs? Don't they provide incentives for LTCi?
A federal law enacted last year has given states the ability to start programs called LTCi Partnership Plans. These are designed to encourage the purchase of long-term care insurance by allowing for some protection of policyholders' assets from Medicaid spend-down requirements-often as much as the equivalent of two years' worth of care in a facility.
To date, five states have enacted these plans under the Partnership for Long-Term Care in varying forms: California, Connecticut, Indiana, New York and Iowa. Twenty-five other states have begun efforts to develop their own plans.
Without careful planning, you may exhaust your accumulated assets trying to pay long-term care bills. Seek professional tax consultation and speak to your financial advisor when evaluating these plans and your available alternatives.
Cameron Waite, the Long Term Care Insurance Answer Man, is Executive Vice President of Strategic Operations for Penn Treaty Network America Insurance Co., a leading provider of long-term care insurance.
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