Starting on January 1 2010, proceeds from annuities will be free from federal income taxes when used to pay for long term care.
The Pension Protection Act of 2006 provides the basis for this change in the tax law.
So called "long term care annuities" provide an alternative to the purchase of a long term care insurance policy.
There are pros and cons to both approaches, and consumers may wish to pursue both options as they potentially complement one another.
A positive for the annuity involves the fact that, unlike long term care insurance, the applicant's health status has no impact on product availability.
One drawback to long term care annuities involves the need for a relatively large lump sum payment or deposit versus a drawn-out monthly payment for long term care insurance.
The U.S. Department of Health and Human Services provides a good source of summary information on long term care annuities.
Source: Smart Money
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