Long Term Care Annuity Definition

Long Term Care Annuity

Long term care annuities are used to pay for long term health expenses. These annuities serve as an alternative to long term care insurance, and unlike the insurance policy, access to long term care annuities is not affected by a person's health status. Long term care annuities involve a relatively large up-front payment that is in the form of a lump sum rather than periodic payments. Proceeds or income from long term care annuities can be either immediate or deferred. Beginning in 2010, proceeds from long term care annuities will not be subject to federal income taxes. Payments from long term care annuities only last for a certain period of time, so other sources such as an insurance policy may be required to cover costs associated with longer periods of care.

Annuity Income is Tax Free Starting in 2010 When Used to Pay for Long Term Care

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...

Glossary:

Long Term Care Annuity

Key Phrases:

Retirement

Taxes

Health