Tax Issues and Life Care Annuities

David Brazell, Jason Brown and Mark Warshawsky

in Recalibrating Retirement Spending and Saving

Published in print September 2008 | ISBN: 9780199549108
Published online January 2009 | e-ISBN: 9780191720734 | DOI:
Tax Issues and Life Care Annuities

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A life care annuity combines an immediate life annuity with long-term care insurance. This chapter reviews empirical evidence supporting the claim that the marketing of a life care annuity will produce a lower total price for the combined product, less adverse selection in the individual annuity market, and greater availability of long-term care insurance. It also discusses the institutional, regulatory, and tax aspects of a life care annuity, including its future tax treatment under the recently enacted Pension Protection Act of 2006. The chapter concludes with a numerical illustration of the tax implications of various ways of structuring the life care annuity, and it compares these implications with those produced by an above-the-line deduction for qualified long-term care insurance premiums.

Keywords: life care annuity; long-term care insurance; costs of care; retirement income; insurance value; disability; healthcare; premium charge; taxable income

Chapter.  9998 words. 

Subjects: Pensions

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