The OneAmerica® Hybrid Annuity Care Suite Tackles the LTCi Catch-22

For clients over 70, it can be a winning combination!

If you have older clients sitting on nonqualified assets — especially clients who may have difficulty qualifying for traditional long-term care insurance — there’s a smart strategy to help them get the protection they need, without incurring tax penalties or risking legacy planning.

It’s a strategy that Tim Vannoy, a OneAmerica regional sales director, is sharing with as many financial professionals as he can.

The LTC Catch-22 and How To Solve It

According to the Census Bureau, the fastest-growing population is adults age 85-100. Because of improved health care and medical technology, many are expected to live even longer. Unfortunately, while this population swells, few are holistically prepared for a long-term care event and the costs associated with it.

Many of them want long-term care coverage, but they can’t afford it or they don’t qualify for it. Others are in denial that they would ever need it or are misinformed as to what coverage entails. Finally, some are hesitant to pay premiums for a policy they may never file a claim on.

Fortunately, many of the same individuals, those age 70-85, could be ideal candidates for the Annuity Care suite from OneAmerica.

The way the products are designed, the client will either use the long-term care benefit without incurring any tax penalties or, if they never have a long-term care event, can pass the death benefit on to a beneficiary.

Nonqualified Annuities and the Key to Protecting More Retirees

It’s well known that nonqualified deferred annuities are a popular solution for Americans planning their retirement because they offer tax-deferred growth and the opportunity to provide a source of income.

According to a 2013 Gallup Poll interviewing nonqualified annuity participants, 86% of people buy one for its tax-deferred accumulation. While some decide to annuitize their contract, most clients never do.

“One of the things we train people to ask their clients with nonqualified annuities who don’t plan to annuitize their policies is ‘What would cause you to spend this money?’ —and 73% of them said it is an emergency fund and they do not need the income. It is in case they need assistance,” Vannoy says.

The downside for many clients using their current, nonqualified funds for a long-term care event is that it can come at a hefty price with fees and taxes. Vannoy wants financial professionals to know that their clients don’t have to pay this price.

“I wish more financial professionals knew about the benefits of the Pension Protection Act of 2006,” says Vannoy.

Tucked inside this law is a special exemption for those holding nonqualified annuities. The provision allows policyholders to make withdrawals for long-term care events (such as at-home nurse visits and live-in facilities) tax free. These withdrawals, which the OneAmerica Annuity Care suite pays monthly, are also not counted as income but rather as a reduction of cost basis. The catch is that, because nonqualified annuities are a form of tax-deferred growth, only select products qualify. The exemption allows policyholders the ability to access the bases of the annuity rather than the growth, preventing a taxable event from occurring.

An Annuity Care Suite Offering Hybrid LTC Options Like No Other

While many annuities may carry long-term care provisions, few can touch the benefits that the OneAmerica Annuity Care suite is designed to handle.

That starts with an annuity’s easier underwriting requirements.

“I tell people looking for long-term care that our underwriting is so much easier than traditional policies. If you can’t get LTC here, you just can’t get it,” Vannoy said.

Housing many of the few Pension Protection Act options, the Annuity Care suite is designed to help your clients get the care they need — guaranteed for life.

“When financial professionals explain the impact a long-term care event can have on a family and how these products can turn on tax-free income — without endangering any legacy planning — the results are amazing,” Vannoy states.

It all comes packaged with an industry-leading claims concierge service, where the same specialist guides a family during their time of need from start to finish. Vannoy encourages you to have meaningful conversations with your clients to increase their access to income when they need it most.

You can help unlock more business that’s right in front of you. To dive deeper into this topic and learn more about the OneAmerica product suite, visit TheLTCAnnuity.com for a white paper. You’ll learn more about how to help the aging population navigate the challenges they face by having meaningful conversations about a product suite designed with them in mind. You’ll also hear from a successful financial professional who speaks to how producers can successfully position these products to increase their books of business.