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Little Known Law May Help Seniors Needing Long Term Care (Part 2)

                Last week we were discussing a little known law that can be a boon to seniors.  The Pension Protection Act of 2006 contains provisions that allow individuals to use their annuity cash value to purchase long term care coverage.  Let’s look at an example of how that can work.

                Bob is age 70 and recently widowed.  His children live out of town and are concerned  about what would happen if he needs long term care in the future.  Bob has had some health issues and was recently diagnosed with diabetes.  He also has a history of heart disease and is not a good candidate for traditional long term care insurance.

                What Bob was able to do, however, is take advantage of an annuity based long term care strategy that utilizes the benefits of the Pension Protection Act.   He was able to take his $140,000 fixed annuity which had a low cost basis of $40,000 (the amount he originally deposited), and using the IRS 1035 tax free exchange, transfer  from his existing fixed annuity to a new annuity that complied with the rules set out in the Act.  Bob’s annuity could continue to earn interest, but, in addition to that, he now has an additional $280,000 for a total of $420,000 available to him should he need nursing home, assisted living or home care.

                To learn more about the ways to pay for long term care without going broke, email me at and we’ll send you out my new book co-authored with Don Quante, a financial adviser with 30+ years of experience in long term care, titled Don’t Go Broke in a Nursing Home.