by Mark J. Orr, CFP

Business owners and the self-employed looking for ways to take some more money out of their business on a tax-advantaged basis for the benefit of themselves and their spouse might consider long-term care (LTC)insurance.Expenses for long term care vary greatly across the country, but home care costs from $150-$250 for an 8 hour shift. Assisted living facilities run from $2,500-10,000 monthly depending upon the location, the level of care and the quality of the facility. Private nursing home rooms cost even more.? And these costs are expected to triple over the next 30 years when baby boomers will likely need care. Just one spouse needing care for only 2 years could easily run to well over $500,000.

LTC policies pay benefits when the insured cannot do 2 of the 6 activities of daily living (bathing and dressing are two ADLs). Severe cognitive impairment (Alzheimer?s) is another benefit trigger.

For the self-employed or owners of pass-through entities such as S-Corps and LLCs, the business deduction for traditional LTC premiums are age based. For 2010, an owner aged 41-50 can deduct $620 (and the same for the spouse too), an owner aged 51-60 can deduct $1,230 each, and owners aged 61- 70 can deduct $3,290 each. People who are not business owners can apply those same amounts towards their medical expense deduction (subject to 7.5% of AGI).

Owners of C-Corps have no deductibility limits on premiums (subject to reasonable compensation). Many C-Corp owners buy LTC insurance on a 10-pay basis so the policy will be fully paid in 10 years and get the benefit of sizable business deductions as well. The premiums are not taxable income to the owner, nor are future benefits received taxable income. It?s a great way to use corporate dollars to prepare for retirement.

Many business owners offer long-term care insurance as a voluntary employee benefit and can pay some, all or nothing towards the employees premiums. Any premiums paid for employees (who own 0% – 1.99% of the enterprise) are fully deductible to the business and are not taxed as income to the employee. Many employers encourage their employees to participate in the benefit plan by paying as little as $15 a month towards the employee?s premiums and the insurance is fully portable.

Businesses with as few as 3 employees in the plan (executive carve outs) can benefit from simplified underwriting and/or a 5-10% premium discount. For a healthy 55 year old couple, a pretty good LTC policy can be found for as little as $59 a month each — which could jointly preserve up to $800,000 of their assets thirty years from now when they are likely to need care.

The younger and healthier one is the better. I bought my own policy at age 40. No matter how many years one pays premiums, it usually only takes a claim of only 3 months to get all those premiums back!

Most business owners are not aware of the CLASS ACT which was hidden deep in the new Health Care reform passed by Congress that might create unlimited liability for uninformed business owners and sets up a pitiful national LTC health care program. More information:

Finally, there are non-deductible asset-based plans which have been made even more attractive under provisions of the Pension Protection Act. These insurance products are either annuity based or life insurance based.

For example, a standard health female aged 65 might buy a life policy with $100,000 single premium with an immediate death benefit of $166,000 or LTC benefits of $498,000. If LTC is needed, she would start accessing her death benefit at up to $83,000 a year for two years.

If she needed care longer, there would be another $83,000 for 4 more years available to pay expenses. If she never needed care, the death benefit would be paid to her beneficiaries. These are especially attractive plans for people holding substantial money in low-paying, taxable CDs. And there?s a lifetime 100% premium-back guarantee for any reason.

Mark J. Orr, Certified Financial Planner (licensed in many states) has specialized in helping clients plan for LTC since 1997. You can request LTC quotes and view educational videos at: He can be reached at 770-777-8309 for individual LTC planning consultations.