Follow
Share

Is it wise to exchange a non-Qualified Variable Annuity for a fixed LTC Annuity for which money in order to not be taxed for those LTC expenses. Such an exchange forfeits the growth potential (and also avoids potential loss) of the non-Q account, but there is little to no growth potential b/c most interest growth is xonsumed by high fixed Annuity fees.


Of course LTC and Anuity salepeople promote these accounts, but I would appreciate opinions from people ot selling annuities.

This question has been closed for answers. Ask a New Question.
Find Care & Housing
You should ask this question at www.bogleheads.org. There are a couple of real annuity experts chime in there.
Helpful Answer (2)
Report

This site imo is so not the forum for deep dive finance advice. Barbs suggestion of bogelheads is especially fabulous. Also Reddit has pretty solid subreddits but you have to have a somewhat thicker skin as you will be called out mercilessly if you have made obvious dumb moves.
Helpful Answer (1)
Report

https://www.investopedia.com/ask/answers/082715/how-are-nonqualified-variable-annuities-taxed.asp#:~:text=Nonqualified%20variable%20annuities%20are%20tax,a%20regular%20income%20in%20retirement.
Helpful Answer (1)
Report

RVA, do you understand the annuity you currently own and how it's taxed?

Annuities are deliberately complicated instruments designed to maximize profit for the salesperson and to confuse the purchaser.

You have already paid a huge sales charge upfront. Don't do it again until you understand exactly what taxes you are avoiding--capital gains, income tax? Unless you are in a VERY high tax bracket, the tax saving might be minimal--and the sales charge huge.

The agent is NOT your fiduciary advisor or friend. S/he is looking out for their own profit.
Helpful Answer (2)
Report
igloo572 Jul 2023
Barb, I seriously hate annuities. They imho are a pox by & large sold to the unsophisticated. To me, the only, like only time they work in the context of paying for LTC world if Medicaid is going to be needed is if there is a couple who is somewhat May-December and there are assets that need to get shifted pronto to Community Spouse to get the older needing a NH spouse impoverished enough to get him qualified for LTC Medicaid. That unique situation works for a SPIA aka single premium immediate annuity. Absolutely not a DIY. Your CELA atty has their speciality underwriter shift as much $ into SPIA as asset for community spouse to pay income to CS. The CS’s income not a factor for the Nh spouse eligibility and if CS is young enough they outlive the SPIA. All done b4 ever filing for LTC Medicaid and the segregation of income/ assets. It’s beyond very different underwriting than 99% of most annuities which are puro products sold by any guy holding insurance licenses, & those types cannot do SPIA at all. Really those I hate, big time hate.

What folks don’t realize is that often theses are touted as being “Medicaid compliant”. Yeah technically is accurate. So if you file for LTC Medicaid, having an annuity won’t necessarily keep you from being eligible. It is your money placed into something you own and you draw from. So it’s compliant. But what is glossed over or flat not mentioned are couple of things:
- the beneficiary part of annuity probably will have to be changed to have the State become the primary beneficiary. So only after the State is paid whatever costs paid by LTC Medicaid will the old beneficiaries get whatever left. My State has a form for this, it’s easy peasy to be done. Not done = not eligible.
- if not yet in pay out mode, may have to be cashed in & spent down or accelerated to be in pay out.
- annuity in pay out mode and the income folds into required copay or SOC / share of cost to the NH.
In other words, ya don’t get to keep any of the annuity $!!!
I do not know how it works if $ in pay out mode is so large that it takes the application over the Medicaid monthly income maximum. Right now for most States, monthly income max is $2,742.00 month. So older folks - 90’s & late 80’s - probably OK for annuities in pay out as their SS retirement income is low & under 2K or even under $1500 a mo. But younger retirees needing LTC Medicaid, that’s going to be problematic - is my guess - as many already SSA 3+K mo retirement income max so over Medicaid mo income max. I bet it’s ineligiblity.

US not ready for tsunami of boomers needing LTC….. not pretty.
(1)
Report
Note that deductible LTC expenses may be large enough that it doesn’t matter so much whether the income used to pay for them is taxable.

Also, many variable annuity contracts already limit your exposure to loss, in exchange for which your gain is also limited in some way, e.g., by losing any dividend income. If you have already paid the commission to get into such a product, you wouldn’t want to pay again for a different way to do the same thing.

Be prepared to invest a lot of brainpower into understanding what you have and what you are being offered.
Helpful Answer (2)
Report

This question has been closed for answers. Ask a New Question.
Ask a Question
Subscribe to
Our Newsletter