With 7,900 Baby Boomers turning 65 every day, it comes as no surprise that there
is a heightened interest in the area of long term care planning. The older we
become, the more we recognize the costs of extended care can wipe out most or
all of our nest-egg. The high cost of long term care can often be reduced using
insurance.

For many, an obstacle has been the high cost of long term care insurance. A
relative newcomer to long term care planning and asset protection is becoming
the plan-of-choice for many "Boomers" and young seniors. To find out more, I
enlisted the expertise of Manatee County's foremost long term care specialist
Thomas Kenyon, with Florida Long Term Care Planners.

Tom: Thomas, tell me about these new plans and why they have seemingly
caught on overnight.

Thomas: Tom, the new plans can best be understood as hybrids, a blend of long
term care insurance and asset protection. You avoid losing the premiums you paid
if you do not need long term care. Their sudden popularity can be summed up in
three letters, PPA.

Tom: That's the Pension Protection Act of 2006. What role is it playing?

Thomas: The Pension Protection Act secured high tax favorability for life
insurance or annuity products that included the ability to pay for long term care
expenses. Many top insurance carriers then developed appropriately structured
hybrid life/long term care and annuity/long term care products. Each of these play
a somewhat different role in planning, but both address one of the largest
stumbling blocks to the purchase of traditional long term care insurance; "use it or
lose it."

Tom: So if someone owns a life/long term care hybrid contract, either they will use
their policy to pay for extended care expenses, or their heirs will receive an
inheritance that is greater than what has been paid in, right?

Thomas: That is correct, but there are other advantages. Using the life/long term
care hybrid as our example, the policy might have a $250,000 death benefit, but
the benefit pool available for long term care expenses will be two to four times the
death benefit depending on their age when they buy the contract. That is
$500,000 to $1 million for long term care expenses. The IRS guidelines in PPA
allow all payouts from this policy to be tax-free.

Tom: Do the annuity/long term care hybrid products have the same features?

Thomas: They do, but the long term care multiplier is not as great. The real draw
for the annuity/long term care hybrid is tax-free distribution. As an example, a 65-
year-old had purchased a $100,000 fixed annuity at age 50. The annuity is now
worth $200,000. They can make a tax-free 1035 exchange of the $200,000 fixed
annuity into a $200,000 annuity/long term care hybrid. If they need long term care
in their early 80s, the hybrid now has $400,000 of long term care expense benefits
to draw on. Their annuity has grown by $300,000, which would normally be taxed
when disbursed. However, under PPA, funds used for long term care expenses
will come out tax-free.

Tom: This sounds too good to be true; why aren't these contracts the best answer
for everyone?

Thomas: First, most -- but not all -- of these products require a substantial onetime
upfront payment, $50,000, $100,000 or more. Second, if a person only needs
long term care protection, stand alone long term care insurance gets you more
benefits for each premium dollar. These policies do not fit every situation, but for
the person or couple with unprotected assets, reluctant to purchase traditional
long term care insurance, hybrids are becoming a popular solution.

Planning for unknown long term care expenses is an important part of any
financial plan. For more information on long term care planning and protection
options, check out www.longtermcare.gov and www.FLLTC.com.