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.
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.
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.
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.