long-term care

Hidden Tax Benefits of Long-term Care Planning

By Tom Strangstalien, Insurance Advisor

We’re well into the tax season, filing our returns for 2024 and planning for the 2025 tax year, and this is a perfect time to explore the hidden tax advantages offered by diligent long-term care planning.

Some things to consider:

  • Did you know tax-qualified long-term care policies are tax deductible?
  • Do you have funds accumulated in your Health Savings Account that you’re not sure what to do with?
  • Did you know that you can pay premiums for a tax-qualified long-term care insurance policy with your HSA funds?
  • Did you know that any benefits paid out by a qualified long-term care insurance policy are not taxable as income?
  • Are you looking for more tax deductions?

Tax-qualified long-term care insurance premiums can be combined with other medical expenses and be deductible for those who itemize their returns. The sum of medical expenses must exceed 7.5% of one’s adjustable gross income to be deductible. If this is not the case, the premiums alone can be deductible. There are limits on the amount of the premiums that are deductible, based on a taxpayer’s age and adjustable gross income. For this tax year (2024), anyone over the age of 70 can deduct up to $5,880 on their federal tax return. A taxpayer can deduct premiums as medical expenses OR deduct the premiums alone – not both.

To be considered qualified, these policies must adhere to the guidelines established by the Health Insurance Portability and Accountability Act (HIPAA) of 1996. This means they must provide coverage for medically necessary care for individuals who are chronically ill and unable to perform at least two activities of daily living such as bathing, dressing, or eating, or who require supervision due to cognitive impairments.

2024 Qualified Long-Term Care Insurance Premium Deduction Limits 

Long-term care insurance premiums can also be deducted on your state tax return. Each state varies with the qualifications and limits that are deductible, so you should consult a financial advisor or tax professional in your state.

If you have accumulated funds in your health savings account, purchasing long-term care protection can be a smart place to use these funds. Not only are you purchasing long-term care insurance with “pre-tax” dollars, any benefits received by the policy will be tax free! It is important to know that if HSA funds are used to pay premiums, these premiums are not eligible to be deductible on your federal or state tax return as mentioned above.

Benefits received by a qualified long-term care policy are not taxable as income. This can also be the case with the increasingly popular “hybrid life insurance policies” that contain long-term care insurance benefits. These hybrid policies can be viewed as a win-win-win and there are many plans available. These policies offer a life insurance amount that is income tax free upon death, an accelerated long-term care benefit where benefits are not taxed as income (subject to the IRS 2025 per diem daily benefit of $420), and a cash value component where cash value amounts of the contract accumulate on a tax deferred basis.

I’m a big fan of the hybrid life insurance policies that offer long-term care benefits. In many cases where I have assisted in long-term care insurance planning, we have utilized an “indexed universal life” policy. Let’s consider the purchase of a $1,000,000 contract. One of three things can happen. If the policy is used for long- term care expenses, most of the policy amount can be used to pay the expenses tax free. When the policyholder passes away, the designated beneficiary will receive the unused portion of the $1,000,000 on an income tax free basis. Lastly, you can choose to access the cash value of the contract if needed in the form of a withdrawal or loan (tax treatment will vary based on many factors). The return on the funds in the cash value account is contingent on the performance of selected stock market indexes. A better alternative to self-funding long-term care? In many cases a resounding yes!

There are numerous tools and options available for long-term care planning. If you want to explore your personal long-term care plan to determine your best course of action, do not hesitate to reach out to the WisMed Assure team at insurance@wismedassure.org, or call 608.442.3810. 

Picture of Tom Strangstalien

Tom Strangstalien

Insurance Advisor

Reach out to me to learn more. You can contact me at tom.strangstalien@wismedassure.org or 608.442.3730.

Send me an email!
Picture of Tom Strangstalien

Tom Strangstalien

Insurance Advisor

Reach out to me to learn more. You can contact me at tom.strangstalien@wismedassure.org or 608.442.3730.

Send me an email!

Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisionsFull disclaimer and contact information.

2025 Volume 1

Working with WisMed Assure Helps Keep Medical Malpractice Rates Low in Wisconsin

By Shawna Bertalot, CIC, ACI, WisMed Assure President

Clipboard with documents about medical malpractice and gavel.

Some good news for Wisconsin Physicians, Certified Registered Nurse Anesthetists (CRNA), and the hospitals and clinics that employ them. At the last meeting of The Board of Governors of the Injured Patients and Families Compensation Fund (IPFCF) in December 2024, the Actuarial Committee made the recommendation to keep rates the same for the IPFCF’s Fiscal Year July 1, 2025 to July 1, 2026. 

Read more…


Last-Minute Money Moves for 2024 Taxes

By Mark Ziety, CFP®, AIF®, Senior Advisor, WisMed Financial

Road sign that reads 'Smart Money next exit'

As the April 15 tax deadline approaches, physicians still have opportunities to adjust and improve their 2024 tax returns.

Contribute to a Health Savings Account If you have a high-deductible health plan (HDHP), you may be eligible to contribute to a Health Savings Account (HSA). For 2024, the contribution limits are $4,150 for individuals and $8,300 for families. Contributions can be made until the tax filing deadline.

Read more…


Hidden Tax Benefits of Long-term Care Planning

Documents on table for the premise of calculating the amount needed for retirement and Long Term Health Care.

By Tom Strangstalien, Insurance Advisor

We’re well into the tax season, filing our returns for 2024 and planning for the 2025 tax year, and this is a perfect time to explore the hidden tax advantages offered by diligent long-term care planning.

Read more…


Tenants Improvements and Betterments, Is Your Clinic Properly Insured?

Clinic renovation

By Laura Weber, Senior Large Account Director

If you rent space for your office, clinic, or even just for storage, it’s important to understand per the lease terms which party (lessee versus lessor) is responsible for covering property at the location. The agreement with the building owner should specify:  if a property damage occurs at the rented location, who is responsible for securing insurance to cover walls, flooring, permanent fixtures, including any updates you may have made to the property whether fixed or removable.

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WisMed Assure Implements Employee Navigator to Enhance Benefits Administration

Person presents employee benefits options on a digital interface.

By Martin Hurst, Insurance Service Representative

WisMed Assure is taking a significant step in modernizing benefits administration for our employee benefits clients by implementing Employee Navigator (a leading benefits management platform designed to streamline enrollment, improve efficiency, and enhance overall experience for both employers and employees). This cloud-based platform serves as a central hub for benefits management, integrating with insurance carriers, payroll systems, and HR software to create a seamless and efficient process.

Read more…


Good Samaritan Law

By Jensen Peck, Business and Professional Insurance Executive

person helping jogger in distress

Good Samaritan Laws in Wisconsin are vital for protecting physicians who provide emergency care outside of a clinical setting. These laws encourage medical professionals to offer immediate assistance in emergencies without the fear of legal recourse, allowing medical professionals to extend their care beyond hospitals and clinics. However, it is important to be aware of when the law protects you and when it may not apply.

Read more…


Tax Treatment of Long-term Care Insurance a Game Changer

By Tom Strangstalien, Insurance Advisor

We put my dad into a nursing home on Monday. My mom had been his caretaker since he was diagnosed with a somewhat rare neurological disorder. My mom has been superwoman, a real- life example of a family member caring for a loved one. However, even superwoman has a kryptonite, hers being a diagnosis of breast cancer with an impending dual mastectomy this Friday. In need of her own care, our family had no choice but to concede to the fact that dad needed continuous care from qualified professionals. The cost? $8,000 per month, and that does not include costs for prescription medications and other needed skilled medical treatments. My parents are faced with a common long-term care phenomenon, which asset do we liquidate first?

As part of our financial planning, we should all anticipate being faced with this conundrum. Which asset should we set aside to be liquidated first in the event of the need for exorbitant long-term care expenses? In considering the tax treatment of “qualified” long-term care insurance products, we may be able to make this decision much easier.

Qualified long-term care insurance premium deduction

First, the IRS allows a tax deduction for qualified long-term care insurance premiums. These premiums could be in the form of a traditional long-term care policy or for the prevalent “hybrid” life insurance with long-term care benefits available today. In essence our premiums can be combined with our unreimbursed medical expenses to the extent that they do not exceed 7.5% of our adjusted gross income. The maximum we can deduct is subject to age limits, but this by itself can be significant, especially if we combine the sum-total over a respective number of years. If we do not claim the deduction on our Federal return, we can claim the expense of our premiums on the State of Wisconsin income tax return. All states vary with how these premiums are treated, so you need to check with your individual state.

The 2024 federal IRS deduction limits are:

Age 40 and below       $470

Age 41-50                    $880

Age 51-60                    $1,760

Age 61-70                    $4,710

Age 71 and over          $5,880

How are long-term care insurance payments for care treated by the IRS for tax purposes?

When determining which asset to liquidate first, this can be the determining game changer! If the policy is “qualified” per IRS guidelines, typically the payments for any level of care including home health care, assisted living or skilled nursing home care are not taxed. For my parents that would mean an estimated $96,000 in annual benefits received that would not be taxed. If assets were set aside and allocated to a taxable investment for future long-term care, it likely would need to achieve a significant rate of return to compete and almost certainly involve volatility and risk. I would say most of the time it makes much more sense to purchase “tax qualified” long-term care protection. My grandmother was in a home with cognitive impairment for 12 years. In her case at an average nursing home cost of $100,000 per year, she would have received $1,200,000 in tax-free benefits. Can a savings account or investment compete with that? And how will inflation and supply and demand affect future costs?

Using a Health Savings Account for long-term care insurance premiums

Another tax consideration worth mentioning is that qualified long-term care insurance premiums can be funded with Health Savings Account (HSA) assets. As we know, our health savings accounts accumulate on a tax-free basis, are deductible for individual contributions and can be funded with employer contributions. This fact can further enhance the benefits of purchasing long-term care protection.

I work with insurance planning for our physicians every day. Yet, the value of proper planning still resonates with an abrupt wake-up call when faced in real life. How much expense will accrue with my dad’s nursing home stay? Only the future holds the answer. One fact is undisputable, knowing which asset we will liquidate first should be planned well in advance. That asset may very well be and should be a tax qualified long-term care insurance policy.

For help with your insurance planning, contact Tom Strangstalien at 608.442.3730 or the WisMed Assure team at insurance@wismedassure.org, complete this quick online form or call 608.442.3810.

Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisionsFull disclaimer and contact information.

Do you have the old or the new life insurance?

Tom Strangstalien

By Tom Strangstalien, Insurance Advisor

September is Life Insurance Awareness Month and is the time when I urge all our members to take a moment to reflect on the life insurance protection they have in place. Not too long ago, life insurance (especially term life), was generally viewed as a commodity. All policies were generally the same, so you simply bought the desired amount of coverage for the least expensive cost. Today’s New Life Insurance contains several bells and whistles well worth consideration and begs the question whether you should keep your old life insurance or upgrade to the new and improved model.

So, what are these new improvements that may benefit you and your family or your overall estate and financial plan? The major upgrades include protection for a critical illness, long term care protection and a living benefits or accelerated death benefit rider to the policy. All provide security that goes well beyond a payment to beneficiaries upon death.

If you elect a critical illness rider on your policy, the policy will pay either a lump sum payment or periodic payments upon sustaining a serious illness among a list of health conditions. These can include things like heart attack, coronary bypass events, cancer, kidney disease, stroke and various other neurological disorders. In other words, the life insurance proceeds can potentially be paid out while you’re living.

Another critical consideration when purchasing a life policy today is inclusion of long-term care protection. A long-term care event can devastate a financial plan. The premise is that since the life insurance amount will be paid out in the future (if the policy remains in force), and the amount of the proceeds is known, so why not allow the proceeds to also be paid for long-term care? It’s never too early to purchase long-term care protection! Placing a long-term care policy while young dramatically lowers the cost. So why not incorporate it into your life insurance policies? If you’re unable to perform a respective number of “activities of daily living,” you’re qualified to receive the life insurance benefits for payment of long-term care expenses. The life insurance amount will be paid out in the form of a payment to your beneficiaries or for costs associated with long-term care. It’s a win-win!

Lastly, many policies today include an accelerated death benefit provision, where if you would be unfortunately diagnosed by a physician to have a designated timeframe to live or are unable to perform activities of daily living, you qualify to receive benefits while you are living. How fortunate to be able to direct the life insurance proceeds as you see fit while you are alive! Many times, the cost of this benefit rider is zero.

As you can see, there are substantial benefits to upgrading to a policy containing the new available options. Please reach out to me and my team at WisMed Assure at insurance@wismedassure.org, complete this online form or call 608.442.3810 to explore upgrading your life insurance to the New Life Insurance.

Hybrid Policies Shine in Addressing Long-term Care Concerns

Tom Strangstalien

By Tom Strangstalien, Insurance Advisor

It’s not a secret that the rapidly increasing cost of long-term care is driving dramatic increases in long-term care (LTC) insurance premiums. You may also have been victim or witness to a dramatic increase in long-term care insurance premiums on a policy purchased years ago.

In the 1990s and early 2000s, people realized the potentially huge benefit of buying long-term care insurance. Along with advances in medicine and the benefits of nutrition and exercise, life expectancy increased. Coming with that was the demand for long-term care services, assisted living facilities and home health care. Popularity in long-term care insurance grew exponentially and consumers bought policies with lifetime premiums, ten pay premiums or even single premiums at an affordable price.

Actuaries calculate statistics with acute precision to guide insurance companies to make their profits. However, this is one of very few instances where they missed the mark. Typically, with life and health insurance, a significant number of people will not hold the policy for their lifetime, and the policy will lapse. This lapse rate was miscalculated, as people who purchased these policies held on to them. Furthermore, inflation for this sector of health care was severely under calculated. Simple supply and demand economics manifested cost increases well beyond the costs of other consumer goods and services. Exacerbating the situation was the decrease in interest rates, as long-term bonds are purchased to provide the future benefits.

Now, consumers are experiencing the results of this perfect storm. We are seeing shockingly increased premiums, lowered benefits or even offers by insurance companies to buy-out or provide a dramatically lower paid-up benefit. Thankfully, actuaries have learned the impact of past transgressions and traditional long-term care policies are now priced properly. But what does this mean to you? A very expensive insurance protection, along with the risk that it may never be used, so what should you do?

What happens if you pay for LTC insurance but never actually need it?

Despite long-term care insurance being so costly, I remain steadfast that long-term care protection is paramount to your financial plan! The facts speak for themselves; longtermcare.gov and the AARP agree, 70 percent of people 65 and older will require long-term care and meeting that need will continue to become more expensive.

Genworth’s Cost of Care Survey shows national annual median costs increased across the board for assisted living facilities (6.1%), home care (4.3-4.4%) and skilled nursing facilities (3.2-3.5%). The median monthly cost of an assisted living facility is $4,051, a home health aide costs $4,385 and a private room in a skilled nursing facility $8,517 a month. Genworth estimates these costs will almost double over the next 20 years.

There’s a new option for long-term care planning: hybrid life insurance long-term care policies. Actuaries have been properly pricing life insurance policies for decades. They now know the amount that will be paid out in benefits and when that benefit will be paid. In these hybrid policies, the life insurance benefit can be paid out early if needed for long-term care. If benefits are not used for long-term care, the life insurance amount is paid upon death to the policyholder’s beneficiaries. This addresses the concern of never using the policy. Benefits will not be taxable if paid out for long-term care and the life insurance benefit is paid out income tax free. In the majority of cases, this type of plan outperforms self-funding.

Hybrid policies have a lot going for them:

  • They offer flexible premium payment options. You can make one lump-sum payment, pay over ten or twenty years, or pay premiums over time.
  • It is often easier to qualify for coverage as the insurer knows what will be paid out in benefits.
  • A hybrid policy can also pay for home health care, assisted living, adult day care and even respite care for a loved one.
  • Permanent life insurance policies build cash value that can be cashed out in the future if you feel there’s no longer a need for long-term care protection or independent wealth negates the benefit.

You have options…lots of options to choose from

Hybrid life and long-term care policies come in several shapes and sizes.

  • Linked benefit policies are true hybrids that link a life insurance policy to a long-term care policy. With these, the typical long-term care benefit amount is close to or equals the life insurance amount. The greater the life insurance amount, the greater the LTC benefits.
  • You can also get a long-term care rider on a life insurance policy which only allows you to add LTC coverage at the time you buy the life insurance policy – you can’t add it later.
  • There are chronic illness or critical illness riders that let you accelerate the death benefit to pay for care if you have a qualifying chronic lifetime illness.

If you currently own some form of LTC insurance and want to compare which coverage may fit best into your current financial plan, we are here to comprehensively explore all the options and make sure your plan is suitable and won’t blow up at a time when you may need it most.

If you do not yet have any form of LTC insurance, the longer you wait, the more expensive it will become. I highly recommend exploring a hybrid life insurance / long-term care policy and getting it early. The younger and healthier the better! Avoid crisis mode or future exorbitant premiums.

As your financial partner, your WisMed Assure team is here to take care of your personal financial security so that you can take the best possible care of yourself, your family and your patients.

Contact me today to protect your tomorrow.

tom.strangstalien@wismedassure.org

608.442.3730