October 2006

A Monthly Newsletter Source of Financial Sources

Don't miss this month's timely story ideas, direct dial phone numbers, and E-mail addresses of these accessible experts!

INVESTMENTS

• Private Annuities and Charitable Remainder Trusts Offering Similar Tax Advantages
  Are Often Overlooked in Current Rush to 1031 Exchanges.

• Answering “What Have You Done for Me Lately?” Regarding Clients’ Performance Questions
  May Require Some Research.

401(k)

• 401(k) Plans Come Full Circle.
  Professional financial advisors are making important investment choices for 401(k) participants.
  It’s called the “DB-ing” of the 401(k) industry.

RETIREMENT

• Estimating the Differences Between Building a Home
  Versus Buying a Home for Retirement.

• Prudent Money, Adventuresome Life
  Reviewing Your Intentions to Work As Part of Retirement Planning.

• The Pension Protection Act of 2006 Benefits Both Unmarried Couples and Married Same-sex Couples.

• Putting Kids First Before Saving for Retirement Can Create Long Term Problems.
  An environment of immediate gratification can be a difficult legacy for children.

HEALTH SAVINGS ACCOUNTS (HSAs)

• Medical Consultation Service Harnesses Best Diagnosticians and Provides Medical Advocates
  on Behalf of HSA Account Holders; Unique Benefits Differentiate Bank or Insurance HSA.

LONG TERM CARE INSURANCE

• Year-end Tax Planning Opportunities with Long Term Care Insurance

INVESTMENTS

Private Annuities and Charitable Remainder Trusts Offering Similar Tax Advantages Are Often Overlooked in Current Rush to 1031 Exchanges.

Private annuities and charitable remainder trusts are being overlooked in the current headlong rush by business owners of commercial properties who are trying to sell via a 1031 exchange to avoid capital gains taxes on the sale proceeds. In fact, there are several viable options to save taxes on the sale of investment real estate; private annuities and charitable remainder trusts are at the top of the list for the right families.

Recent media has focused on the high demand for investment income-producing property in New York City, because many business owners cannot find an appropriate exchange in their home states. The tax-free exchange of investment property of one kind for another is known by its tax code as the 1031 exchange.

It’s all about tax avoidance or tax deferral. Recently, the Robinson Family wanted to sell a $4 million commercial rental property at retirement and were looking for ways to avoid the nearly $700,000 capital gains tax that would be levied at the time of the sale. They were feeling pressure because their property’s buyer is doing a 1031 exchange into their property. They thought that their only option to avoid the tax penalty was to do a similar, like kind 1031 exchange, but they had no property in mind to purchase.

Federal rules state that in a 1031 exchange, the sellers have 45 days after the closing of their property to identify potential properties into which they will exchange that they must close on that sale within 180 days from closing on the family investment property. The Robinsons’ buyer is 60 days from closing, giving them nearly eight months to get organized. They want to avoid acting hastily, nonetheless. In their research, they discovered that if they put the proceeds of the sale in a number of vehicles, they could do what they really want to do and avoid the capital gains tax slam.

For example, a private annuity offers similar tax deferral properties to a 1031 exchange. The private annuity has no timeframe for investing and will hold the assets for a year or ten years, and a real estate purchase is not required. A private annuity trust is one answer that allows Boomers to downsize successfully and create an income stream from real estate assets. A private annuity trust document is not complicated and only needs to be two pages long, but its impact is very impressive.

The Anderson family wanted to sell their $3 million home and avoid as much capital gains tax as possible. After their advisor presented all of their options, they chose to put half of the house sales proceeds, $1.5 million, into a private annuity trust, saving approximately $250,000 in state and federal capital gains. They used their $500,000 exemption and half of their improvements against the other half of the proceeds of $1.5 million, reducing the tax bite dramatically. They took their $1.5 million and bought a house in Florida.

The private annuity helped assuage this couple’s fear of running out of money. They understood their private annuity could serve them like an IRA. They understood that they would have to begin to draw income from the private annuity at age 70 1/2, just like an IRA. The even greater benefit of the private annuity is that income from it is treated in three different ways, a very small portion is tax free, a greater portion is taxed as long-term capital gains at 15%, and a portion will be taxed as ordinary income at their top tax bracket. They will stretch their taxes out over their lifetime as they draw upon the private annuity income.

There is a huge push to get advisors to pay attention to the stretch possibilities with IRAs. Private annuities work the same way.

Or, a charitable remainder trust (CRT) can be another tax saving option:
A property valued at $4 million, for instance, can be deeded to a CRT. This eliminates the payment of the capital gains tax at the time of the sale. The existence of the CRT also means that the trust owners can claim a $400,000 tax deduction that can be spread over an allowed six-year period. During each of those next six years, the trust owner can take $66,666 a year out of their taxable IRA and put it in a Roth IRA. Roth conversions require that the investor pay taxes on the amounts being converted. In this scenario, however, the trust owners will have a large tax deduction from the CRT and can use it “against” the deposits to their new Roth IRA, making the trust owner’s conversion of $400,000 to a Roth IRA tax free. The Roth IRA has no minimum distributions compared to a regular Roth IRA.

The proceeds from the sale of the commercial real estate, inside the CRT, will pay the trust owners income for rest of their lifetime, estimated to be age 90, or 25 years going forward. Because the trust owners saved the $700,000 in capital gains taxes at the time of the commercial real estate sale, and assuming an 8% rate of return on this portion of their investment portfolio, the trust owners could generate $56,000 more income for their life expectancy of 25 years, or a total of $1.4 million of additional income.

The Robinsons, having discussed their options with their advisor, now intend to do the following with their $4 million.

1. Buy raw land in Arizona for $1 million in a 1031 exchange.
2. Create a private annuity
3. Six months after they close and shelter $1 million from taxes, they want to build a $500,000 home on the investment property.
4. When they take the $500,000 to build the Arizona home from the private annuity, it is still tax deferred.
5. They will still have $2.5 million in the private annuity that they can invest in any way they wish. The assets are still tax deferred inside the annuity and they can create an IRA-like income stream for their retirement.

Commercial realtors are delighted with the land rush to investment properties, particularly in the hot spot of Manhattan, but the responsibilities of investment real estate are not what many retiring families want. They prefer alternatives that give them more options but with the same tax deferral advantages.
An additional option considered and discarded by the Robinson was a 1031 exchange into a Tenants-in-Common (TIC) investment. They were advised about the high risk of these largely unregulated real estate options and chose not to invest in the TIC.

Pearson Financial Services, Dennis, MA, is the author of "The Million Dollar Gift: Dynasty Trusts. Why Leave Your Assets Any Other Way", written for his clients, his clients' families, and his own family. He offers a fully integrated wealth management process, incorporating investment, retirement, financial and estate planning specialists under one roof, serving clients as their family's office, designing and implementing strategies to protect and distribute their wealth and highly appreciated property. Seth Pearson, CFP, 800-385-7925, seth.pearson@verizon.net.

Answering “What Have You Done for Me Lately?” Regarding Clients’ Performance Questions May Require Some Research.

Any investment advisor who employs asset allocation for client investments must, at some point, deal with underperformance when compared to the major indices.

Allocations to cash, bonds, small cap stocks, REITs, commodities and international stocks create periods of over- and under-performance. Clients never seem to complain when their investment diversity allows them to beat the major indices, but they can get snippy when they see the S&P 500 up 8% for the year and their portfolios are only up 3 or 4%.

Certainly, it is our job to remind them that no one knows which asset classes will perform the best in the coming years and of the need for asset class diversification to avoid the potential for huge losses similar to those posted by the S&P 500 in 2000, 2001 and 2002.  This response, while true, doesn't answer the question of why the portfolio underperformed.

Rather than simply talk in generalities about diversity, it is a good to investigate the specific portfolio your client may be questioning to see where and how it suffered in comparison to the major indices. In one case, the investigation tracked both individual securities, asset class exposure and sector exposure over the course of several months. The performance of the various economic sector weightings within the portfolio and the performance of individual securities that made up the portfolio, and the wider asset class allocation performance (stocks, bonds and cash) of the portfolio were examined, using the client's actual returns available from the firm's portfolio management software (Advent's Axys) along with data provided by Morningstar's Principia. Index returns always include dividends and capital gains reinvested.

The firm's portfolio returns are always determined net of fees. By examining the portfolio in this way, it is possible to determine when periods of under-performance (and over-performance) occurred during the year and whether the relative performance was due to asset class diversity, sector weightings, or the superior or inferior performance of the individual securities.

The research and its results provide a much stronger understanding of how the individual parts of the portfolio interacted; an understanding easy to lose when an advisor looks only at overall performance.  In this case, the review made it possible to point out to the client the need to recognize the impact of risk tolerance on long term performance and not just the "what have you done for me lately" approach of year-to-date returns. 

Donald L. McCoy, J.D., CMFC -- Planners Financial Services, Inc., 952-835-9000. Minneapolis, Minnesota. Registered investment adviser and subsidiary company Montgomery Investment Management, specialize in the management of no-load mutual fund portfolios for individuals and retirement plans designed to protect capital by reducing risk. pfs@usinternet.com.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

401(k) INDUSTRY

401(k) Plans Come Full Circle. Professional financial advisors are making important investment choices for 401(k) participants. It’s called the “DB-ing” of the 401(k) industry.

Participation rates don’t provide the full picture when plan sponsors evaluate their 401(k) plans. The only important metric is whether someone is on track for retirement.
Until the advent of one-on-one counseling for all employees (not just the front office), employers still had no meaningful metrics to work with to decide whether their employees were investing properly. The major metrics most often looked at by 401(k) plan sponsors were participation rates (data that tells nothing about future financial preparedness of the employee), and investment choices that are often far too conservative to support a retirement.

Enter meaningful financial advice. The companies offering advice to 401(k) plan participants are now accepted as important additions to a 401(k) plan. Delivery of that advice is the key characteristic for evaluation of the success of a plan and the focus of pension consultants. No longer is the availability of an advice program all that is necessary to make a sale, but the advice program must provide one-on-one counseling that effectively helps employees position themselves “on track” for employment.

“The average employee has assets outside the 401(k) plan such as IRAs, 401(k) plan assets left behind at a previous employer, a spouse’s pension assets, highly appreciated real estate that will be sold at retirement, and even expected inheritances. At 401(k) toolbox, we provide individual counseling that gathers all of the pertinent information during one-on-one meetings. We can tell employers whether their employees are on track,” says Tim McCabe, senior V.P., national marketing director, PMFM/401(k) toolbox,” and it is data they have never had before.”

Defined benefit plans in the “old” days made all of the investment decisions for the employees based on actuarial tables that indicated how much an employee would have to have saved in order to retire based on their salary history. 401(k) plans did not come with understandable specifics on how much participants needed to save to be “on track” to retire. The industry responded by elaborate and then still more elaborate educational programs, using both paper and online software. Plan sponsors expected employees to wade through foreign material until they had made enough correct decisions to secure their retirement. It did not work.

Enlightened employers have begun to support automatic enrollment and annual automatic deferral increases and access to independent professional management of their assets inside their 401(k) plan. Such additions to 401(k) plans are meaningful because they get employees enrolled, they force the issue of saving more each year, and they make professional management available to the employee.

Now employers are coming to the realization that they must gauge whether their employees are “on track” for retirement. A brief web-based software program, used by a consultant talking individually with every employee brings the industry full circle. The employees have the counsel of an investment professional showing them, in very easy to understand terms, what their entire financial picture is regarding retirement funding. The counselor can make suggestions for changing the funds in which they invest, increasing their deferrals every paycheck, extending the time they expect to work, and what a post-retirement spending budget might look like. This is real, timely, and useful information to get employees “on track” for retirement.

Asset performance can now be measured against goals that prepare employees for retirement. No longer are employees left searching for someone to tell them how to invest and what to do. That someone is now available as a trained professional financial advisor, sitting with employees, and showing them very specifically what it takes to prepare for retirement. The industry has come full circle.

401k Toolbox, a service of PMFM, Inc., Athens, GA., is the acknowledged leader in one-on-one advice programs. PMFM, Inc. manages $800 million as of September 30, 2006. The firm has increased its assets under management by nearly 40% in each of the last three years. The firm has worked with thousands of clients and now offer their services to plan sponsors through 401k Toolbox. Tim McCabe is national marketing director. Tim McCabe -- 800-222-7636. Tim.McCabe@pmfm.com
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

RETIREMENT

Estimating the Differences Between Building a Home
Versus Buying a Home for Retirement.

Acquiring a second home is a rite of passage for many Baby Boomers preparing for retirement. Many analysts believe it is less expensive to build a new home rather than buy one already on the market. While the total purchase price of an existing second home is generally known at the outset, buying land and actually building a new home brings with it a time commitment, a need for oversight, and many other costs that may be hard to foresee.

When you buy a home that is already on the market, you and the seller agree upon a total cost for that home, subject to any “surprises” that weren’t discovered as part of the inspection process. Here are areas where extra, unexpected costs of buying a second home may come into play.

• Managing Remodeling
  When remodeling is involved, your initial costs will increase and your new home may ultimately cost more than you anticipated. Additionally, it is important to remember that an inherent cost of remodeling is that associated with “undoing” work that may already have been done as part of the original home.
• Travel
  There can be considerable costs involved in managing your remodeling contractor from afar if your second home is distant from where you now live. This includes travel, accommodations, long distance calls, and delivery services to approve changes to the construction plans.
• Financing
  Buyers of second, existing homes can lock in their loan terms immediately. Use of a home equity line to pay for remodeling is an option, as well as taking out a building loan for costs that may accrue should your remodeling run past the target completion date.

There are different concerns and other variables to consider when you decide to build “new.” You can plan to build and live in the home of your dreams, but with a greater risk of error in estimating the ultimate cost including the following:

• Cost of consultants
  You may think you only need an architect. But you may also need an engineer, a surveyor, and a landscape designer, among other specialists, when building your house.
• Building permits and licenses
  Local fees for permits and inspections are often underestimated in the planning process.
• Bringing utilities to the site
  Costs can vary significantly, subject to the property’s accessibility relative to the utilities,.
• Controlling unexpected price increases for building materials
  The long term process of building a home makes it very difficult to estimate future price increases in basic building materials. This has been especially true this past year, based on the increased demand for building materials primarily driven by China, but also aggravated by the Katrina disaster. Furthermore, many materials are derived from petroleum, so rising oil costs have increased the cost of basic building materials, as well as the cost of copper.
• Managing the Process
  Second homes are typically not within driving distance from your primary home. Under these circumstances, you need an architect who will oversee the day-to-day managing of the project, as well as a competent general contractor. (Unfortunately, one can quickly learn when the term “independent contractor” may have a different meaning that you think.) If your home is a significant distance from the one you are building, you will usually incur additional costs in travel and lodging to oversee the construction process.
• Financing
  Most financing related to construction projects can’t be locked in until construction begins, and even then may only be locked in for a fixed period. If your project runs over schedule, which is not unusual, you may be subject to a penalty or prevailing mortgage rates at the time your project is completed. This is of great concern now, at a time when interest rates are increasing and adjustable rate mortgages are resetting.
• Property Taxes:
  Subject to the county where the home is built, you may find that property taxes are less to build a new home than to buy an existing home.

While purchase an existing home may at first appear to cost more than building a new home, one can’t forget, all of the additional costs that can be inaccurately estimated at the planning stage. The bottom line: Consider your financial risks when thinking about building a second home. Assuming that you can control your costs and build a home for less than it would cost to purchase a comparable home, you will be rewarded for your effort and the risk that you have taken. Much like investing in the stock market, rewards can come with taking extra risks, but so can greater losses

Barry Taylor, CFP®, is a financial planner with Bingham, Osborn & Scarborough, LLC, a comprehensive wealth management firm based in San Francisco. working with high net worth clients. Barry provides financial planning, investment advice and portfolio design for private and institutional clients, including non-profit organizations. He has appeared in personal finance and investment segments on television networks.  Barry, who is a native of the Bay Area and resides in San Francisco, is a former Chairman of the Board of Directors of the San Francisco Chapter of the Financial Planning Association (FPA) and is the founding chair of the Pro Bono and Education Committee.  He also teaches the CFP® continuing education ethics requirement to financial planners.

Barry not only consults with clients on real estate issues, but also has personal experience buying and renovating personal homes and investment rental properties. After owning a home for more than 10 years, he is currently in the process of building a second home. Barry can be reached at 415-781-8535 or barry.taylor@bosinvest.com.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

Prudent Money, Adventuresome Life
Reviewing Your Intentions to Work As Part of Retirement Planning.

The smart retiree is the man or woman who is able to live with a prudent approach to money and an adventuresome approach to daily life. In the same way that investors need to review their investments as they approach retirement, they also need to review their work. Work has always been both a financial and personal investment, with its own risks and rewards. As you prepare for retirement, you must ask yourself what role work will play in your portfolio of activities, and whether or not you expect to earn income in retirement.

The majority of boomers and their older siblings expect to work beyond the traditional retirement age of 65. They report that they want to work for intellectual and social engagement as well as for income. Some want to work as volunteers. Others want to start or buy a business. However, the majority do not want to work full-time. Instead, they want to save time for the leisure activities promised for retirement, as well as time for family.

To achieve these aspirations to work in different ways in retirement, changing your approach to work, and maybe even your work will be necessary. Transitions aren't easy, can be risky, but can be extremely rewarding.

Let's talk about risk. As you age, investment wisdom recommends a more conservative approach to investing, in most cases. You will feel more secure with a financial plan that protects your assets so that if you live longer than expected, you will have the money you need. On the other hand, many workers view retirement as the time to take more risk in their daily lives, travel to new places, learn new skills, pursue new and old interests, relocate, and even try out a new career or different way of working. At the same time that it is prudent to avoid risk in your financial investments, you can embrace risk in your life.

Faced with financial realities, it is easy to pull back to a safe place unless you have the support and guidance you need to make the transition. Your financial advisor may be able to direct you to a professional who specializes in advising about work in retirement. Life planners and retirement coaches can provide this assistance. See http://www.lifeplanningnetwork.org. Online, you can find numerous resources to assist you in exploring your alternatives, or to discover retirement jobs that you may not have considered. For example, visit http://www.2young2retire.com.

Rewards include finding a balance of work, leisure activities and family that match your interests. Working differently means working in ways that engage you mind, take you into a broader community and give you a sense of purpose, while providing time for a full life. Retirees who have found valuable work to do report that they can now proudly answer the “What do you do?” question they dreaded before. A former engineer is a town selectman with a growing expertise in affordable housing. A lawyer has become an angel investor and advisor to start up companies. A teacher and school principal now sells real estate. A corporate executive purchased a seasonal fly fishing business that neatly dovetails with his passion. They all sought advice along the way and spoke with numerous friends and contacts until they found the work that best suited them and their retirement aspirations.

Today, you are apt to meet people who have changed careers more than once, and even retired from more than one job. These individuals are ready to take risks, because they have seen the rewards that come from exploring new opportunities, testing their limits, and working differently.

Anne Hartman is Managing Partner of Working Differently, a firm consulting with individuals and organizations to redefine retirement. Her book "Working Differently: A step-by-step guide to finding work that works" will be published in the fall of 2006. She can be reached at anne@workingdifferently.com, or 508-349-7921
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

The Pension Protection Act of 2006 Benefits Both Unmarried Couples
and Married Same-sex Couples.

On August 17, 2006, the President signed into law the Pension Protection Act of 2006. Among its numerous provisions were several that specifically benefit unmarried couples and married same-sex couples. First, a non-spouse beneficiary (or a same-sex spouse, who is considered a "non-spouse" for Federal purposes), who inherits qualified plan assets, such as a 401(k) or a 403(b), can now roll over his or her interest into an IRA. This allows for the continued tax deferral of all accumulation while mandatory distributions are taken over his/her life expectancy. Previously, when a non-spouse inherited assets from a qualified retirement plan, the non- spouse was forced to withdraw most if not all assets immediately, triggering a large tax liability.

Second, the new law now allows 401(k) hardship withdrawals for hardships and unforeseen financial emergencies with respect to any person who is listed as a beneficiary under a 401(k) plan. This means that if a partner/spouse is listed as a beneficiary to a 401(k) plan, they can potentially withdraw money from the 401(k) plan when he or she experiences an unexpected financial emergency, Previously, this provision was only available for hardship expenses relating to legally recognized spouses and dependents.

Debra Neiman, CFP®, Neiman & Associates Financial Services, LLC, Watertown, Mass., helps traditional and non-traditional couples and families make smarter financial decisions so that they can achieve peace of mind and pursue their life dreams. SHE IS THE CO-AUTHOR OF "MONEY WITHOUT MATRIMONY: THE UNMARRIED COUPLE'S GUIDE TO FINANCIAL SECURITY." Neiman provides fee-only financial planning, tax preparation and investment advisory services. deb@neimanonline.com 617-744-1816.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

Putting Kids First Before Saving for Retirement Can Create Long Term Problems. An environment of immediate gratification can be a difficult legacy for children.

Many parents will say that they put their children’s needs ahead of their own. Delaying your own financial goals by putting the kids first can sometimes mean that you may become a burden on the kids as you age. So while it is generally laudable and makes for good parenting to focus strongly on your children, it can create problems for the kids when they become adults.

If Mom and Dad are already behind on saving for retirement, and use their children’s needs as the reason they put off saving for themselves, they are digging a hole of significant proportions. Parents who delay and choose to ramp up saving for retirement after the kids leave home will have to save more each year once they start the value of compound growth during the years they didn’t save has been lost. This can leave adult children with greater responsibilities for taking care of Mom and Dad than Mom and Dad ever intended. If Mom or Dad lose a job or become unable to work because of a physical disability, the impact can be irreversible.

Each generation of parents has a tendency to want their kids to be spared some of the hardship they experienced in their lives, and many families have successively greater financial security for the kids than the parents realized. But that doesn’t mean that the children—at surprisingly young ages—won’t benefit from having financial responsibility and learning to prioritize spending. These financial skills can be some of the most valuable gifts parents convey to their children. Of course no parent wants his child to go without, but developing a sense of immediate gratification and expensive tastes can be a difficult legacy for the child. Making the distinction that the family—and the child—can have everything that’s needed, but not necessarily everything that they want will build monetary discipline. Always having the newest cell phone, designer clothes, and the most expensive vacations can be hard habits to break as adults.

It’s important for parents to discuss their retirement goals and how much of the family resources are devoted to those goals to help kids with the long view. Also, it can help the kids get a sense of what they need to do to make career decisions and life choices. If they know that a flexible approach to lifestyle needs can give them more autonomy in choosing a career path, that may give them a greater sense of purpose about their education and job choices. It helps kids when their parents can be open about what their choices have been and what’s worked well and what hasn’t. Also, telling kids that they won’t have to be responsible for their parents’ financial needs in the future can be a relief long before the kids realize what a gift that is.

Linda Leitz, CFP, Pinnacle Financial Concepts, Inc., Colorado Springs, Colorado, is author of The Ultimate Parenting Map to Money Smart Kids,” as a book or as a CD. She specializes in helping families and individuals meet their long- term financial goals. She also helps those in the midst of divorce resolve financial issues through her company Divorce Solutions, Inc. She can be reached at 719-260-9800 or Linda@brightleitz.com.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

HEALTH SAVINGS ACCOUNTS (HSAs)

Medical Consultation Service Harnesses Best Diagnosticians and Provides Medical Advocates on Behalf of HSA Account Holders; Unique Benefits Differentiate Bank or Insurance HSA.
Medical Consultation Service Harnesses Best Diagnosticians and Provides Medical Advocates on Behalf of HSA Account Holders; Unique Benefits Differentiate Bank or Insurance HSA.

A new medical consultation service can uniquely differentiate a bank or insurance company Health Savings Account (HSA). WorldCare North America and their WorldCare Consults gives HSA account holders two very significant and differentiated benefits:

• Best Diagnosis: The very best diagnosis possible from the most accomplished physicians at the nation's most highly rated hospitals is accessible by the account holder. The account holder will know that they can bridge the gap between what is medically possible and locally available, even, in some cases, avoiding unnecessary surgery and often returning to work and productivity sooner. WorldCare Consults are provided by teams of physicians who are chosen because of their reputations for being tops in their specialties. 
• Advocacy: The WorldCare Consults team becomes the outside advocate for the patient, free of any built-in bias that may exist in the health plan system. A diagnosis completely independent of the account holder's existing medical system or HMO offers the account holder certainty that the diagnosis has been made and the treatment plan has been selected outside of the insurance guidelines and geographic constraints of the health plan.

Account holders facing important medical decisions can receive comprehensive, independent reviews of their diagnoses. WorldCare works with a HSA account holder's physician to gather medical records, check the file to insure it is complete, and send records to the top medical institution or institutions best suited to address the medical condition. The diagnosis and treatment recommendations are returned to the patient's physician of choice within four business days. Four of WorldCare North America's top hospitals earned Honor Roll Status in the July issue of U.S. News and World Report's annual ranking of top hospitals. The honored hospitals include  Brigham and Women's Hospital, Duke University Medical Center, Massachusetts General Hospital,  and  UCLA Medical Center .  This distinction reinforces that WorldCare memberships provide consumers with access to top physicians, cutting-edge medical practices and best medical advice.

In the competitive world of selling HSA products, it is clear that World Care Consults provides institutions with a truly distinctive HSA benefit.

To reach Ron Mastrogiovanni, call Joanna Flynn, WorldCare North America
Cambridge, Mass., 617-250-5167 or e-mail jflynn@worldcarena.comjflynn@worldcarena.com
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com , 508-479-1033

LONG TERM CARE INSURANCE

Year-end Tax Planning Opportunities with Long Term Care Insurance

Accountants are interested in learning more about long term care insurance (LTCi), and some are calling it “The last great tax deduction.” “I have been teaching continuing education classes to CPAs for years, and this year the level of interest is exploding,” reports Barry J. Fisher, V.P. of Republic Marketing Group, Inc., a national LTCi marketing organization (www.SecurityAdvantageLTC.com).

Here’s why accountants like long term care insurance:

• Premiums are tax deductible (see below), and, even if premiums are deducted, benefits are still tax-free (see below). Compare this to disability insurance, whose benefits are typically taxable if a deduction is taken for premiums.
• In addition to the federal deduction, many states allow a deduction for LTCi;
• If someone were uninsured and was paying privately for long-term care (at typical cost today of $70,000/year), they would often need to liquidate IRAs and other assets that often have penalties and costs associated with liquidation. Long term care insurance helps people avoid these penalties and the unpleasant task of having to sell valuable assets, sometimes at fire sale prices
• Baby boomers entering their second “career” phase are starting their own businesses, and are now eligible for a LTC insurance deduction.

Deduction details
Qualified LTCi premiums generally are eligible for a federal income tax deduction as follows:

• Owner-employees of C-Corporations may deduct 100% of the premiums.
• Owners of other business entities and the self-employed may deduct LTCi up to the age-based schedule below.

2006 Age-Banded Limits on Long-term Care Premiums

• Individuals who itemize their deductions may include LTCi premiums as an unreimbursed medical expense. The amount of premium that may be included in the deduction is limited by the age-based schedule above.

Benefit Taxation
The benefit is tax-free, unless the amount paid exceeds the cost of care and the benefit paid is higher than $250/day (2006 limit).

Now’s the time to consider the benefits of LTC insurance in your 2006 tax planning – and beyond.

FOR COSTS AND COMPLETE DETAILS OF COVERAGE:
Republic Marketing Group, Inc., of New Braunfels, TX, is the national distributor of Security Advantage™ long term care insurance, available only through their network of independent SMOs and BGAs (www.SecurityAdvantageLTC.com).

Agents may get more information on Security Advantage™ Long Term Care Insurance by calling 20+ year LTCI industry veterans Ronald Hagelman (830-620-4066; Ron@rmgltci.com) and Barry Fisher (818-489-1839; Barry@rmgltci.com).  Product is not available in all states.  Limitations and exclusions apply. Underwritten by Loyal American Life Insurance Company®. Neither Loyal American Life Insurance Company, nor any of its appointed agents can give tax advice to a consumer.  Consumers should be advised to consult with a CPA, an accountant, an attorney or another tax professional regarding their specific tax situation.

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