Exchange an Old Annuity or Life Insurance for Long-Term Care Insurance

March 31, 2010

A new law makes the purchase of products that combine annuities or insurance policies with long-term care insurance more attractive. As ElderLawAnswers previously reported, these “hybrid” products are gaining in popularity due to a law that went into effect January 1, 2010, making distributions from life insurance and annuities tax-free when used to pay for long-term care. The same law also allows owners of annuities or life insurance policies to exchange their old policies for long-term care insurance or hybrid policies without being taxed.

Section 1035 of the U.S. tax code allows holders of annuity or life insurance contracts to move to another annuity or life insurance contract without being taxed on the move. The new law extends the benefits of section 1035 to individuals who want to exchange an old annuity or life insurance policy for a long-term care insurance policy or a hybrid policy. The law applies only to “non-qualified” annuities, which means annuities that were purchased with after-tax dollars.

If you have an old annuity or life insurance policy and want long-term care insurance, you have several options. You can either partially or fully exchange the old policy and use the proceeds to purchase a stand-alone long-term care insurance policy. Or you can fully exchange the old policy for a new hybrid insurance or annuity contract that also includes a long-term care insurance policy. You will then be able to withdraw money from the annuity or life insurance contract tax-free as long as it is being used to pay for long-term care.

Exchanges may not be beneficial for everyone. Before exchanging any policies, you should make sure your current policy doesn’t have a death benefit or another benefit that you don’t want to give up. Also, there may be surrender charges for exchanging an old annuity.

To determine if an exchange is the right move for you or to discuss other Elder Law matters with an attorney, please email the Elder Law Center or call 630-844-0065. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Open House- National Healthcare Decisions Day, April 16, 2010, Elder Law Center, Aurora, IL

March 14, 2010

The Elder Law Center, P.C. is giving back to the community on April 16, 2010 in support of National Healthcare Decision Day.  The Elder Law Center, P.C., along with other national, state and community organizations, are leading a massive effort to highlight the importance of advance healthcare decision-making.   As a participating organization, the Elder Law Center, P.C. is providing information and tools for the public to talk about their wishes with family, friends and healthcare providers, and execute written advance directives in accordance with Illinois state laws.

Specifically, on April 16, from 10a.m. to 2p.m., Elder Law Center, P.C. is welcoming the public to an open house at their offices at 2111 Plum Street, Suite 201, Aurora, Illinois 60506.  During the open house, three free informational workshops will be conducted by our Managing Partner, Connie Renzi, at 10:30a.m., 11:30a.m. and 12:30p.m.  At the conclusion of the workshop, you will have the option of working with Mrs. Renzi to create and execute, free of charge, a durable power of attorney for health care specifically for you.  A health care power of attorney allows you to document the person you select to be your voice for your healthcare decisions if you cannot speak for yourself.  If you are interested in completing this important legal document free of charge at our workshop, please call May Rygh at 630.844.0065, ext. 109 to reserve your seat.

If you do not have time for a workshop or just simply want information about advance care planning and advance directive forms, please come to the open house on April 16, 2010, between 10a.m. and 2p.m. where refreshments will be served and staff will be available to answer your questions.

To learn more about the Elder Law Center, visit our website at

We look forward to seeing you on April 16 in honor of National Healthcare Decisions Day!