“How to Use IRA Savings to Buy Long-Term Care Insurance,” by Rick Pendykoski, ElderLawAnswers
“Typically, withdrawals or non-qualified investments (including insurance purchases) made with IRA funds before the age of 59½ are subject to taxes and penalties. Certain allowances are made if you use IRA savings to pay for medical expenses that exceed 10 percent of your adjusted gross income, or if you’re unemployed and using these funds to buy medical insurance. Although these exemptions don’t apply if you’re buying LTCi directly with your IRA savings, there are some indirect options available that allow you to avoid taxes and penalties. Here are two: fund a 20-pay life insurance plan or a qualified Health Savings Account (HSA) with part of the money saved in a traditional IRA. Both options can be done penalty-free before age 59 ½”
LTC Comment (from Stephen A. Moses, President, Center for Long-Term Care Reform):
Well, for once here’s an elder lawyer looking for good loopholes.