1. 870 POINTS
    William Bridgers
    Specialist, LTCi, DI, Annuities, Life, Designs In Life, LLC, Utah
    Payment of long-term care costs from a long-term care insurance (LTCi) policy may be taxable if one owns a "non-qualified" (NTQ) long-term care policy.  There may be a few carriers out there that still sell them.  However, most carriers exclusively sell only "tax-qualified" LTCi (TQ) policies, the payouts from which are not subject to being taxed as regular income.

    If one owns an NTQ policy, it is important to check to see if it was re-categorized TQ by the carrier.  There was a period of time in the mid-90s in which coverage design for TQ policies was mandated, but NTQ policies sold prior to that time were allowed to become considered TQ if the policy owner requested it.  For some carriers, it was an automatic retro-action.  If in doubt, call the carrier's claims department to determine the tax treatment of an LTCi policy sold before 1998, even if the title page of the policy in question specifically states that it is "not tax qualified".  A definitive answer may not be given - one may be referred to a qualified tax professional for a final determination.
     
    Nothing in this answer is intended to be construed as tax advice.  For a specific tax situation, go to www.irs.gov or consult with a qualified tax advisor.
    Answered on July 23, 2013
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