Key Person Corporate Fringe Benefit Utilizing Long Term Care

Model Purchase during high income years DEDUCTIBLE as a business expense, including spouse coverage No imputed income (C Corp) Benefit paid TAX FREE Discriminatory participation Paid up in 10 years CRUCIAL ELEMENT

Genesis HIPAA (Jan.’97 Federal legislation) Cost is DEDUCTIBLE, including spouse, with no imputed income Discriminatory participation TAX FREE benefit Brought to you by the following IRS Codes: Sec. 106 Sec. 162 Sec. 213

Why? Cost of Long Term Care may be the biggest social crisis we will face in the next 25 years 1946-1964 baby boomers FICA/Retirement age

Affluent Medicaid Never Current Funding 100% Dollars 401(k) Savings/Investments Largest Silo to fund

Long-Term Care Insurance Plan Provides long term care insurance for officers and their spouses, if applicable, to cover the costs of an extended stay in a nursing home or similar facility. Highlights of the Plan   Overview   Long term care insurance protects the insured against financial hardship caused by an extended stay in a nursing home or similar facility. It was unclear for some time whether such insurance qualified for favorable tax treatment as health and accident insurance under Internal Revenue Code (Code) Sections 104, 105, and 106. Legislation passed in 1996 cleared up the confusion by characterizing qualified long term care insurance as health and accident insurance, making it eligible for favorable income tax treatment under Code Sections 104, 105, and 106.    Participants With closely held companies, the plan is typically provided only for officers, but could be provided to a wider range Of employees. If non top-hat employees are covered under the plan, participation should be limited to fewer than 100 employees if ERISA's full reporting and disclosure requirements are to be avoided. Income Taxation of the Plan Participants in an employer-paid, long term care insurance plan may exclude from income any premiums paid by The employer for such insurance. (Code Sec. 106) Employer expenses for long-term care insurance premiums are deductible under Code Section 162 as a business expense. The employee’s exclusion of the premium paid by the employer and the employer’s deduction for such premiums Are permitted even if the plan is discriminatory in favor of highly compensated employees. Benefits payable under the policy are excluded from taxable income as a medical expense as defined in Code Sec 213 to the extent that such amounts reimburse the insured for the actual expenses incurred. (Code Sec. 105)

Long Term Care Insurance Plan Minutes and Resolution   A special meeting of the Board of Directors of (Corporation) was held on the ___ day of _______,_____ for the purpose of Considering the adoption of a long term care insurance plan for all officers of the corporation and their spouses, if they qualify. A quorum of officers and Boards Members was in attendance, and those who were present are listed as follows: ______________________________________ (Chairman)   ______________________________________ (Secretary) (Board Member) The Chairman described to those present the need to increase the security of eligible executives and their families by providing long term care insurance to pay the costs of extended care in a nursing home or other similar facility. After the Chairman’s presentation and discussion of its merits, it was unanimously Resolved: That the Board of Directors has determined that such a company provided, long term care insurance plan would avoid substantial financial loss to officers due to the payment of long term care expenses, whether due to disability or old age, and would further relieve the officers of anxiety concerning the financial security of their families in the event of long term illness or injury and That such a long term care insurance plan shall be provided to all officers of the Corporation and their spouses. In Witness Whereof, the Corporate Secretary’s name has been affixed hereto this ______ day of ______________,____. ________________________________

Specifications $100/day NHC & HCBC Compound benefit 5% 30-day elimination period Lifetime benefits Indemnity benefits – NHC/HCBC Waiver of Premium NHC – Optional HCBC 10 pay option

Loss of Activities of Daily Living Comprehensive Coverage NHC/HCBC Least Impaired Person       Most Impaired OR Cognitive Impairment Least Impaired Person    Most Impaired Feeding Continence Toileting Toileting Transferring Transferring Transferring Bathing Bathing Bathing Bathing Dressing Dressing Dressing Dressing

LTC “Walk away fringe benefit” Joint Rates* Annual Cum. Prem. Benefits/Day Age Premium 10 yr. Age 75 Age 85   40 $4,623.32 $46,233.20 $552.00 $899.00 45 $4,683.34 $46,833.40 $432.00 $704.00 50 $5,054.69 $50,546.90 $339.00 $552.00 55 $5,588.61 $55,886.10 $265.00 $432.00 60 $5,944.26 $59,442.60 $208.00 $339.00 65 $6,854.13 $68,541.30 $163.00 $265.00 70 $9,174.92 $91,749.20 $128.00 $208.00 *Preferred Non Smoker *Endorsed Group Discount LTC “Walk away fringe benefit”

Accounting *S-Corp, LLC, Sole Prop. Age Eligible Premium 2005 40 or less 270 41-50 510 51-60 1020 61-70 2720 70+ 3400 Example Bonus Distribution 100,000 LTC Prem.-included (5,000) Insured age 55 Spouse age 52 Age Eligible Premium Deduction 1020 x 2 = 2,040 *Owners greater than 2%

How to Choose a Long Term Care Company Financials Comdex 90 or Higher Highest industry ratings Engineering 10 Pay – YES (Lifetime Pay or Single Pay??) Indemnity or Reimbursement Consumer Value Premium Features

NO Blood, Urine or Tax Returns! Approval Process Short Form application (Unique) Telephone Call Medical Records from Primary Physician 30-45 day decision process NO Blood, Urine or Tax Returns!

Immediate Long Term Lifetime Disability Risk Management to Protect Your Lifestyle

Companies Represented Disability White Collar Principal Blue/Gray Collar Assurity/Illinois Mutual Female Assurity/Principal Special Risk Petersen International Impaired Risk Fidelity Security Long Term Care Executive Carve Out Lincoln Benefit/ MET/GE/John Hancock Senior Lincoln Benefit/MET/GE/ John Hancock Critical Illness Mutual of Omaha/Assurity