Lifestyle 2000 TM CORPORATE LONG TERM CARE POINT OF SALE PRESENTATION

Lifestyle 2000 TM C-Corporations & Long Term Care Insurance The Last Great Tax Advantage SLTC00-17

Lifestyle 2000 TM How to use corporate dollars to fund a federally tax-qualified employee benefit. LONG TERM CARE INSURANCE

Lifestyle 2000 TM What is Long Term Care? Long Term Care is assistance provided to someone who has a condition or illness that limits his or her ability to perform normal daily activities.

Lifestyle 2000 TM Long Term Care Includes: Assistance with Activities of Daily Living (ADL’s) -Bathing -Eating -Dressing -Toileting -Transferring -Continence

Lifestyle 2000 TM Who Will Pay for Long Term Care?

Lifestyle 2000 TM Long Term Care Myths u My Children Will Take Care of Me u Medicare Pays for Long Term Care u Medicaid Will Take Care of the Bill u I Will Never Go to a Nursing Home

Lifestyle 2000 TM What are the chances of needing Long Term Care? The total risk of a 65 year old entering a nursing home at some point in life is 49% (1) (1) Long Term Care: Knowing the Risk, Paying the Price, Health Insurance Association of America

Lifestyle 2000 TM Protecting Current Assets >Even younger clients have a current need for Long Term Care Insurance >Long Term Care Utilization: 3% are under age 18 40% are ages 18 to 64 57% are over age 65 (2) (2) U.S. Accounting Office, 1995

Lifestyle 2000 TM Friends and family may not be in a financial position to help pay for the care you require when you need it. Currently, the national average for one year in the nursing home is estimated to cost $41,000 (3) as a national average. If we consider even a conservative inflation increase of 5% per year, within the next 25 years, one year’s stay in a nursing home could more than $100,000. (4) (3),(4) The American Health Care Association, September 1998

Lifestyle 2000 TM Long Term Care Insurance Helps You To: Maintain Independence Control the Quality of Your Care Have Peace of Mind for Your Future Preserve Your Assets

Lifestyle 2000 TM Our Purpose To help you move pre-tax corporate dollars out of your company. Deduct those dollars as a usual business expense. Make those dollars available to your heirs. Provide you or your key employees lifetime protection against the high cost of long term care.

u Health Insurance Portability and Accountability Act u Mostly aimed at Group Medical Insurance u Revolutionized corporate executive benefit Long Term Care Insurance sales u Defined tax-deductible LTC Insurance premiums u Defined amount of tax-free LTC benefits Lifestyle 2000 TM HIPAA

Lifestyle 2000 TM u All reimbursement plan benefits are tax-free. u All indemnity plan benefits spent on qualified nursing care are tax free. u Tax free benefits from an indemnity plan can exceed nursing care costs. u However, indemnity benefits above nursing care expense AND above $190 per day (adjusted for inflation) are taxable. HIPAA Tax Free Benefits

Lifestyle 2000 TM u The IRS has determined that Long Term Care, as an employee benefit, does not have to follow ERISA guidelines. This means that the employer can “pick and choose” who will participate in this benefit program. (5) u This benefit can create “Golden Handcuffs” for key employees and a “Golden Parachute” for business owners. u This benefit allows the Corporation to move business dollars into the hands of key executives. What the IRS says: (5) IRS Section 105(b)

Tax Deduction for Self Employed (6) n Tax qualified long term care insurance plans only n Not eligible for cafeteria plans n Eligible for MSA accounts n Deduction limits – 60% (2000 and 2001) – 70% (2002) – 100% (2003) n Deductible amount is lesser of premium paid or age related amount – $ 220 – $ 410 – $ 820 – $2200 – $2750 Per insured person, based upon age at the end of the taxable year. Other 40% is eligible for the 7.5% of Adjusted Gross Income for un-reimbursed medical expenses. 100% of premium paid through an MSA is an eligible expense. Consult your tax professional. Lifestyle 2000 TM (6) IRC Sec. 213(d)(10)(A)

Lifestyle 2000 TM u C-Corporation - 100% Deductible u S-Corporation, LLC, Partnerships and Sole Proprietorship. - 60% (2000/2001) Deductible on the owner(s) - 100% Deductible on other employees - Excess carried over to personal tax return subject to limitations What is your deduction? (7) (7) IRS Section 162(1)(2)(c)

Lifestyle 2000 TM u All Qualified Long Term Care Insurance premiums and expenses for employees are fully deductible by employer without limitation. (8) u Premiums not included in W-2, even for owner-employee.(9) u Benefits are not taxable (10) u Employer can offer to select employees. (11) Qualified long-term care insurance and expenses (8), (9), (10), (11) HIPPA 1996, P.L L, IRC Sec. 106(a), IRS Sec. 7702B(a)(2), IRS Sec. 105(b)

Lifestyle 2000 TM u Exceptional executive benefit u Uses pre-tax corporate dollars u Lower age - lower premiums u Lower age - insurability is less concern u Tax advantages not available individually u Paid-up options fund post-retirement u Endorsed Group premium discounts The “C-Corp” Advantage

Lifestyle 2000 TM u LTCI cannot be part of a Section 125 plan (12) u No C Corp cap on premiums that HIPAA did impose upon others (13) u No C Corp limit on limited payment premium plans (14) u Can be viewed as a way to increase executive retirement income “C” Corp Tax Qualified LTCI (12), (13), (14) HIPPA 1996, P.L L

Lifestyle 2000 TM u Limited-Pay Premium options u Allows pre-payment of future premiums during specified period using pre-tax dollars u There is a high cost of waiting to buy Pre-funding Retirement Expense

u Lifetime Benefits u 5% Compound Benefit Increase Rider u $200 per day u Indemnity Benefits u Estate is protected by not having to liquidate estate assets in order to pay for long term care. u Comprehensive Benefits u 10-Pay Premium Option u Retirement income increases since you are not using retirement dollars to pay for long term care Lifestyle 2000 TM Example Benefits for a Key Employee

Lifestyle 2000 TM u Tax Qualified u 5% Compound Interest Inflation rider u Comprehensive Nursing Facility Care and HCBC u Indemnity benefit option u 10-Pay and Single-pay premium options u Underwriting related pricing advantage u Lifetime elimination periods of 0, 30 and 90 days u Joint Waiver of Premium u Enhanced HCBC option u Endorsed Group Premium Discounts Comprehensive Benefits

Lifestyle 2000 TM Premiums paid for LTC are not taxable to Executive IRC 162 Benefits are Tax Free up to $190 per day IRC 7702B d(4) Company Purchases “LTC Insurance” on Key Employees ESTATE gets refund of premium upon death of insured(s) IRC 7702B (b)2c(1)(E) “LTC Insurance” is health insurance IRC 7702B Premiums Deductible IRC 162 Insured has Lifetime LTC protection C-Corporation LTC Tax Treatment

Lifestyle 2000 TM Coverage Provided by Policy Series S-6000-P, underwritten by The State Life Insurance Company, Indianapolis, IN. Policy benefits and options vary by state and some of those listed here may not be available in your state. For costs and further details of coverage, including exclusions and reductions or limitations and the terms under which the policy may be continued in force, contact your State Life agent. The information provided here is not intended as legal or tax advice. We recommend that you consult with an attorney, accountant or tax advisor regarding the tax implications of purchasing long term care insurance.