Long-Term Care Insurance As an Executive Benefit

Mr. Key's mother-in-law just passed away at the age of 86 after ten years of illness and years of expensive care. He never wants to worry about exhausting his own retirement funds, nor interrupt his children's lives due to his or his wife's future needs for costly long-term care. He requested and received long-term care policies for himself and his wife, paid for by the corporation. They agreed to buy him and his wife policies that are fully paid by his age 65. Corporation Americana will fully deduct the premiums as an ordinary and necessary business expense. Mr. Key will owe no tax on this benefit, and his eventual use of the policy daily benefits will be tax-free. This is, indeed, a valuable benefit that puts a meaningful safety net under the funds he is accumulating for a secure retirement. It could be worth hundreds of thousands of dollars to him and Mrs. Key.

The Estate Built from Bargaining

Can it be done? That is to say, could a key executive build an estate out of no more and no less than the best compensation agreements he can make with his employer?

The answer is yes.

Here is one estate we know of personally. It is composed of the following items: $325,000 in the pension plan; $65,000 from the profit sharing fund; $150,000 of group life insurance; $110,000 in stock purchased by the use of stock options; $150,000 in split dollar life insurance. It will amount to $675,000 if he dies before retirement, or provide him with $50,000 per year on his retirement.

Or, in other words, a good bargain, even though he is not a top executive in the organization.

Executives in an organization would do well to leverage their value in the company to negotiate a package of benefits that will make them want to stay with the organization, build its value, focus on their responsibilities and contributions to the progress of the company, and have peace of mind knowing that they and their family will have a secure future.