Money Management Q&A
Edited by
Brandon Glenn
Senior Editor
Avoiding the
‘wash-sale’ rule
My investment portfolio has declined
Q: significantly in the last 18 months. Are there
any tax benefits owed to me?
When you sell investments at a gain, you generally pay
A: taxes on the capital gains. Conversely, when you sell at
a loss, you can force the irs to give you a tax break.
short-term gains, or investments you’ve held for one year or fewer, can only Q: Many of the long-term care
be offset with short-term losses. long-term gains, or investments held for more insurance policies I am researching
than one year, can only be offset with long-term losses. Under federal tax laws, require me to make permanent
you can force the irs to provide you with up to a $3,000 annual deduction from choices about the policy benefits.
your income if you’ve suffered investment losses. Are there any types of policies
be aware that the irs discourages you from locking in your losses and that allow me to change my policy
buying back the same or substantially identical investment through its “wash- benefits in the future?
sale” rule, which holds that selling and buying within 61 days voids your loss. one
of the best ways to avoid the wash-sale rule is to replace your investment with A: most long-term care insurance
something similar, rather than the “same or substantially identical” investment. policies require permanent decisions
about policy benefits upon purchase. this
presents a host of potential problems,
including insufficient coverage for the
What’s an indemnity future if you chose coverage that is too
benefit? modest, and the inability to change policy
benefits and features if your health
Q: Some of the long-term care Looking for a more deteriorates.
insurance policies I am researching affordable type of some policies allow you to make
long-term care policy?
allow for an indemnity benefit. Can Learn more at changes after the policy has been
you explain what that means and memag.com/longterm purchased—a tremendous benefit if
what advantages it may provide? you are interested in obtaining a policy
paid a monthly benefit regardless of your today, but are working within a budget.
A: most long-term care insurance actual expenses once you need long- for example, some insurance companies
policies are designed as reimbursement term care. With a partial-indemnity policy, offer flexible policies that allow you to
only, meaning that upon submitting you receive a daily benefit once you increase your coverage without additional
all of your receipts for long-term care receive at least one hour of long-term underwriting.that can be advantageous
Getty imaGes / Kino Brod (toP); Getty imaGes / rolf Bruderer (Bottom)
expenses, the policy will reimburse you care per day. if your health deteriorates, because the
up to your policy’s limits. Unfortunately, both full- and partial-indemnity insurance company is legally obligated to
you may have ancillary expenses polices allow you to receive the policy’s increase your coverage upon your request.
associated with your long-term care, maximum benefit regardless of your you should only pay for the additional
such as adding ramps or expanding actual expenses. indemnity policies come benefits you add to the policy, while
doorways. you may also want complete at a higher price than reimbursement- the premium for the initial coverage
control over how you want to spend only policies, since the insurance purchased at the inception of the policy
your long-term care benefit, regardless company incurs a higher probability they remains unchanged. before purchasing
of your actual expenses. that flexibility will have to pay you more benefits during a policy, ask your insurance company
is not permitted with a reimbursement the course of your policy. or agent if the policy has the flexibility
only-policy. to allow you to increase your benefits
With a full- making Changes to long- without additional underwriting after it
indemnity policy, you’re term Care poliCies has been issued.
aaron skloff, aif, Cfa, mba is chief executive officer of skloff financial group, a registered investment advisory firm based in
berkeley heights, new Jersey. he can be contacted at www.skloff.com or 908-464-3060.
54 Medical ecoNoMics October 9, 2009 memag.com ModernMedicine.com