Alabama Is an Estate Tax Haven, but You Need a Plan for Medical Care

Alabama doesn’t have an estate or inheritance tax. The state abolished its estate tax back in 2001 and has been considered one of the top places for retirees ever since. In addition to having no estate tax, Alabama exempts most retirement income from taxation. As an added benefit, Alabama considers residents over the age of 65 exempt from property taxes on their homes.

These benefits make Alabama seem like a haven for retirees who want to limit state taxes and pass on their assets to their heirs. But before you start scouting properties and booking plane tickets to Alabama, there is one thing that you need to consider — the high cost of medical care.

The High Cost of Getting Sick in Alabama

Alabama might be a haven for retirees, but it’s a nightmare for medical costs. The state has a high amount of chronically ill residents, a shortage of physicians, and some of the highest insurance premiums in the nation. If you choose to live in a rural area in Alabama, you could wind up having to travel for hours to reach a medical provider or specialist.

Long-term care can be particularly expensive in Alabama due to the limited amount of space available. The minimum cost for an at-home caregiver is almost twice the national average, and in more remote locations, it can be three times higher. A month in an assisted-living facility can cost up to $6,524 while nursing home rates can run up to $396 a day.

All of this results in one major problem. Even with no estate, income, or inheritance taxes, the cost of medical treatment in the state can quickly deplete your savings, resulting in you having nothing to leave behind for heirs. So while you might not need an Alabama-specific estate plan, you absolutely need to have one for long-term care and medical treatment.

Using Life Insurance and Annuities to Cover Care in Alabama

There are two ways you can turn a lump sum of money into a long-term health plan. You can either use a universal life insurance policy, or you can buy an annuity. Both have tax advantages and can offer you an income boost in the event you become ill.

In a life insurance policy or annuity, you can purchase riders that will kick in if you become disabled. These riders offer many benefits, including:

  • Paying out lump sums when you’re diagnosed with a serious illness.
  • Offering an ongoing series of payments to cover medical care and expenses.
  • Benefits that can be received at a tax-free or tax-reduced rate.
  • The ability to direct your own medical care without needing provider approval.
  • Protections under the Alabama Life and Disability Insurance Guaranty Association in the event of insurer insolvency.

At Howard Kaye, we highly recommend using annuities or life insurance as a means of covering medical care or long-term care expenses if you’re a resident of the state of Alabama. We offer a wide range of insurance policies and annuities from reputable providers, so you can get  competitive pricing while ensuring your care is covered should you need it. For more information on protecting your estate by planning for your healthcare in Alabama, contact a Howard Kaye advisor today at 800-DIE-RICH.