Meet Amy: Amy was a comptroller at a mid-sized company. She loved her work, she loved numbers, and she loved the independence her career gave her.

But here’s the thing—Amy was single. She didn’t have kids, and she wasn’t planning on having any. One night over dinner with a friend, it hit her:

“If I ever need long-term care, who’s going to help me? I don’t want to leave that stress to my nieces or my sister.”

So, Amy decided it was time to put a plan in place.

First Step: Facing the “What If”

Like a lot of people, Amy didn’t want to think about nursing homes or assisted living. But she knew ignoring the problem wouldn’t make it go away. Long-term care is expensive, and if she ended up needing it, she didn’t want to wipe out her savings.

She started by looking at traditional long-term care insurance. It worked like any other insurance: she’d pay premiums every year, and if she needed care, the policy would cover it.

But there was a problem. If she never used it, the money would be gone. For someone as practical as Amy, that felt like throwing dollars into a black hole.

Amy's AHA Moment!

The Pension Protection Act

During her research, Amy learned something surprising. Back in 2006, a law was passed called, The Pension Protection Act.

https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/pension-protection-act

It basically says:

You can use money from certain retirement accounts to pay for long-term care insurance—without paying taxes on those withdrawals. Normally, when you pull money out of these accounts, the tax bill shows up right behind it. But thanks to this rule, Amy could finally use her savings for something she really needed, and she got to keep every penny working for her.

You also get tax breaks when making charitable contributions. For Amy, this mattered. She had always donated to animal rescue groups, and this law made it easier to include charitable giving in her financial plan—without losing out on tax benefits.

For Amy, these two points were game-changers.

Trading In the Old for the New: The 1035 Exchange

Amy also discovered something called a 1035 exchange. Don’t let the numbers fool you—it’s basically a tax-free trade-in. And here’s what makes it powerful: it isn’t just for annuities.

With a 1035 exchange, Amy had options:

Life insurance to life insurance: If she wanted a new policy with better features, she could swap her old one for a new one without owing taxes.

Life insurance to annuity: She could even move an old life insurance policy into an annuity that offered long-term care benefits. That way, her old policy didn’t just sit there collecting dust—it got recycled into something she might actually need.

Annuity to annuity: And if she had an older annuity, she could exchange it for a newer one with better long-term care features, again without a tax penalty.

The Hybrid Discovery

Amy also discovered hybrid products—a combination of life insurance and long-term care coverage.

This idea made so much sense to her.

If she needed care, the money would be there. A hybrid policy could help cover the costs of nursing care, assisted living, or in-home support.

If she didn’t, her family would still receive a life insurance benefit. Nothing would be wasted, which gave Amy peace of mind as someone who worked hard for her savings.

It felt more like a “safety net” than a gamble. Either she would use it, or her family would benefit.

For Amy, this solved the “what if I never need it?” problem that traditional insurance couldn’t.

For Amy, this flexibility was huge. She had an older annuity she wasn’t using, so she traded it in for a combination policy: part life insurance, part long-term care coverage. If she ever needed care, she’d be covered. And if she never did, her sister—the person she named as her beneficiary—would still get a payout.

Why This Mattered to Amy

By combining all these tools, Amy scored three big wins:

• She avoided taxes on money she would’ve had to pay if she cashed out her old annuity. That savings went directly toward her new coverage.

• She turned “wasted premiums” into value. With a hybrid product, her money either paid for her care or went to her family as life insurance.

• She got peace of mind. Amy no longer worried about being a financial burden. She could focus on living her life, knowing she’d planned ahead.

And because charitable giving mattered to her, she used the Pension Protection Act to keep her favorite animal rescue in her plan.

Amy’s Takeaway

Amy’s story shows that planning ahead doesn’t have to be complicated or scary. By using hybrid products, the Pension Protection Act, and a 1035 exchange, she turned old accounts and policies into a flexible plan that worked for her life today.

As she put it: “I’m not scared about needing care anymore. I know I’ve got it covered, and I know I did it in the smartest, most tax-friendly way I could.”