Life Insurance and Estate Planning

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Life insurance coverage is the fact that most versatile of investment of minimal-risk product which works best for clients in nearly any wealth category and existence stage. In the past, it’s been an essential component in lots of a properly-performed estate plan, also it remains probably the most relevant, secure possibilities. However, with last year’s restored estate tax exemption, agents must still adjust their scope and sales hype if this involves offering this time around-honored solution.

The way the forex market change within the short- and lengthy-term? Which financial planning problems is it more beneficial suitable for solve? John Titus, advanced marketing attorney at Saybrus Partners, a Hartford, Conn.-based wealth management firm, weighs in at in regarding how to get the most from the merchandise this year and beyond.

Why is life insurance coverage a highly effective wealth transfer vehicle?

For just one, after dying, its benefits are immediate. Second, and much more important, its smart an advantage that’s generally tax-liberated to the beneficiary and may usually be produced estate tax-free if required. Thus, the policy’s internal rate of return on its rates is fairly attractive. And, in present day economic atmosphere, another reason life insurance coverage is really good at this context is the fact that its benefits aren’t always correlated to the market conditions. When dying benefits are compensated, for instance, the present status from the stock exchange isn’t a factor.

How have recent estate tax rules influenced or transformed the requirement for life insurance coverage inside a well-rounded estate plan?

The current temporary rise in the estate tax exemption implies that less individuals will be influenced by tax rules. Much less sometime ago, a husband and wife with combined assets of $5 million could have been facing a $1.5 million federal estate tax liability. For deaths this year and 2012, that same couple doesn’t have federal estate tax liability. Obviously, the question pending over all this is the way forward for the estate tax exemption, that is slated revisit $a million in 2013. Count me among individuals who think it’ll stay at current levels for that expected future.

When the exemption remains at $5 as well as $3.5 million, estate proprietors will turn to life insurance coverage like a strategy to cope with other, non-estate tax-related financial targets and challenges. These challenges include business succession planning, using needless IRAs and deferred annuity and taking advantage of life insurance coverage like a supplemental retirement earnings vehicle, amongst others.

Would you expect the forex market to alter within the next 5 years? If that’s the case, how?

I actually do think you will see significant market uncertainty as well as unpredictability for that expected future. Nonetheless, I believe that federal estate and gift tax exemptions will stay at relatively high levels.

Because the federal budget reduces, federal grants or loans towards the states will even likely shrink, putting more financial pressure on condition budgets. Consequently, I believe that condition inheritance taxes will most likely remain in place as well as return in states which have removed them. Many states are needed to balance their budgets, and condition inheritance taxes will most likely be a welcoming supply of revenue later on. Because of this, estate proprietors will need to keep close track of this problem. I believe it is more probably that tax rates will rise soon which life insurance coverage like a supplemental retirement earnings vehicle could play an progressively natural part for the reason that regard.

Is life insurance coverage equally suited to clients with all of amounts of wealth?

The fast response is yes. When the federal estate tax exemption amount stays in the $5 million level or near to it, then certainly less estate proprietors will need to bother about federal estate taxes. I see pointless why our prime-internet-worth estate owner won’t still turn to life insurance coverage to supply the liquidity required to pay future estate taxes, even when the total amount needed is less.

For individuals who’ll not need to bother about federal estate taxes, you will find other non-estate-tax-related financial issues that life insurance coverage could be a solution. Again, using life insurance coverage like a supplemental retirement earnings vehicle might be quite attractive within an atmosphere of rising tax rates.

What’s the No. 1 question you listen to clients about integrating life insurance coverage to their estate plan? How can you answer it?

Most likely probably the most comon question nowadays is, “So why do I want life insurance coverage basically don’t have any estate tax problem?” I answer this in a few various ways. First, the financial agent and also the client must have attorney at law about the way forward for federal and condition estate taxes. The customer might not have an problem today, but might have one later on.

When the client and agent agree that there’s no federal estate tax problem, then your agent should discuss other financial planning problems that would use life insurance coverage included in a general strategy.

269 thoughts on “Life Insurance and Estate Planning”

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  146. This seems a very active site. How on earth do you manage to keep up with looking at all the comments?A couple has a house with a mortgage, a life insurance policy, and two minor children. Do they need to do estate planning? Yes, they certainly do.Too often, parents of young children neglect or postpone estate planning, saying they are too young, quite healthy, or cannot afford the expense. Another reason may be that estate planning deals with feelings and attitudes that people often prefer to ignore. Estate planning can provoke a mix of feelings about death, property, marriage and family relationships. These feelings must be explored so the estate plan reflects the parents’ desires and needs.

  147. I want you to understand one thing from the very start of this record understanding that one thing is that this: I care about your needs and i also sincerely imply that. By leaving all your assets to your spouse, you don’t use your estate tax exemption and instead increase your surviving spouse’s taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse’s death.

  148. Its like you read my mind! You seem to know so much about this, like you wrote the book in it or something. I think that you could do with a few pics to drive the message home a little bit, but instead of that, this is fantastic blog.Most people never take time to put together an estate plan. But that can be a terrible mistake. Learn how to protect your assets and your loved ones at the same time.If you don’t have a lot of assets, it might be a good idea to buy yourself a policy. Life insurance can come in handy should something unexpected happen. Among other things, your family members can use it for:Burial expenses, College tuition,Mortgage payments, Other debts and expenses Just remember, the more coverage you buy the more it will cost you. But if you can afford a generous policy, your loved ones will be appreciative in the end.

  149. For most people, this is the centerpiece of an effective estate plan. With it, you can name your heirs and state exactly what you wish to leave them. This is true whether it’s financial assets or material belongings. Your will can be a simple handwritten document. But it’s best to let an attorney help you draw one up. That way you can be sure it satisfies the courts.

  150. Many thanks for your submission, previously interesting and compelling. I found my way here through Google, I’ll return Purpose Define Zeroed Out Estate Tax Define why we use life insurance in Zeroed Out Tax Plans Identify where the math works Give 3 choices for zero estate tax planning. Uses of Life Insurance in Zeroed Out Planning Paying the estate tax with life insurance and leaving all assets to family TCLAT Life Insurance Replacement Strategy TCLAT Strategy. Paying Estate Taxes w/ Insurance Client’s Irrevocable Life Insurance Trust will purchase life insurance on the client’s life At death, Trust will purchase assets equal to estate tax from client’s estate Client’s estate will use liquidity to pay estate tax. Paying Estate Taxes w/ Insurance Pros Simple Inexpensive up front costs Ease of administration at death No realistic audit issues Cons You still will pay estate taxes.

  151. I am excited to find so unique constructive details in this article, we should have create further more methods regarding this. My job provides life insurance. Do I need to buy additional life insurance?
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  152. In larger estates though where estate taxes are a factor, a life insurance trust can be used to great advantage. When planning for larger estates avoiding the specter of estate taxes is the primary goal. The first step is usually to advise the client of the prospect of gifting. Gifting amounts out to the heirs sufficient amounts to keep the estate below $600,000. (Remember that this amount will be adjusted upward each year over the next ten years.) If the use of an “AB” credit shelter trust is not sufficient to eliminate estate taxes we use an annual gifting program. For many clients gifting is sufficient to keep them below the tax threshold. Other clients, however, do not like the idea of gifting their assets while they are alive while others may have an estate too large for gifting to be able to make a dent in its overall size. The next step in the estate planning hierarchy of complexity is to use the life insurance trust. . Keep up the very awesome efforts and I’ll be checking back again once again soon.

  153. By leaving all your assets to your spouse, you don’t use your estate tax exemption and instead increase your surviving spouse’s taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse’s death.

  154. An irrevocable life insurance trust (ILIT) can remove your life insurance from your taxable estate, help pay estate costs, and provide your heirs with cash for a variety of purposes. To remove the policy from your estate, you surrender ownership rights, which means you may no longer borrow against it or change beneficiaries. In return, the proceeds from the policy may be used to pay any estate costs after you die and provide your beneficiaries with tax-free income.That can be useful in cases where you leave heirs an illiquid asset such as a business. The business might take a while to sell, and in the meantime your heirs will have to pay operating expenses. If they don’t have cash on hand, they might have to have a fire sale just to meet the bills. But proceeds from an ILIT can help tide them over.

  155. Estate planning isn’t just about how you want your assets distributed after you die. It’s about deciding how much you want to give away while you’re still alive. If you plan carefully — so you don’t outlive your assets — giving allows you to reduce your taxable estate and provide advance help to your beneficiaries.

  156. Life insurance is a tool many use to leave necessary funds to your surviving family members, pay off large debts and set aside funds in order to meet your children’s educational needs and goals. Life insurance is also used to fill the gap caused by all the taxes and other costs incurred following your passing, as well as providing a means for low-cost charity donations.

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  158. If you don’t have a lot of assets, it might be a good idea to buy yourself a policy. Life insurance can come in handy should something unexpected happen. Among other things, your family members can use it for:Burial expenses,College tuition,Mortgage payments,Other debts and expenses Just remember, the more coverage you buy the more it will cost you. But if you can afford a generous policy, your loved ones will be appreciative in the end.

  159. he market shock of 2008 set an adverse chain of events in motion in some variable life insurance policies, and the damage is starting to surface. Insurance policies used for estate planning purposes are frequently held in ILITs with trustees who don’t closely monitor the performance of the policy investments. If the trustee simply collects the checks and pays the premiums, the trustee may not realize that the policy is in trouble until it’s too late.Once the cash value hits zero, the insurance company will send a notice requiring more money within 30-60 days to keep the policy alive. If enough time has passed, it is very difficult to come up with the cash to save the policy, and someone who has paid for a policy for years may lose the full cash value and the death benefit.

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  163. When people think of estate planning they often think of rich older folks who have a lot of assets that need to be divided among family and friends. Unfortunately for those people, there is a lot more to estate planning than simply figuring out where assets will be divided when someone with a lot of money passes away. Estate planning is a process that absolutely everyone should take part in, because it involves preparing your family, loved ones and your assets for an untimely death. Unfortunately, without proper asset management and estate planning, the Government will be forced to come in and take control of everything you leave behind. So if you do not prepare yourself and your family through term life insurance and estate planning, your family may end up with absolutely nothing once you are gone.

  164. Now that you understand what estate planning and term life insurance mean for your family, hopefully you will understand why it is so important to combine both in order to protect yourself and your family from future financial burdens.

  165. Think of the process this way. A tax is, by nature, a redistribution of wealth. If you pay the tax out of your own pocket, you are sharing your wealth with all 300 million people of the United States. If you let the insurance company help pay the tax, you are sharing your wealth with your own family instead. The cost to share your wealth with 300+ million people is the cost of the tax out of your pocket – the cost to share your wealth with your own family is the premium at pennies on the dollar.

  166. Depending on the year you die, if your estate is worth more than $3M, taxes can take upwards of 50% of all your worth. Yes, that is correct; about half of your wealth could be wiped out as a result of tax liabilities. With correctly structured life insurance and advanced planning, those tax liabilities can be very effectively minimized or in some cases eliminated.

  167. With an insurance trust, your trust owns the policy. The trustee you select must follow the instructions you put in your trust. And, with your insurance trust as beneficiary of the policies, you will have more control over the proceeds.

  168. Let’s say you are married, with a combined net estate of $2.5 million, $500,000 of which is life insurance. With a tax planning provision in a revocable living trust or will, you can protect up to $2 million in 2003 from estate taxes. But your estate would have to pay $210,000 in estate taxes on the additional $500,000. With an insurance trust, the $500,000 in insurance would not be in your estate. That would save your family $210,000 in estate taxes.

  169. One of the estate planning tools that is most frequently utilized is life insurance, and for many people the purchase of life insurance is the initial step taken into the realm of estate planning. You may be one of the many who is first exposed to life insurance as a component of your benefits package at work, and a lot of people who are first starting out are unmarried and without children.

  170. By leaving all your assets to your spouse, you don’t use your estate tax exemption and instead increase your surviving spouse’s taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse’s death.

  171. By leaving all your assets to your spouse, you don’t use your estate tax exemption and instead increase your surviving spouse’s taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse’s death.

  172. Let’s say Mr. Smith is a healthy 35 year-old with a pure insurance value of $1 per year for every $1,000 of face value. Provider A will charge him $10 per $1,000 for every year that he owns it. After the first year, after Mr. Smith pays the $10, he will have $9 of cash value in the policy. In the second year, Mr. Smith’s pure insurance value may rise to $1.05 per year per $1,000. After he pays the $10, he will then have $17.95 ($9 plus $8.95) of cash value plus any earnings or dividends on it.

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  174. If you get nothing else from this article then please understand this one thing: the reason why life insurance is so valuable as an estate planning tool is that life insurance allows one to guarantee that a lump sum of money will be available upon their death to be directed in a way that will provide maximum benefit to their estate. This is just a fancy way of saying that many very wealthy people have a lot of their wealth tied up in non liquid assets like houses, property, businesses, etc. that if their estate was forced to liquidate some or all of those assets at death then they would likely greatly inconvenience the beneficiaries of the estate at best or at worst force a very unwise business decision (selling a business before the ideal time, being forced to quickly sell a piece of land, etc. – all in order to pay estate taxes due). Using life insurance in estate planning gives enormous freedom to those who upon their death may be ultra wealthy but relatively cash poor.

  175. Estate tax planning strategies typically seek to transfer future appreciation since the tax levied at the death of the first spouse can be deferred. Successful estate planning can postpone payment of the estate tax until the death of the surviving spouse. New types of life insurance can be used effectively in estate planning to transfer future appreciation. Both a husband and a wife can be insured under a survivorship life insurance policy, which pays the death benefit upon the death of the surviving spouse. Irrevocable life insurance trusts can eliminate income taxes and estate taxes. Life insurance can be used to convert the generation-skipping transfer tax exemption from $1 million per transferor to over $1 million per transferor. Charitable remainder trusts allow individuals to distribute funds to beneficiaries, with the remainder being used for a charitable purpose.

  176. Some seniors think that life insurance benefits are tax-free, so they purchase them to provide an inheritance for family members or others. But tax-free means only that the beneficiary does not have to pay income taxes on the proceeds that are paid after the insured person dies.What many individuals do not realize is that life insurance can increase their estate taxes, because the often-substantial value of a life insurance policy is included in a taxable estate. Life insurance can be the asset that pushes an estate’s value over the decedent’s applicable exclusion amount and into a situation of owing estate taxes.

  177. Life insurance is a key component to the estate planning process. Gone are the days when life insurance was primarily thought of as a means to pay for funeral expenses and burials.
    Life insurance is a tool many use to leave necessary funds to your surviving family members, pay off large debts and set aside funds in order to meet your children’s educational needs and goals. Life insurance is also used to fill the gap caused by all the taxes and other costs incurred following your passing, as well as providing a means for low-cost charity donations.

    Let’s break apart what was just outlined in the paragraph above so you can have a better understanding of how essential of a tool life insurance is to your estate planning, as well as some other considerations:

    Life insurance is also used to fill the gap caused by all the taxes and other costs incurred following your passing.

    There are a number of expenses following your passing beyond funeral expenses and burial (or cremation, depending on your last wishes). Some of these expenses include estate taxes, probate court attorneys, income tax (filed on your final income tax return), and your final debts (mortgage, creditors, etc.).

    . . . as well as providing a means for low-cost charity donations.

    A portion of your life insurance can be donated to charity based upon your final wishes, and those listed in your estate will benefit from the tax deduction. Outline these conditions when creating a will. These conditions can also be outlined when creating a trust. As you can see, creating wills and trusts are both essential during the estate planning process even when life insurance is involved in the scenario.

    Your estate taxes will not increase due to life insurance if you plan ahead accordingly.

    Confer with your estate planning attorney about how to develop an estate plan that will minimize estate taxes. There are estate valuation thresholds that must be met (i.e. the estate must be valued under a certain dollar amount) in order to avoid such matters, and your attorney will outline this for you. If your estate exceeds this dollar value, outline a plan with our attorney to help beneficiaries reduce the associated estate taxes. Otherwise, the requirement to pay such taxes is inventible. Confer with your estate planning lawyer, too, about how beneficiaries may be able to avoid inheritance taxes if at all possible.

  178. Though he’s in excellent health, my friend’s father has prepared for his death down to the very last detail. He’s told my friend not only where his money and assets are going, to whom and when, but where he wants to be buried, what he wants on his epitaph, who should come to his memorial service, and why.

    I’m in awe of this kind of planning. I got a trust together years ago but haven’t really planned for life two years from now, never mind when I’m in the Great Beyond, since I’m too busy planning for the Great Here And Now. Ironically depending on what source you look at, roughly 58 to 64 percent of Americans haven’t done any form of estate planning whatsoever, which makes me something of a planner.

    The resistance to the process is as logistical as it is ontological, because estate planning is linked to the unpleasant task of death planning, and who wants to think about that? But when children come into the picture parents often enter the Kingdom of Anxiety, and concerns about what we leave behind are harder to sweep under the carpet.

    What prompted me in this department was learning that in the absence of a trust, lawyers and the state — i.e., decisions of a probate court — might determine not only where my assets will go but who will care for my children. No thank you. We’re all familiar with the famous Woody Allen quote, “I’m not afraid of death. I just don’t want to be there when it happens.” Well, we may or may not be “there” when it happens (because we’re already gone, right?) but other people continue on in our absence, and those people aren’t necessarily our friends.

    On a rudimentary level, one problem with estate planning is the word “estate” itself, which is a misnomer. It suggests ownership of a giant stock portfolio and a lovely mansion — two things most mere mortals, including yours truly, don’t have. But even people with no assets and few possessions would rather dance on hot coals than tie up the myriad details of life in anticipation of death. This not only involves significant emotional complexities, but also dealing with insurance companies, banks and assorted bureaucracies.

    Of course there are many companies that are happy to help you out. One such company, KeepandShare, offers a list of lists, including a Funeral Arrangement Checklist, a Post Death Checklist, a Social Security Death Checklist, and a What To Do In The Event Of A Death Checklist. Talk about death by checklist.

    In her bestselling (and now classic) “The American Way of Death,” Jessica Mitford meticulously examines the death and funeral planning business. The sobering reality is enough to make the idea of moving to India and perishing in the Ganges almost appealing. There’s also suspicion woven into all this — that is, the notion that if you plan for your death you might somehow conjure it and make it happen. This form of magical thinking is on par with, say, forcing your mind to keep an airplane aloft if you have fear of flying. I warded off mild suspicions and did not enjoy the estate planning process at all, but miraculously I survived it. If I don’t implode right after I upload this blog post, I hope to put that suspicion to rest forever.

    Add to this cocktail of concerns the many existential questions that emerge in the process, no matter what your religious convictions might be, and you have some serious heavy-lifting to do. But while statistics suggest that we’re a nation divided between big planners like my friend’s father and the rest of humanity (not to mention those who even talk about their own passing, and those who don’t), we all share inextricable and existential bonds.

    In his lively and sometimes irreverent book “The Whole Death Catalogue: A Lively Guide to the Bitter End,” crime writer Schechter reminds us that “of all the traits that distinguish human beings from other animals — language, tool-making, the urge to buy other people’s unwanted stuff on eBay — perhaps the most fundamental is our awareness of our inevitable deaths.” What we do with that awareness is another story entirely.

  179. Thanks for your post. I would love to say that a health insurance agent also utilizes the benefit of the particular coordinators of the group insurance cover. The health insurance broker is given a long list of benefits desired by someone or a group coordinator. What any broker can is try to find individuals or perhaps coordinators which often best match up those needs. Then he provides his referrals and if the two of you agree, the actual broker formulates a legal contract between the two parties.

  180. A trust is a legal entity into which the creator (called a grantor, donor, or settlor) can transfer ownership of financial assets and other property. A trust doesn’t go through probate when the owner dies, but rather directly passes trust assets to a beneficiary. Trusts are harder to contest than wills, although, even with an established trust, individuals still need to have a will.

    The grantor appoints a trustee, who is a person or entity, such as the trust department of a bank, to manage the trust. The grantor also designates a beneficiary who receives benefits from the trust. Sometimes, the grantor, trustee, and beneficiary are the same person, in which case, the grantor also appoints a successor trustee to manage the trust when the grantor dies or becomes incapacitated. Upon the grantor’s death, either the trust begins to provide income to the beneficiaries designated by the grantor or the successor trustee dissolves the trust and distributes the property it owns to one or more beneficiaries.

    A trust created while the grantor is alive is a living trust. Revocable living trusts, the most popular type of trust, can be changed at any time, while irrevocable living trusts cannot be changed. However, irrevocable trusts have tax shelter benefits that revocable trusts don’t have.

    Another type of trust is the testamentary trust, created by a will after a person’s death. Often, these trusts are used to provide for minor children or other persons not capable of managing their own financial affairs. Also, many other types of trusts are available for specific purposes, including:

    Charitable trusts for donating money to charity
    Bypass trusts, also called credit shelter trusts, which put assets in trust for the surviving spouse rather than passing ownership of assets directly to the spouse. This tool is primarily for high-asset couples where leaving assets directly to the surviving spouse would cause that person to have an estate that exceeds the amount of estate tax exemption allowed upon death.
    Spendthrift trusts designed to provide income for heirs without giving them access to the trust’s assets
    Life insurance trusts that own life insurance policies

  181. On a rudimentary level, one problem with estate planning is the word “estate” itself, which is a misnomer. It suggests ownership of a giant stock portfolio and a lovely mansion — two things most mere mortals, including yours truly, don’t have. But even people with no assets and few possessions would rather dance on hot coals than tie up the myriad details of life in anticipation of death. This not only involves significant emotional complexities, but also dealing with insurance companies, banks and assorted bureaucracies.

    Of course there are many companies that are happy to help you out. One such company, KeepandShare, offers a list of lists, including a Funeral Arrangement Checklist, a Post Death Checklist, a Social Security Death Checklist, and a What To Do In The Event Of A Death Checklist. Talk about death by checklist.

  182. ABC News recently interviewed Danielle Mayoras on this very topic. It reported how Jobs, the largest single shareholder of Disney (which of course owns ABC News), has received $242 million in Disney stock dividends alone, since 2006. How much is his Disney stock worth? $4.4 billion, for 138 million shares, good for 7.4 percent of the total Disney stock.

    As Danielle pointed out in the interview, usually people with that much wealth do the proper estate planning, including using living trusts, charitable bequests, and more. Not only does this keep their affairs private, it can help minimize estate taxes. Topping out at 35%, the current estate tax laws — while much lower than in years past — will obviously take a big bite out of Jobs’ family fortune. That comes out to almost $2.45 billion in taxes, if Jobs did not do the proper planning.

    Ultimately, we are unlikely to ever discover the full extent of planning Jobs did to minimize his taxes. When living trusts are used the right way — and assets are funded into them before death — families are protected by privacy. Wills must pass through probate court to work, which means they are public record. Trusts, on the other hand, when properly funded before death, remain out of the public eye, unless there are problems, like a lawsuit.

    Reuters reported that Jobs did use living trusts. Real estate records in California show that in March, 2009, which was about two months after Jobs took his second leave of absence from Apple, Jobs and his wife transferred three real estate properties into two different trusts. This means he funded those trusts with that real estate. Funding a trust is key to using it correctly.

    Does this mean Jobs funded all of his assets, such as his Disney stock, into his trusts too? We don’t know. But with someone as intelligent — and private — as Jobs was, the smart money is on him having done so. The only way we’ll find out for sure, though, is if someone files his will in probate and opens his estate. If that happens, it would be reported what assets have to pass through probate, which would only include assets that were not funded into the trusts during his life. Jointly-held assets, such as joint bank accounts with his wife, and assets with beneficiary designations, like insurance, also would not have to pass through probate in most cases.

    The proper estate planning is extra important when there are complicated family dynamics, such as second-marriages or with siblings who do not get along. In Job’s family, his first child was born out-of-wedlock to another woman, before his marriage, so doing the right legal planning was even more important for him. A child does not have an automatic right to share in the inheritance, so how much Jobs chose to leave her — and his other children — was up to him. When people don’t make their intent clear in their estate planning documents, families often fight over their wishes, especially when there are children of different parents involved.

    So many rich and famous people fail to do the proper estate planning. Michael Jackson, James Brown, Gary Coleman, Sonny Bono, Jimi Hendrix, Martin Luther King, Jr., and Stieg Larsson are just a few that we have written about through Trial & Heirs, to help teach people about doing the proper planning to protect their family fortunes.

    It’s refreshing to write about a celebrity who apparently did things right.

  183. One thing I enjoy about most of the top estate planning blogs is that they go to the trouble of citing others’ fine work. In this week’s top 10 posts and articles, you will find several examples of this praiseworthy practice.

  184. It’s never pleasant to dwell on your death or a death within the family. But securing a sound life insurance policy eases the burden on your loved ones during the difficult period following your death by providing financial support. The rising costs of long term healthcare and funerary services show no signs of abating—a life insurance policy guarantees that your family won’t have to manage the financial costs of a death alone.

    Many people avoid investing in life insurance simply because they imagine the costs as being too high for their budgets. Fortunately, there are a wide variety of insurance policies available for every set of needs and budgets. Insurance providers provide death benefit payouts ranging from as little as a few thousand dollars all the way up to a few million. Most providers offer more affordable term life insurance policies—term policies have low premiums and payout death benefits for the duration of a specific period.

    If low premiums aren’t a priority, the majority of life insurance providers feature coverage plans that accumulate cash value over the life of the policy. With universal and whole insurance it is possible to configure lucrative benefits packages that payout death benefits and can be cashed out or borrowed against like equity.

  185. Why Whitney Houston’s Estate May be in Debt and Dolly Parton is Set to Make a Fortune Everyone remembers how Michael Jackson’s estate more than quadrupled after he died. Sales of his CD’s sent millions of dollars to the trustees of his estate. Sadly, industry insiders say that Whitney’s Houston’s beneficiaries won’t be so lucky. In fact, Houston’s heirs may be burdened with massive debt instead of a windfall of cash.It all has to do with the difference between how Whitney Houston and Michael Jackson earned their income. Michael Jackson owned catalogs of his own music. He produced and wrote some of his own songs, while Houston was a performer, not a writer.A record industry insider told the Huffington Post, ” unlike Michael, you have to remember that Whitney didn’t write any of those massive hits. They were songs that Clive Davis told her to sing and she did.”

    This is why the writer of “I Will Always Love You”, Dolly Parton, will receive much more money from increased sales of the record than Whitney Houston’s family. The industry insider went on to say that it’s very possible that Houston’s estate owes money because of the loans it received from the record label in anticipation of future sales.

    Some would make the case that Houston wasn’t responsible with her money, but that’s not the issue. Even if Whitney had been 100% responsible with her royalties, she still would’ve earned far less than the publishers and writers of her songs. That’s what’s at issue here. Parton wrote a wonderful song, but she never could’ve sang it or performed it like Whitney. So is it fair for Parton to get the bulk of the residual income from the mega hit “I Will Always Love You”? Is there is an undervaluation of talent and an overvaluation of writing in the music industry?

  186. Uses of Life Insurance
    Life insurance is present in almost every estate plan and serves as a source of support, education-expense coverage and liquidity to pay death taxes, pay expenses, fund business buy-sell agreements and sometimes to fund retirement plans.

    For small estates, the amount of applicable exclusion ($2 million per person per estate), death taxes are not a significant consideration. For this reason, insurance ownership as a tax-savings device is not critical. The main item that policy owners should be aware of is to ensure that the beneficiaries are well provided for by the chosen insurance policy.

    For larger estates with more assets than the amount of the applicable exclusion of $2 million, life insurance is an essential component of the estate plan.

    Tax Implications of Life Insurance and Your Estate
    Proceeds from life insurance that are received by the beneficiaries upon the death of the insured are generally income tax-free. However, there are three circumstances that cause life insurance to be included in the decedent’s estate:

    The proceeds are paid to the executor of the decedent’s estate.
    The decedent at death possessed an incident of ownership in the policy.
    There is a transfer of ownership within three years of death (three-year rule must be observed).

    An incident of ownership includes the right to assign, to terminate, to name beneficiaries, to change beneficiaries and to borrow against the cash reserves.

    Planning Objectives for Insurance
    Life insurance has many uses in an estate plan, including estate liquidity, debt repayment, income replacement and wealth accumulation. There are many different types of policies to consider, at different price levels, which are beyond the scope of this article. Policies can be owned in many ways, as outlined below. (To read more about different types of available life insurance, check out Buying Life Insurance: Term Versus Permanent, Permanent Life Policies: Whole Vs. Universal and Variable Vs. Variable Universal Life Insurance.)

    Types of Insurance
    First-to-Die Life Insurance Policy
    Also known as joint whole life insurance, this is a group insurance policy where benefits are paid out to the surviving insured upon the death of one of the insured group members. The insurance policy can be designed as either a whole life or universal life policy. A first-to-die policy can reduce taxes upon the death of the first spouse if the unlimited marital deduction is not fully used.

    Survivorship Life Insurance Policy
    Survivorship life insurance, also know as second-to-die, is similar to joint life in that the policy insures two or more people. However, survivorship life pays out upon the last death instead of the first one. Because the benefit is not paid until the last insured dies, the life expectancy is greater and therefore the premium is lower. Survivorship policies are typically either whole or universal life policies and are usually written to insure husband and wife or a parent and child.

    The proceeds of the policy can be used to cover estate taxes, to provide for heirs or to make a charitable contribution. The premium on a second-to-die policy is generally lower than for separate policies because the premium is based on a joint age and the insurance company’s administrative expenses are lower with one policy.

    Types of Life Insurance Trust Arrangements
    Revocable Life Insurance Trust
    In this arrangement the grantor names the trust as beneficiary of life insurance policies, retaining the right to revoke the trust and other rights of ownership.

    This is often recommended for younger families with relatively modest assets but substantial life insurance policies.

    Irrevocable Life Insurance Trust
    The purpose of this arrangement is to exclude life insurance proceeds from the estate of the first spouse to die and from the estate of the surviving spouse. The spouse may be the life income beneficiary, but may not have any right to or power over trust principal except per the discretion of the trustees.

    Ownership Considerations
    The big question with regard to insurance in estate planning is who should own the policy. The following are some advantages and disadvantages of ownership scenarios:

    If a life insurance policy is owned by the insured, the advantage is that he has continued control of the policy and any ownership in the associated cash values of a permanent policy. However, the death benefit of this policy would be subject to estate tax and the three-year inclusion would apply if it’s transferred out of the estate.
    If the spouse of the insured owns the policy, you could argue that the insured does have some indirect control of the policy and any associated cash value. The downside is that the replacement cost of the policy would be included in the estate of the spouse, and if the spouse dies before the insured, it’s possible that the policy might revert to the insured and be included in his or her estate.
    If the children of the insured owned the policy, the advantage is that the death benefit would be included in the children’s estate, not the parent’s. But here again, the insured has zero control over the policy, and if the children are minors it would require the costly appointment of legal guardians before benefits can be paid.
    The policy might also be owned by a revocable trust, where the insured might still control the policy and the death proceeds are shielded from potential creditors of the insured. But, because the insured has an incident of ownership through the revocable trust, the death benefit is includable in the insured’s gross estate and could be accessible to the estate’s creditors.
    If the policy is instead owned by an irrevocable trust as mentioned above, there is no inclusion in the gross estate, and there is an embedded mechanism via the trust language for continuation of the policy if the insured becomes incompetent. The downside is that the insured does not regain any control over the policy and cannot revoke the trust.

    Naming Beneficiaries for Life Insurance
    If an individual is named as beneficiary of a policy, while cheap to execute since a trust was not used, it could lead to some challenges. The biggest problem with this strategy is that the decedent cannot exert any control over the death proceeds. The individual that inherits the death benefits can use the money for any reason, even if the money was earmarked to pay estate taxes or settlement costs. If the beneficiary is a minor, the challenges will likely escalate.

    If an estate is named beneficiary of the policy, the death benefits are includable in the decedent’s gross estate and are subject to the claims of the estate’s creditors, and this will no doubt increase probate costs. If, however, the beneficiary is an irrevocable trust, the trustee can be given broad powers to distribute or withhold benefits available to the insured’s estate, the assets are protected from creditors and oversight of the trust’s assets can be assigned to professional money managers.

    Individuals should consult an experienced financial planner to determine their needs for life insurance and the types of policies that are suitable for their estate planning needs.

  187. Life insurance is present in almost every estate plan and serves as a source of support, education-expense coverage and liquidity to pay death taxes, pay expenses, fund business buy-sell agreements and sometimes to fund retirement plans.

    For small estates, the amount of applicable exclusion ($2 million per person per estate), death taxes are not a significant consideration. For this reason, insurance ownership as a tax-savings device is not critical. The main item that policy owners should be aware of is to ensure that the beneficiaries are well provided for by the chosen insurance policy.

    For larger estates with more assets than the amount of the applicable exclusion of $2 million, life insurance is an essential component of the estate plan.

    Tax Implications of Life Insurance and Your Estate
    Proceeds from life insurance that are received by the beneficiaries upon the death of the insured are generally income tax-free. However, there are three circumstances that cause life insurance to be included in the decedent’s estate:

    The proceeds are paid to the executor of the decedent’s estate.
    The decedent at death possessed an incident of ownership in the policy.
    There is a transfer of ownership within three years of death (three-year rule must be observed).

    An incident of ownership includes the right to assign, to terminate, to name beneficiaries, to change beneficiaries and to borrow against the cash reserves.

    Planning Objectives for Insurance
    Life insurance has many uses in an estate plan, including estate liquidity, debt repayment, income replacement and wealth accumulation. There are many different types of policies to consider, at different price levels, which are beyond the scope of this article. Policies can be owned in many ways, as outlined below. (To read more about different types of available life insurance, check out Buying Life Insurance: Term Versus Permanent, Permanent Life Policies: Whole Vs. Universal and Variable Vs. Variable Universal Life Insurance.)

    Types of Insurance
    First-to-Die Life Insurance Policy
    Also known as joint whole life insurance, this is a group insurance policy where benefits are paid out to the surviving insured upon the death of one of the insured group members. The insurance policy can be designed as either a whole life or universal life policy. A first-to-die policy can reduce taxes upon the death of the first spouse if the unlimited marital deduction is not fully used.

    Survivorship Life Insurance Policy
    Survivorship life insurance, also know as second-to-die, is similar to joint life in that the policy insures two or more people. However, survivorship life pays out upon the last death instead of the first one. Because the benefit is not paid until the last insured dies, the life expectancy is greater and therefore the premium is lower. Survivorship policies are typically either whole or universal life policies and are usually written to insure husband and wife or a parent and child.

    The proceeds of the policy can be used to cover estate taxes, to provide for heirs or to make a charitable contribution. The premium on a second-to-die policy is generally lower than for separate policies because the premium is based on a joint age and the insurance company’s administrative expenses are lower with one policy.

    Types of Life Insurance Trust Arrangements
    Revocable Life Insurance Trust
    In this arrangement the grantor names the trust as beneficiary of life insurance policies, retaining the right to revoke the trust and other rights of ownership.

    This is often recommended for younger families with relatively modest assets but substantial life insurance policies.

    Irrevocable Life Insurance Trust
    The purpose of this arrangement is to exclude life insurance proceeds from the estate of the first spouse to die and from the estate of the surviving spouse. The spouse may be the life income beneficiary, but may not have any right to or power over trust principal except per the discretion of the trustees.

    Ownership Considerations
    The big question with regard to insurance in estate planning is who should own the policy. The following are some advantages and disadvantages of ownership scenarios:

    If a life insurance policy is owned by the insured, the advantage is that he has continued control of the policy and any ownership in the associated cash values of a permanent policy. However, the death benefit of this policy would be subject to estate tax and the three-year inclusion would apply if it’s transferred out of the estate.
    If the spouse of the insured owns the policy, you could argue that the insured does have some indirect control of the policy and any associated cash value. The downside is that the replacement cost of the policy would be included in the estate of the spouse, and if the spouse dies before the insured, it’s possible that the policy might revert to the insured and be included in his or her estate.
    If the children of the insured owned the policy, the advantage is that the death benefit would be included in the children’s estate, not the parent’s. But here again, the insured has zero control over the policy, and if the children are minors it would require the costly appointment of legal guardians before benefits can be paid.
    The policy might also be owned by a revocable trust, where the insured might still control the policy and the death proceeds are shielded from potential creditors of the insured. But, because the insured has an incident of ownership through the revocable trust, the death benefit is indeclinable in the insured’s gross estate and could be accessible to the estate’s creditors.
    If the policy is instead owned by an irrevocable trust as mentioned above, there is no inclusion in the gross estate, and there is an embedded mechanism via the trust language for continuation of the policy if the insured becomes incompetent. The downside is that the insured does not regain any control over the policy and cannot revoke the trust.

    (Read Shifting Life Insurance Ownership to find out how to reduce your taxable estate and leave more to your heirs.)

    Naming Beneficiaries for Life Insurance
    If an individual is named as beneficiary of a policy, while cheap to execute since a trust was not used, it could lead to some challenges. The biggest problem with this strategy is that the decedent cannot exert any control over the death proceeds. The individual that inherits the death benefits can use the money for any reason, even if the money was earmarked to pay estate taxes or settlement costs. If the beneficiary is a minor, the challenges will likely escalate.

    If an estate is named beneficiary of the policy, the death benefits are indeclinable in the decedent’s gross estate and are subject to the claims of the estate’s creditors, and this will no doubt increase probate costs. If, however, the beneficiary is an irrevocable trust, the trustee can be given broad powers to distribute or withhold benefits available to the insured’s estate, the assets are protected from creditors and oversight of the trust’s assets can be assigned to professional money managers.

    Individuals should consult an experienced financial planner to determine their needs for life insurance and the types of policies that are suitable for their estate planning needs.

  188. Whitney Houston’s career is getting a post-mortem boost, but it isn’t likely to be as big as the one that enriched the King of Pop’s estate after his death.

    Like the late Michael Jackson, Houston was in the midst of an attempted career revival. She was found dead at age 48 on Saturday in her Los Angeles hotel room on the eve of the Grammys, a stage she once ruled.

    It could be weeks before the coroner’s office completes toxicology tests that could establish the cause of death.

    In an outpouring of grief – and a desire to remember her soaring voice and upbeat personality – Houston’s fans have propelled her decades-old recordings to the top of sales charts on iTunes and Amazon.com. Twitter recorded more than 2.5 million Tweets about her within two hours of her death.

    Not unlike Jackson’s posthumous star turn in the movie “This Is It,” Houston will star in a film that is set for release this fall. In addition, dozens of t he six-time Grammy-winner’s unreleased recordings may someday be released to a public grieving her loss.

    “It really is a finite universe of celebrities that are able to transcend their own death to create commercial opportunities,” said David Reeder, vice president at GreenLight, a subsidiary of Corbis Images that helps license the images and work of late icons such as Albert Einstein and Johnny Cash. “People want to remember her back in 1986 at her peak, when nobody was doing it better than she was.”

    As a former model who crossed racial barriers, Houston’s image might find a home with a fashion brand, much like Elizabeth Taylor, who continues to grace fragrances, or Audrey Hepburn, who has been given numerous tributes by clothing companies long after her passing.

    If Houston breaks into Forbes’ list of top-earning dead celebrities in 2012, she will likely get in “towards the bottom end” with single-digit millions of dollars, Reeder said. Michael Jackson domi nated the list in 2010 and 2011, after his death three years ago.

    Mark Roesler, chief executive of CMG Worldwide, a company that collects licensing revenue for the estates of Marilyn Monroe, James Dean and others, said fans will be looking to fill the hole Houston left behind on the eve of music’s biggest night.

    “For all those reasons, it creates a situation where people feel like something’s been taken away from them,” he said.

    There are no signs that Houston made savvy investments like “the gloved one.” Jackson had a 50 percent stake of one of the world’s largest music publishing catalogs, Sony/ATV. Houston was known for her voice, but not for songwriting, which can generate lucrative revenue from years of radio play.

    Consider that many of her top-selling songs were written by others. “I Will Always Love You” was a song that Dolly Parton wrote and sang in 1974. “I Wanna Dance With Somebody” (1987) was written by George Merrill and Shannon Rubicam and “Didn’t We Almost Have It All” (1987) was written by Michael Masser and Will Jennings, according to the National Music Publishers Association.

    Houston’s image took a hit after her appearances in the Bravo reality TV show “Being Bobby Brown” in 2005. To many, the documentary series with her ex-husband was a cautionary tale about a drug-fueled lifestyle that damaged her voice and ruined her career.

    A hard-partying existence contributed to her failure to fulfill a $100 million recording deal she signed with Arista, now part of Sony Music Entertainment, in 2001. At the time she was reported to have owed the label six new albums and two greatest hits compilations. Since then, only four have come out, including a greatest hits collection that was not released in the United States.

    It’s unclear if any posthumous releases would be part of that recording deal or if the agreement is still in force. A spokeswoman for Sony Music and for her longtime producer, Clive Dav is, declined to comment. Houston’s publicist did not respond to requests for comment.

    Lawyer Bryan Blaney, who represented Houston in a recent fight with her stepmother over the proceeds of a $1 million life insurance policy she took out on her father, said he did not handle her financial affairs. He said that if the singer did not have a will, the proceeds of any continuing revenues would go to her 18-year-old daughter, Bobbi Kristina Brown.

    Whatever the case, as the remembrances of Houston continue, her estate will likely be flush with a stream of money that had slowed to a trickle in recent years.

    Although she sold 22.6 million albums in the U.S. in her lifetime – half of those through the best-selling 1992 soundtrack to “The Bodyguard” – her latest release, “I Look To You,” sold just 978,000 since its debut in 2009, according to Nielsen SoundScan.

    It’s not clear whether Houston had debts, but she lost homes in New Jersey and Georgia to foreclosure several years ago, and some reports said she had recently tried to borrow small amounts of money from friends.

    Renewed interest in Houston may continue for some time.

    Later this year, the singer will appear in the film, “Sparkle,” in which she plays a mother concerned about the influence of fame and drugs on her three daughters, who form a singing group.

    Houston sings a gospel song on camera and a duet with co-star Jordin Sparks over the credits in the film, which began shooting in October. The movie and a soundtrack are set for wide release in August through Sony Corp.’s TriStar Pictures.

    “She was on top of her game,” said executive producer Howard Rosenman, who saw a rough cut of the movie on Friday, a day before the singer’s death. “She was really coming back.”

  189. Most new parents will agree: It’s initially an overwhelming experience and many things that once seemed important suddenly get pushed to the back burner. But sometimes critical things also get ignored with the addition of a new family member. Among them: Estate-planning issues. Let’s look at the 5 most common estate-planning mistakes that parents make after having a baby.

    5. Not putting enough thought into life insurance. Life insurance is designed to provide financial support for your family after you die. A key question to ask when deciding whether and how much life insurance to purchase is, “How many people depend on me for financial support?” Someone who’s single with no children may not need any life insurance or just enough to pay for funeral expenses. But a parent who works, perhaps supporting a stay-at-home spouse and children, may need a much larger life insurance policy. New parents without life insurance policies will want to consider purchasing a new policy and those who already have life insurance may want to adjust the size of their policy.

  190. And people with older wills should have them reviewed now, due to a new law from Congress

    A federal estate tax return doesn’t have to be filed every time someone dies. In fact, most estates never have to file one. In 2011 and 2012, a return has to be filed only if the person’s estate (including property, life insurance, taxable gifts, etc.) is worth $5 million or more.

    However, even if a return isn’t required, a recent change in the law means there could be big tax savings for many families if they file one anyway.

    The change applies to estates of people who die in 2011 or 2012 and are survived by a spouse.

    There are strict time limits for filing a return, so if you know of someone whose family could take advantage of these savings, you or they should speak with an attorney right away.

    Also, if you have an older will that includes a trust designed to reduce taxes when a surviving spouse later dies, you should have the will reviewed, because under the new law there might now be better alternatives.

    How it works

    Generally, when a person dies, his or her estate can give an unlimited amount to a surviving spouse. After that, if the person’s bequests (plus large lifetime gifts) total more than a certain “exemption amount,” then an estate tax is due. For 2011 and 2012, the exemption amount is $5 million.

    Traditionally, the exemption amount applied separately to each spouse. So if a husband died first, his estate could use the exemption amount, and when his wife died later, she would get her own exemption amount.

    But under a change in the law starting in 2011, if the first spouse to die doesn’t use all of his or her exemption amount, the difference can be passed along to the other spouse. So suppose a husband dies and doesn’t use any of his $5 million amount (because he leaves everything to his wife). When the wife dies, her exemption amount will be her own $5 million plus the $5 million that the husband didn’t use. So instead of being able to leave $5 million tax-free to her heirs, she can leave $10 million tax-free – a potential savings of millions of dollars.

    However, this only works if the husband’s estate filed an estate tax return and elected to pass the exemption amount on to his wife. If the husband’s estate didn’t file a return (because it wasn’t legally required), then all the potential tax savings are lost.

    This means that it’s almost always a good idea to file an estate tax return for anyone who dies in 2011 or 2012, if they are survived by a spouse.

    Even if it seems highly unlikely that a surviving spouse will be worth more than $5 million when he or she dies, it’s still a good idea to file a return, because the $5 million exemption amount only lasts through 2012. After that, Congress can change it, and we don’t know what amount Congress will choose. It appears that if Congress doesn’t do anything, the amount will be reduced to just $1 million in 2013.

    Because the current law only lasts through 2012, there are a lot of questions and uncertainties about what will happen after that. It’s possible that the law will change again, and the tax savings may be reduced or lost by the time the surviving spouse dies. However, in most cases, the cost of filing an “unnecessary” tax return will be small compared to the potentially huge savings down the road.

    (In a few cases, executors might be put in an awkward position because the heirs who would have to pay for filing the return might be different from those who would benefit from the increased exemption. In such a case, the executor might want to ask the surviving spouse to pay the cost of the filing, since he or she will benefit from it.)

    Many wills need to be reviewed

    In the past, many people tried to achieve a similar result – using both spouses’ exemptions – through the use of a trust, sometimes called a “bypass trust.” Typically, when the first spouse died, some of his or her assets (often a sum equal to the current exemption amount) went into a trust, and the rest was left directly to the surviving spouse. The trust might pay income and principal to support the spouse during his or her lifetime, after which the assets would go to children or other heirs. When the surviving spouse died, the trust property wasn’t included in his or her estate, and so it didn’t “count” toward the exemption amount.

    A new law means that it’s almost always a good idea to file an estate tax return for anyone who dies in 2011 or 2012, if they are survived by a spouse.

    The new law might make these kinds of bypass trusts unnecessary for some people – at least until the end of 2012.

    You might want to consider the costs and benefits of eliminating such a trust from your will, or at least providing that the trust provisions won’t take effect unless the law changes again such that the trust becomes a good idea.

    Some of the disadvantages of a bypass trust include:

    The surviving spouse has less flexibility and access to the assets.
    There are expenses in managing the trust, filing trust tax returns, and sometimes hiring an outside trustee.
    If trust property is sold after the surviving spouse dies, the “basis” for capital gains tax purposes is its value at the time of the first spouse’s death – whereas without a trust, the basis would be the (presumably higher) value at the time of the second spouse’s death.

    On the other hand, there are some powerful reasons to keep a bypass trust. For instance:

    Assets in such a trust will be protected from a surviving spouse’s creditors, and from the actions of a future spouse if the surviving spouse remarries.
    A spouse might want to put property in a trust to make sure that when the surviving spouse dies, the assets will go to the person’s children from a prior marriage.
    A bypass trust can also reduce state estate taxes, as well as generation-skipping transfer taxes.
    A bypass trust shields all future appreciation from estate taxes – even if the assets in the trust grow in value far beyond the amount of the first spouse’s exemption.

    As an aside, if your old will says that the amount that will go into a bypass trust is equal to the exemption amount, you might want to review this in light of the fact that the exemption amount in 2011 and 2012 has been dramatically increased to $5 million. You might prefer to say that the trust assets will be the exemption amount or a certain dollar figure, whichever is less.

    Remarriage

    One final note: If a surviving spouse “inherits” the other spouse’s unused exemption, it’s not clear what happens if the spouse remarries. While the law is confusing, it appears that if the spouse remarries and then the new spouse dies first, the unused exemption from spouse #1 is wiped out, and the spouse is limited to any unused exemption from spouse #2.

    This is something that spouses who are considering remarrying will want to take into account in their estate planning. The issue of “inherited” exemptions is also something that they might want to specifically provide for if they are going to sign a prenuptial agreement.

  191. How to Minimize Estate Or Inheritance Tax And Gift Tax?

    One of the many financial factors that people must consider during their lifetimes is the possibility of estate tax or inheritance on possessions they leave behind after their death. We are all subject to various taxes during our lives including a gift tax on gifts of money or property that we give or receive. But the taxes that are imposed on your estate and its beneficiaries after you pass are called estate taxes. The “estate” includes everything (home, care , business, investments, pension, IRA, 401k, jewelry, collectibles, real estate etc.) you own when you died including the proceeds from your life insurance policy, if you are the owner of a life insurance policy. This is why talking to an expert estate and life insurance at the BeamaLife, is so helpful when you plan for your estate and considering the possibilities of estate tax.

    Estate tax can be levied on many different assets. For federal estate taxes, your gross estate includes all real property such as real estate, investments, business interests and personal property that you own at the time of your death. It also includes property you’ve given away but still used or had a vested interest in during your life, gifts that aren’t dispersed until after your death, your one-half interest in community property, annuities, pensions, profit-sharing plans and your share of any property owned jointly.

    Many people don’t even realize that estate tax can also be levied on the proceeds from their life insurance. Any life insurance policy that you own at the time of our death, including policies for which you retained the right to change the beneficiary, cancel the policy or make policy loans with, can potentially be taxed. The life insurance experts at BeamaLife can explain how your life insurance policy will be affected by estate tax though, and since they represent more than 100 different highly rated life insurance companies and are not paid on commission alone, they are not biased towards one type of policy or one specific company. It pays to have RIGHT guidance when choosing a life insurance policy and structuring policy right. Please call (877) 972-3262 now.

    Estate tax law and estate tax rates are very fluid currently as Bush estate tax relief extention is expiring and there is no ageement on the new estate rates. for year 2012 the estate tax, gift tax and generation-skipping transfer tax exemptions are $5.12 million and 35% 2012 estate tax rates.

    If you believe that your assets will be hit hard by estate tax and you want to protect the assets you plan to leave your loved ones, there are many ways you can minimize estate tax. It is always advisable to speak to an estate tax attorney before making any decisions, though. Without proper estate planning, gifts and transfer to family members can potentially trigger gift tax. A tax & legal expert can advise you about whether a gift will trigger this tax, but generally you can count on certain gifts not triggering the tax, including gifts made to U.S. citizen spouses and certain charities, those worth $139,000 or less made to non-U.S. citizen spouses, certain payments on behalf of others for tuition or medical expenses and those under the annual gift tax exclusion amount of $13,000. Gifts under the gift tax applicable exclusion amount of $5.12 million will also not be hit by gift taxes, but they will reduce the applicable exclusion amount for estate taxes.

    Whether it’s a life insurance policy or any other types of property, many people choose to transfer their assets to an irrevocable trust in order to reduce estate tax liabilities. This may also be hit by the gift tax, but the estate tax will not apply, so if the assets increase in value they still won’t affect the estate. And with expert guidance from BeamaLife, you can fund your estate tax liabilities with a life insurance that benefits you and your beneficiaries to the fullest. It’s important to have this type of unbiased advice from an impartial source that has the knowledge to assist you in your estate and policy ownership decisions so your loved ones will be taken care of.

  192. Death, incapacity and taxes … That subject matter may be why we avoid and procrastinate when it comes to estate planning! The fact is, no matter what your age or how much wealth you’ve accumulated, you need an estate plan to protect yourself, your loved ones and your assets — both now while you’re still active as well as after your death.

    An effective estate plan is one of the most important things you can do for your family. Your first steps in the planning process are to create a comprehensive net worth statement showing all of your assets, including taxable accounts, tax-deferred accounts (IRAs, annuities, retirement plans) and life insurance investments.

    Your Financial Advisor can create a personal net worth statement containing this important information. Being organized will make your meeting with your attorney more productive and expedite the planning process.But before visiting with your legal counsel, you need a basic understanding of the documents he or she may recommend for your plan.

    1. Will. A will simply provides instructions for distributing your assets to your family andother beneficiaries upon your death. Your attorney can customize its provisions to meet your needs.

    2. Durable power of attorney. A power of attorney is a legal document in which you name another person to act on your behalf. This person is called your agent or attorney-in-fact.

    3. Health care power of attorney. A durable power of attorney for health care authorizes someone to make medical decisions for you in the event you are unable to do so yourself. This document and a living will can be invaluable for avoiding family conflicts and possible court intervention if you should become unable to make your own health care decisions.

    4. Living will. A living will expresses your intentions regarding the use of life-sustaining measures in the event of a terminal illness. It expresses what you want but does not give anyone the authority to speak for you.

    5. Revocable living trust. There are many different types of trusts with different purposes, each accomplishing a variety of goals. A revocable living trust is one type of trust often used in an estate plan. By transferring assets into a revocable trust, you can provide for continued management of your financial affairs during your lifetime (when you’re incapacitated,for example), at your death and even for generations to come. Your revocable living trust lets trust assets avoid probate and reduces the chance that personal information will become part of public records.

  193. Whitney Houston’s untimely death clearly presents much larger questions than tax and estate planning ones. Nevertheless, the latter are nothing to sneeze at. In fact, it was only a few weeks ago that Whitney Houston herself was dealing with a legal mess involving the death of her own father. See Whitney Houston Denies She’s Broke; Wins Lawsuit vs. Step-Mom.

    Now there will be a much larger mess over Ms. Houston’s estate. The smaller question involved Ms. Houston’s father, John Houston, who died in 2003. Whitney had lent him money years before.The elder Houston was supposed to repay it, and one commonly-used mechanism was put in place to do that. Mr. Houston took out a life insurance policy on his own life and named his daughter as beneficiary. Upon John Houston’s death in 2003, the remittance of the policy proceeds to Whitney should have been smooth.

    It was also structured not to constitute income to Whitney for tax purposes. Unfortunately, that’s where the good planning ended. Just as Cinderella faced a step-mother, so did Houston, and that’s where things got nasty.

    Whitney’s step-mother was none other than Barbara Houston. It didn’t help that she was the forty-year younger woman who supposedly broke up John Houston’s marriage to Whitney’s mother, Cissy Houston. Whitney’s collection of the policy proceeds angered her step-mother.

    Barbara Houston wanted the funds to pay off the mortgage on the residence she had shared with Whitney’s father so she sued Whitney. Whitney counter-sued and she and her step-mother Barbara became locked in a multiyear expensive legal battle. Whitney eventually won but only weeks ago, a victory she hardly had time to enjoy.

    Is life insurance money free of income taxes? Is it estate tax-free? In both cases, the answer is not always.

    However, properly set up, it is often possible to avoid having the insurance proceeds subject to income tax and even to estate tax. There are two independent sets of tax rules to navigate since the two taxes are distinct. You’ll need professional help to do so. Some kinds of insurance don’t qualify.

    However, unlike so many tax rules, the tax rules governing insurance–and life insurance in particular–are surprisingly concrete. What about the rest of Whitney Houston’s estate? Perhaps as a result of her well-publicized problems which may have even been exacerbated by this unfortunate family litigation, there has been speculation that she was in dire financial circumstances. See Whitney Houston Denies She’s Broke; Wins Lawsuit vs. Step-Mom.

    Whether that’s true may now be irrelevant. Still, as more Whitney Houston death news emerges, there are likely to be tax and estate planning lessons—and perhaps some bigger life lessons—for all of us.

  194. When a person engages in estate planning, there are many things he or she should consider. Getting term life insurance is one of the best decisions a person can make during the process of estate planning. There are many reasons a person can benefit from term life insurance, and this article will explain those reasons.

    For some people, buying a life insurance policy that comes in terms can be very beneficial. For example, some people are unable to afford the payments of a life insurance policy that is not paid in terms. Many retirees are in positions where they need to be very considerate of a monthly budget. A term life insurance policy can help a retiree to stay in budget, since the payments are usually lower than purchasing an entire life insurance policy at once.

    To do a term life insurance compare is a smart choice, in order to avoid paying too much for insurance. Whole life insurance can often cost thousands of dollars for a year. On the other hand, there are many term life insurance best rates a person can find. Getting insurance for a life term may only cost a person hundreds of dollars every month. It is always a good idea to compare term life insurance with the cost of whole life insurance, before blindly committing to a plan.

    A person can choose from all sorts of term life insurance policies. To find the best term life insurance best rates, a person should always run an online comparison. A person may elect to receive either 10, 20, or 30 year term life insurance. This allows a person to have greater flexibility when designing his or her own estate plan. While one is estate planning, life insurance policy considerations should always be a main consideration of anyone.

    There are many other reasons a person may wish to have term life insurance. Perhaps a parent has a child going off to college. Then a person could buy term life insurance to make sure the child is provided for during his or her college years, in the unlikely event the parents passed away. Then, after a child graduates, the term life insurance would expire, since it is assumed the child is able to provide for his or her own needs with a salaried job somewhere. Or, a person may wish to buy term life insurance which lasts for the duration of a mortgage on a home. This allows an individual to pay off the mortgage on a home in the event that the main provider of a family happened to pass away. Overall, term life insurance is a smart option.

  195. Estate planning is one of the most important steps any person can take to make sure that their final property and health care wishes are honored, and that loved ones are provided for in their absence. Though often overlooked or put off in favor of more immediate concerns, a comprehensive estate plan can resolve a number of legal questions that arise whenever anyone dies.As we work up to retirement we must consider the appropriate insurances for our needs. We would obviously need to continue our health insurance, long term care insurance and life insurance and rollover our retirement accounts. However…the questions become, what and how much is enough, is it affordable and who should we consult.

    Proper health insurance allows you to seek out the doctors and Centers of Excellence that you want and may need. The idea is to be prepared for any illness and injuries while at the same time have affordable premiums. The freedom to protect your greatest asset…your health… and the associated costs of care and pharmacy needs is essential.

  196. As you age, the idea of life insurance seems increasingly unnecessary. Many retirees prefer not to continue paying life insurance premiums when they no longer have young families to take care of. However, before you shrug off the idea of life insurance in retirement, it’s a good idea to consider that life insurance still has its virtues.You may still have dependents. Many retirees no longer have young children who will suffer financially if they pass on. But even once your children have established their own lives, you might have another dependent: Your spouse.

    Your spouse might need to be protected from the loss of your income, even if you are retired. Check out the conditions of your pension or annuity. Also, consider that your Social Security check forms a portion of your retirement household income. When you die, your spouse’s income is likely to be affected. Pension payments might stop, Social Security income often decreases, and annuity payouts might also cease, or getting at the remaining benefits might prove expensive.It’s important to look over the conditions attached to the income your spouse receives upon your death. If you care for your spouse, you want to make sure he or she is taken care of financially. The right life insurance policy can ensure that, when you pass, your spouse can make up the shortfall that comes with the loss of income from sources tied to your lifespan.

    Life insurance can be used in estate planning. Heirs generally do not have to pay taxes on life insurance benefits. In some cases, retirees can use life insurance as a way to help their heirs pay estate taxes. Life insurance trusts, when used properly and set up with the help of a knowledgeable estate planner, can be a valuable tool for a retiree.

    For some people, life insurance in retirement isn’t very practical. However, for others, life insurance coverage can provide a solid estate planning strategy, as well as provide for a spouse later on.Remember that you are more likely to save money by renewing an existing policy than by purchasing a new life insurance policy after age 50. So, before you let your life insurance lapse, make sure you run the numbers. You might need life insurance in retirement after all.

  197. Given the strong start for life insurance stocks in 2012, it is important to re-examine our Short-Term Neutral View on the life insurance subsectors. In this note, we conclude that the Neutral View remains appropriate, owing to a decline in core return on equity, as well as measurable increases in the cost of equity subsequent to the financial crisis

    Using US industry statutory data, we examine the components of return on surplus (RoS) both prior to (2003-07) and subsequent to (2010-11) the financial crisis. Average RoS has declined 300 bps, driven by sustained lower interest rates (130 bps) and structurally lower operating leverage (160 bps) as companies sought to raise capital and reduce risk. At least in the short-term, these factors seem difficult to control at the company level

    The 300 bps decline in industry RoS is mirrored by a comparable decline in GAAP ROE for mid- to large-cap life insurers. We use a DCF-type model to estimate the change in discount rate pre- and post-crisis that reconciles ROE with average price/book. We conclude that life insurers face 390 bps on average in higher cost of capital post-crisis, owing to the higher asset and liability risk revealed in 2008-09

    The combined 690 bp net increase in ROE hurdle needed to support valuation represents a high hurdle for investors looking for investment opportunities in life insurance, in our view. If one holds the view that the apparent increase in life insurer cost of capital is transitory, there may be many more opportunities than we think are available. We think it would be more prudent to focus on those areas where there is a higher probability to improve ROE

    At the company level, Life-Investment “value” plays (e.g. LNC, GNW, HIG) seem more challenged to improve ROE near-term, owing to the stress taken during the crisis. In contrast, the lower-risk Life-Other names (AFL, AMP) already have post-crisis ROEs above the pre-crisis level. Neither group seems likely to see near-term decline in risk premium, absent a market event

    Some Life Investment names—MET in particular and PFG to a lesser extent—may have a higher probability to increase ROE near-term. Even a recovery of one-half the post-crisis ROE decline (350 bps for MET, 200 bps for PFG) could result in meaningful price/book improvements (on average 100 bps of ROE or cost of capital equates to 0.1 points of price/book)

    Our Long-Term Views on the Life Insurance subsectors remain unchanged. We remain Long-Term Negative on Life-Investment, owing to insufficient change in the core asset and liability challenges of variable annuities and their associated guaranties, which are not likely to be full addressed absent another crisis. Conversely, we have a Long-Term Positive View on Life-Other, given its lower risk profile and higher innovative potential, both of which increase of the probability of eventual decline in market risk premium

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  200. “No one wants to think about losing a loved one. So we often don’t think about the death of a loved one, a job loss, an injury or illness – or how these events could leave our family vulnerable and struggling to make ends meet – until it’s too late,” stated McCurrie in a recent Forbes article. She wrote that cost often stops people from buying life insurance but the truth is that most people can’t afford ‘NOT’ to have life insurance.

    Dying is inevitable yet we avoid thinking about it, let alone discussing the need to leave life insurance for our families in case something were to happen. People think that an accident, illness or death wouldn’t or couldn’t happen to them. However, according to Ben Best’s Causes of Death report accidents are one of the top four reasons someone dies today particularly if you are younger. In the United States, accidents are the third leading cause of death for males and seventh leading cause of death for women. This is particularly alarming for younger individuals who may not think they need life insurance and are unprepared.

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  208. In most cases, you can purchase life insurance policies for your parents. The most popular types of policies for parents are term life insurance, whole life insurance, and second to die policies. Here is some of the information you’ll need to know if you are a child searching for your parent/s.

    Is Buying Life Insurance on My Parents a Good Deal?

    Prior to age 85, it seems life insurance can still be purchased for a relatively affordable premium. For example, you would pay $14,560 per year for an 83 year old mother in good health for a $250,000 policy guaranteed for life with North American Co for Life and Health.

    If we assume she has a life expectany of 10 years, you will have paid $145,600 into the policy after 10 years. If she were to pass away at any point before that, it seems to be a great rate of return on your premium. You certainly wouldn’t be able to match that kind of return in any alternative investment.

    If your parents are younger than 80 and in good health, life insurance is an incredible leveraging tool, and makes even more sense than in the example above.

    Honestly, life insurance loses leveraging power after age 85 and is pretty expensive. See the quote form on the right for an instant quote.

    Ownership of Policy: One of the first things I ask the child when he/she calls me is who would be the owner and payor of the policy. In some cases, children are simply calling on behalf of their parents who are not internet savvy, and are doing nothing more than helping their parents, who don’t know how to buy life insurance, with the quoting and application process, but that the parents will be paying for the policy.

    In other cases, you have children who will be the owner of the policy, pay the premiums, and also be the beneficiary of the death proceeds. Usually this is okay as long as the child can prove an insurable interest. This is 100% legal, but will require approval by the insurance company.

    An insurable interest means that the child would be somehow financially affected by the death of his or her parents. So if your parents have a big mortgage on their home, and you don’t want to inherit their debt, life insurance may be in order. Or if you are responsible for your parents funeral and burial arrangements, life insurance may be used for this.

    How Much Life Insurance Can I Purchase on My Parents?

    The trick is to apply for a reasonable amount of coverage to protect you from financial hardship. The idea is to be indemnified, or made whole… not to get rich off your parents’ death. So if your 81 year old mother is living with you, and lives off social security, and provides no financial benefit to your family, and has no debt, you would not, for example, be approved for a 1 million dollar life insurance policy.

    In most cases, a $100,000 life insurance policy for parents is approved without hitting any barriers. Beyond this, financial justification will be required.

    Requirements to Purchase Life Insurance on Your Parents

    Your parents will first, need to be aware that the policy is being taken out on them. It’s impossible for them not to know, since they will need to sign the application as the “primary insured” or “primary applicant”. Most policies will also require a medical exam. It’s really not too complicated. You just complete an application, (sometimes the medical exam), and then wait for approval.

    Types of Life Insurance for Parents:

    Term is the most common type of insurance sold today, because it offers the lowest cost for level premiums during the duration of the term. You must consider your parents’ life expectancy, however, if you’re considering term. You don’t want to get a 10 year term if you actually need the coverage for as long as they live.

    In the latter case, whole life insurance, or its little sister, universal life insurance (a lower cost policy offering coverage for life), may be more suitable for you. You can get quotes in our quote form on the right to age 100 or 121, which are guaranteed universal life insurance policies.

    Another popular choice for parents is a second-to-die policy. As the name indicates, this policy only pays out one death benefit, upon death of the second parent. This type of insurance is popular in combination with estate planning and life insurance trusts, but not necessarily.

    Please note if your mother or father have health issues, please see our post on impaired risk life insurance, for details on how we are able to provide affordable life insurance to our clients with history of stroke, heart disease, cancer, diabetes, etc.

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  214. As an estate planning attorney, I’m often confronted with the challenge of explaining to wealthy clients the various estate planning strategies available to them. Many people are prone to inaction when it comes to estate planning because the number of planning alternatives their advisers present to them is so overwhelming.

    In explaining these alternatives, I believe firmly that it’s not what you say but how you say it. If clients have a general understanding of their estate planning options, they’re much more likely to implement a comprehensive and sophisticated estate plan.

    “Five Levels of Estate Planning” is a brochure I developed to explain estate planning to wealthy clients in a way they can easily follow. Which of the five levels they’ll need to complete will depend upon their particular objectives, facts and circumstances.

    Each level begins with the situation that defines that particular level. Then I enumerate the objectives to be accomplished at that level. Next, I list the tools and techniques to accomplish those objectives. Finally, I describe the disadvantages, if any, to those tools and techniques.

    The basic premise behind “The Five Levels of Estate Planning” is that the only way to reduce estate taxes is to make gifts. Except for outright gifts, there are basically only three types of gifts a client can make.

    First, there are cash gifts to irrevocable life insurance trusts. Life insurance is an ideal gift because it leverages the client’s $10,000/$20,000 annual gift tax exclusion, $600,000/$1.2 million estate/gift tax exemption, and $1 million/$2 million generation-skipping tax exemption.

    Second, there are gifts that shift or reduce value. The family limited partnership, grantor retained annuity trust and qualified personal residence trust can all be used to take advantage of fractional and split interest discounts.

    Third, there are gifts to charity, including gifts to private foundations. Charitable gifts are 100 percent estate and gift tax deductible and, if made during a lifetime, qualify for income tax deductions (subject to certain limitations).

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  235. t’s nothing any of us want to consider, and yet, the avoidance of the issue may end up costing our loved ones dearly. In a recent study conducted by LIMRA, it was noted that 30% of Americans don’t have life insurance — a staple asset many rely on to ensure proper care during (and after) one’s end of life. In addition to the inability to pay household bills and care for a family left behind, the mounting cost of funeral services can place a burden on an already grieving family. Just what are these expenses? We break them down:

    Basic Funeral Home Fees

    Regardless of whether you go eco-friendly or traditional, there are some unavoidable expenses that come with the business of death. According to an infographic put together by LifeInsuranceQuotes.info, this includes the cost of permits and legal documents, obituaries, holding the remains and arranging for the final resting place of the body. Since every little detail has a price tag (death certificates, for example, run a minimum of $12), one can expect that these essential but basic services can total in the thousands.

    The Details of Dying

    Less enjoyable to think about are the actual services performed by morticians and those in the end-of-life industry. These can include transporting the remains, embalming the body and the casket or cremation process. What’s interesting to note is the wide range in prices for similar services in this category: cremation, for example, without the pomp and circumstance of a farewell service can come in at under $1,000 if done directly through the cremation service. Compare it with the most costly cremations, done through a funeral home, and you can expect the bill to total $4,000 or more.

    The classic burial service, casket and all, will run several times this amount. Factoring in the expense of the casket (average of $2,000), tombstone ($500 to $3,000) and plot ($4,000 or more), it could be an expense of $10,000 to $20,000 at the end of the ordeal. Everything, even the clothes the deceased wears at the viewing, has a price.

    Third-Party Services

    If you would like the event to have a personal and sentimental touch, there can be a bill for that, as well. Displaying a favorite variety of daffodil or having a special song played after the service will both likely be provided by a service provider outside of the funeral home’s jurisdiction. While there is some wiggle room to work down the costs of such services, most grieving loved ones will not want the hassle of bargain-hunting during this difficult time, and many families will pay the asking price to have things taken care of without the drama. Most of these services will need to prepaid before the event, as well.

    The Bottom Line

    While some friends and families will consider no cost too high to have the memorial service they feel is appropriate, many will find the price tag of even the most modest service to be more than they can handle. To ensure the fees aren’t crippling, a simple, prepaid service plan with a reputable funeral home may be ideal; life insurance or death benefit plans may also be a more practical way to keep the bill from becoming a devastating one. Check with your financial planner or financial service professional to see what your end-of-life needs are and to prevent the cost from falling on others after you’re gone.

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