Perlin Estate Planning

Consider Life Insurance to be a Tool in Your Estate Plan

“Life insurance can be a very powerful financial tool when used properly.  It is often integral to estate planning for wealthy individuals, such as successful entrepreneurs.”

From paying estate taxes to addressing business obligations, life insurance regularly plays a very important role in estate planning, according to a recent Forbes article that asks “What Is Premium-Financed Life Insurance?”

There are many ways to pay for life insurance. One way is to borrow the money, which is called premium financing. There are several different ways to secure premium financing.

When financing life insurance premiums, a wealthy individual may borrow the money from a third-party lender. The borrower is then responsible for paying back the loan with interest. However, the internal tax-free growth of funds inside the life insurance policy can be used to defray some or all of these costs.

When a person borrows the money to pay the premiums, he or she is paying the interest on the loan annually.  However, that interest can also be bundled into the loan. Depending on the way it’s arranged, the life insurance policy can be used as collateral, or other forms of collateral might be used.

It also means that a premium financing arrangement must be monitored, because it’s typical to make adjustments in the deal over time.

There are very few successful entrepreneurs taking advantage of this solution.

In a survey of 262 successful entrepreneurs, only about 10% are using this strategy to purchase life insurance. Part of the reason for the low usage is that it’s not appropriate for a number of entrepreneurs. Another reason is that many financial professionals aren’t knowledgeable about this strategy. In a study of 803 financial advisors, while 40% responded that they are knowledgeable about financing life insurance, fewer than 5% have actually worked with a premium financed life insurance transaction for a client.

It’s crucial to understand the many variations of premium financed life insurance. It is a very versatile way to buy life insurance, with different ways to adjust the arrangement as your situation changes. However, making the strategy work well requires the expertise of a qualified professional with a strong understanding of this solution.

Reference: Forbes (October 20, 2017) “What Is Premium-Financed Life Insurance?”

When Can I Get the Life Insurance Company to Pay Out the Death Benefit?

“If you have the policy and death certificate when you file a claim, it may take as few as five business days to receive a check.”

A common question in settling the affairs of a loved one, is how long it generally will take after that person dies for the life insurance company to pay out the death benefit.

As a follow-up, what happens if the beneficiary doesn't know about the life insurance policy?

As Kiplinger explains in recent article, “How to Speed Up a Life Insurance Payout,” the more information you have about the life insurance policy, the quicker you can get the payout.

If you have a copy of the life insurance policy and a copy of the death certificate when you file a claim, it will expedite the process. If you have these items available, it can take as few as five business days after filing the claim to receive the payout.

If the beneficiaries don't have any idea that they are coming into money from the life insurance policy, the insurer may track them down, but not always.

The Social Security Death Master File will usually have deaths reported. Some state laws also require insurers to compare their files against those records and make contact with the beneficiaries when a death is reported. Some insurers will do this voluntarily.

If you believe the deceased had a life insurance policy but don't know the insurer, you might review their financial records and check for canceled checks, and contact any insurers or agents mentioned.

You can also make a request of the National Association of Insurance Commissioners' policy locator service. This service asks many life insurance companies to check their records for the policies.

You can also consult with the American Council of Life Insurers for more tips on locating a policy.

Reference: Kiplinger (June 7, 2017) “How to Speed Up a Life Insurance Payout”

Planning Ahead with Long-Term Care

“The experiences of people we care about often deeply affect us.”

As we think of our parents aging, we may also start to think about our own aging. Sometimes it takes a negative experience with a parent’s estate planning to motivate us to start planning for our own long-term care and end-of-life decisions.

WTOP’s recent article, “Preparing for old age: Long-term care, insurance and estate planning,” says the first step is to mirror the kind of conversations you held with your parents and have the same conversation with yourself.

Take a look at your vision for how you want to age and how you want to address your end-of-life issues, before you make any moves with your estate plan or insurance coverage. If you have a partner, first work independently on your own wishes, and then have a conversation together.

Working with aging parents can also make you think about your planning for long-term care insurance. Start the process when you’re in your 50s. The older you get, the greater chance you have of running out of time to save or of becoming uninsurable. Recent statistics published by AARP show that 52% of those individuals who turn 65 today, will develop some form of severe disability requiring long-term care support. The average lifetime cost of long-term care in retirement tops $250,000.

The next step is to review your current estate plan in light of your goals. Many individuals or couples who have a plan in place will forget about them, letting their documents become out-of-date. If you don’t have an estate plan yet, getting it completed should be a top priority. Your estate planning attorney is experienced at working with clients to understand their wishes and to create a plan that reflects those intentions.

Before executing a plan, you’ll need to calculate your total level of wealth, create a list of intended heirs and charitable organization names, as well as a divorce decree, if applicable. If you have minor children, you’ll need to designate guardians to act in your absence. It is also necessary to decide whether those same people will manage the inheritance for your children or whether you want someone else to assume that responsibility.

Planning for aging means taking careful consideration of many components of your financial plan. Look at how your retirement lifestyle and legacy plan could be impacted by a long-term care need.

Reference: WTOP (May 3, 2017) “Preparing for old age: Long-term care, insurance and estate planning”

Here’s What an Estate Plan Can Do for You

“It’s common for people to consider how they will eventually like their assets to be distributed among loved ones and ministry organizations. But perhaps you have not developed a comprehensive estate plan because you think that is only necessary for the extremely wealthy.”

The need for an estate plan applies to everyone, says Trust Advisor’s recent article, “Why An Estate Plan Is Beneficial.”

With a small estate, you should be even more careful to avoid unnecessary expenses and to retain the most resources for fulfilling your personal, financial, and charitable goals. The article cites four key reasons why you should have an estate plan:

1. Stipulating Care for Yourself. This includes a healthcare proxy, power of attorney and living will that states how you want to be cared for, if you become incapacitated.
2. Financial Security. Your will lets you specify the way that you want your assets distributed and to whom. Without a will, state probate law will determine who receives your assets.
3. Designating Guardians. If you have minor children, it’s critical to make written arrangements for their care. A will is the only legal way to do so in most states (e.g., California is an exception). You must designate a person that you want to be entrusted with the care of your children.
4. Designating Beneficiaries. Your estate plan will include completing beneficiary forms for insurance policies and retirement accounts. It’s a good idea to review your designated beneficiaries after any major life event, like marriage, divorce, a death in the family or the birth or adoption of a child. Remember, you can also name a charity as a primary beneficiary or contingent beneficiary in your plan.

Reference: Trust Advisor (April 29, 2017) “Why An Estate Plan Is Beneficial”

Even Young Adults Need Life Insurance!

As this recent article from CNBC  notes, even individuals in their 20's and 30's need to consider obtaining life insurance.  While end of life matters may seem a long way off, none of us knows what the future holds, and there are important reasons for young individuals to be protected. 

One very important reason to obtain life insurance at a younger age is to protect your loved ones, should you pass away unexpectedly.  If you have a spouse and/or young children who depend on your income, what would happen to them and their lifestyle if you were no longer able to provide for them?  This is an important question and a very critical reason to obtain life insurance.  Or even if you don't have a family of your own, one in five millennials is financially supporting a parent.  What would happen to that parent if the income stream was no longer available? 

Think also about if you have any debts that are co-signed by another individual.  Should you pass away unexpectedly, that other individual may be held responsible for your liabilities.  Having a good life insurance policy would at least provide funds for your co-signor to pay off that debt.  

Or what if you're going to become an uninsurable candidate through medical issues or career choices?  Then now is the time to set up that life insurance policy!

Term life insurance is a very inexpensive way to obtain a huge gain.  And with the uncertainties of life, there's no good reason not to put that plan in place now.  With a few simple questions, I can get you set up with a policy that can provide you and your loved ones with the peace of mind to know that should the unforeseen occur, you're ready for it.  Give me a call today! 

 

Time to Review your Financial Planning

“There's no time like the present to take stock of your financial life.”

Business Insider’s recent article, “A financial adviser shares a 5-step checklist to complete before the end of 2016,” notes that many folks spend more time planning vacations than they do their finances or retirement. The beginning of the new year is an excellent time to take a comprehensive review of what you have—both assets and liabilities—to prepare for the year ahead and any financial milestones or challenges you may face. These can include things like marriage, a home purchase, adopting a child or retirement.

Here are some important financial steps to at the start of 2017.

Take financial inventory. Consider aggregating your accounts and identifying what you have, such as IRAs, bank accounts, and life insurance. You should take an inventory of your debt and determine how you will pay it off in 2017.

Review your estate plan. OK, it’s not that exciting, but it’s important. Don’t wait until this time next year, because tragedy can strike at any time. If you fail to plan properly, and something unfortunate happens, your family may be left unprepared. It's critical to have control over what will happen to everything that you leave behind.

Update your beneficiary forms. This is a task that should be reviewed periodically—especially if you've been married or divorced, had children or retired in recent years. A designated beneficiary on an insurance policy or an IRA has precedence over a will or a trust. As a result, it's important to make adjustments after major life changes.

Make some smart tax moves. You should know how the taxes work on your 401(k)s and IRAs, so take a look to be certain you're saving effectively. The maximum annual contribution to a 401(k) is $18,000 or $24,000 if you're over 50. Therefore, if you've got a holiday bonus, that’s the perfect reason to add to your retirement accounts.

You should also remember that you can gift as much as $14,000 per person annually to as many people as you'd like without a gift tax liability. In addition, with any tax planning for retirement, you might think about converting your retirement money through a Roth IRA conversion ladder. Money transferred from a traditional IRA to a Roth is tax- and penalty-free after paying taxes on the conversion.

Evaluate your path to retirement. Retirement planning is important at every stage of life, so be pro-active. If you create a plan, it can hold you accountable. It is important to speak with a qualified estate planning attorney. Don’t just “set it and forget it.” Stay on top of issues and continually monitor the situation.

If retirement is in the near future, or if you're planning to retire early, start to have discussions about identifying guaranteed income, social security, your pension options, and how to utilize any or all of them into your overall income plan, along with the tax consequences.

Reference: Business Insider (December 9, 2016) “A financial adviser shares a 5-step checklist to complete before the end of 2016”

Let’s Keep an Easy New Year’s Resolution

“This is the year that you should keep your financial resolutions.”

We all take some time at the end of the year to reflect. As you consider 2016, you can certainly agree that the year had plenty of memorable moments, such as the presidential election, market volatility, as well as a long list of tragic world events.

The US News’ article, “A Simple Resolution for the New Year,” says with 2017 already looking to be a year full of unknowns, you should take a break and think about changes for next year in a New Year's resolution. But this time, you should have a plan to actually stick to.

We all like the idea of making a New Year's resolution…it’s based on our desire to improve. Good intentions go a long way, but we’ve all fought through the jammed gym in January, only to hear crickets while you exercise in March. Instead of biting off more than you can chew—so to speak—find one thing and make that your focus for all of 2017.

While a recent survey found that 40% of respondents put exercise and diet at the top of their resolution lists for 2017, right behind at 37%, was getting a better handle on money and saving more. Regardless of your age, here are simple and obtainable financial resolutions to think about for every generation.

Millennials: Try living on a cash basis for one month. This can be a real eye-opening experience and make you more aware of new debt. In addition, you can see the true cost of living expenses, which can help you to use better budgeting habits.

Generation X: Protect your family and yourself. Many of these folks are now parents and are also focusing on careers. They’re reaching their maximum earning potential. A great resolution for Gen Xers is to purchase life insurance and/or disability insurance, in the event something were to happen to you or your spouse. You should also be sure that your 401(k) is being maxed out to leverage the full employer match. Look into developing a financial plan and examine tax planning to maximize savings.

Baby Boomers: Review your estate plans. Make sure that your estate plan is up-to-date and, at the same time, review all beneficiaries on life insurance policies, IRAs and other plans.

You should also plan for many years ahead, since Americans are living longer. It means a longer retirement for boomers, maybe 20 years or more. Be sure your budget is on track and that investments are keeping pace with cost of living increases.

You can certainly think of numerous other potential financial resolutions that can be made for the New Year. But whatever generational group you’re in, a simple resolution to save even a small amount can make a big difference.

Reference: US News (December 20, 2016) “A Simple Resolution for the New Year”

Estate Planning for New Parents

Think that having an estate plan is only for the super wealthy or those in the final stages of their life?  You’d be wrong!  As explained in greater detail in this article from Nasdaq, a critical time for developing an estate plan is upon the birth of your first child.  Why at this time?  Not only does an estate plan establish your wishes regarding the passing on of assets and end of life decisions, but, most importantly for new parents, an estate plan establishes who will care for your child upon your incapacity or passing.  This ability to name a guardian for your child is of critical importance to new parents.

You probably spent the last nine months – if not years – envisioning the life you would like to give to your child.  While your vision of course never contemplated your passing, in the unlikely event of your passing, what is more important than ensuring your child continues to receive the life you pictured for him or her?  Rather than leaving such a critical decision up to the court – or worse, a family custody battle – it is prudent to discuss your wishes with your family and establish a written estate plan to guide in these circumstances.  Through an estate plan, you can name exactly who you want to care for your child upon your incapacity or passing.  You can also include specifics about how you would like your child to be raised.  Concerned that the selected guardian might not be the best to manage your child’s finances?  No problem!  You can always name a second individual to act as the manager of your child’s financial affairs. 

In addition to this critical step of establishing a guardianship plan for your child in the event of your incapacity or passing, it is also important to speak with your estate planning attorney about the possibility of obtaining life insurance for yourself and/or your spouse as an additional safeguard for your family.  

Your new baby has arrived and you are filled with the love and amazement – and exhaustion – that comes with new parenthood.  But don’t forget, amidst the new parent haze, about the importance of a contingency plan for your child.  Give me a call today and let’s discuss the best way to ensure your child is safe and protected, no matter what the future may bring.

Hybrid Life Insurance as an Estate Planning Tool

“There is a new type of life insurance policy gaining popularity in recent years that provides 'living benefits' or 'accelerated benefits'.”

The concept of leveraging your assets and maximizing your estate with life insurance is a common strategy that has been used by many retirees for decades. If you do this the right way, this can be a great estate planning tool to own within a portfolio of investments, says The Digital Journal’s article “New Hybrid Wealth Transfer Concept Gaining Consumer Acceptance.”

This strategy is called “hybrid life insurance” because the insured doesn’t have to die to use the policy’s death benefit. The insured’s death benefit is calculated by the amount of the one-time deposit, age, gender, and health. In some instances, the single deposit can be multiplied by two or more when determining the policy’s guaranteed death benefit. Therefore, a non-smoking female in average health who contributes $100,000, could see an immediate $200,000 tax-free death benefit. That death benefit can be given to the heirs of her estate without going through probate, as the assigned beneficiaries to the policy. That lets the insured transfer her wealth tax-free and up the amount her beneficiaries will inherit. Insurance companies that write this type of policy may give you an option to accelerate the policy’s death benefit to use for chronic illness and long-term care expenses.

If an individual has bank savings accounts, CDs, money market accounts, brokerage accounts, and even annuities and is keen on the idea of being able to always have access to their money, they should know that some hybrid policies guarantee a 100% return of premium. Other policies allow withdrawals of the policy’s cash value.

Many hybrid policies have growth based on either fixed rates of interest or an indexed rate of interest. This can be much better than a savings account, CD, or an annuity. These added benefits make hybrid life insurance an ideal alternative to depositing cash in the bank.

Some folks over age 65 have the common misconception that the required underwriting process is burdensome and requires perfect health in order for them to qualify. That’s not so in this case because simplified underwriting makes getting qualified quite easy. There’s no medical exam or blood test required. Advanced underwriting and technology that’s been adopted by insurance carriers expedites the approval process. It requires just a few medical questions and a short phone interview.

Hybrid life insurance can be a worthwhile estate planning tool with tax benefits and favorable guarantees.  However, it does have its pluses and minuses.  You should, therefore, work with a competent estate planning attorney with the knowledge and experience to help guide you with this estate planning tool.

I have experience advising clients on the right life insurance policies for their needs, and can get you set up with a policy today.  So give me a call! 

Reference: Digital Journal (November 22, 2016) “New Hybrid Wealth Transfer Concept Gaining Consumer Acceptance”

What If the Estate Tax Goes Away? What Will Happen in Miami, South Florida?

“The Republicans are proposing to end the federal estate tax.”

A recent Forbes article addresses an interesting question: “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?” Even if the tax was eliminated, senior executives at single-family offices will still have to look at non-estate tax estate issues. These include issues such as the transfer of control of assets and how funds are to be distributed among heirs. Estate planning won’t go away. In fact, estate plans will need to be reviewed and reworked to address the changes in the laws.

Likewise, life insurance purchased to pay estate taxes will also need to be reviewed. One way to do this is to convert permanent policies with meaningful cash values into private placement life insurance policies (PPLI).

Private placement life insurance is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account and a life insurance benefit. PPLI is designed to maximize savings and minimize the death benefit.

The investment account typically uses tax-inefficient hedge fund strategies. PPLI can be especially useful as an element of more complicated tax strategies

With advances in technology and greater efficiencies, private placement life insurance is becoming more popular for more wealthy individuals.

People who operate single-family offices are also becoming more aware of the opportunities for PPLI as part of the financial portfolios of their clients. The use of PPLI may increase quickly and considerably if these families are no longer required to keep traditional life insurance policies purchased to pay estate taxes.

The elimination of the federal estate tax will hinge on the presidential election and how Congress acts on the issue.

Do you live in South Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (305-443-3104) right away for peace of mind. I can help!

• I'm an exceptionally experienced Florida Bar Board Certified Estate Planning Attorney,
• I'm a Florida Bar Board Certified Elder Law Attorney, focusing on ALL legal issues related to aging,
• have prepared over 4,000 estate plans in 30+ years in practice,
• have administered over 600 estates through Probate, and
• am a Certified Financial Planner Professional™, plus
• I am also a Florida Certified Public Accountant (CPA).

Of course, if you would like more information about General Estate Planning in South Florida, I have a very informative website you are welcome to visit for more information.

Reference: Forbes (September 29, 2016) “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?”