tag:blogger.com,1999:blog-20643963205757714082024-03-12T22:27:27.904-05:00Why Healthcare Matters to YouAre You Ready for What the Future May Bring? Are You Ready for Your New Health Plan Options? Are You Ready to Own Your Healthcare?Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-2064396320575771408.post-65457688538668306912012-09-13T09:36:00.001-05:002012-09-14T09:00:11.641-05:00Spousal Impoverishment<br />
The expense of nursing home care — which ranges from $5,000 to $8,000 a month or more — can rapidly deplete the lifetime savings of elderly couples. In 1988, Congress enacted provisions to prevent what has come to be called "spousal impoverishment," leaving the spouse who is still living at home in the community with little or no income or resources. These provisions help ensure that this situation will not occur and that community spouses are able to live out their lives with independence and dignity.<br />
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Under the Medicaid spousal impoverishment provisions, a certain amount of the couple’s combined resources is protected for the spouse living in the community. Depending on how much of his or her own income the community spouse actually has, a certain amount of income belonging to the spouse in the institution can also be set aside for the community spouse’s use.<br />
Following are the minimum and maximum amounts of resources and income that can be protected for a spouse in the community in 2011:<br />
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•Minimum Community Spouse Resource Standard – $21,912.00<br />
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•Maximum Community Spouse Resource Standard – $109,560.00<br />
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•Maximum Monthly Maintenance Standard – $2,739.00<br />
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•Minimum Monthly Maintenance Standard –$1,838.75<br />
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Post-Eligibility Treatment of Income<br />
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The post eligibility calculation is made to determine how much an individual in an institution (usually a nursing home) is able to contribute to cost of his/her own care. It applies only to individuals who are institutionalized (most commonly to those in nursing facilities) and to certain individuals receiving home and community-based waiver services. The process only applies to those with income and only after their Medicaid eligibility has been established.<br />
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The contribution is determined by first calculating the individual’s total income and then deducting certain amounts from that income. Specifically, the individual’s contribution is his or her total income less the following deductions (often referred to as “protected amounts”):<br />
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•A personal needs allowance of at least $30;<br />
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•If there is a community spouse and the spousal impoverishment rules discussed above apply, a community spouse's monthly income allowance (at least $1,750 but not exceeding $2,739 for 2011), as long as the income is actually made available to the community spouse;<br />
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•A family monthly income allowance, if there are other family members living in the household;<br />
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•An amount for medical expenses incurred by the spouse who is in the medical facility.<br />
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Once the above items are deducted from the institutionalized individual’s income, any remaining income is contributed toward the cost of his or her care in the institution.<br />
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Sourse from Medicaid.govAvivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-54612394957734951902012-03-25T16:56:00.003-05:002012-05-25T17:15:55.317-05:00Life Insurance Accelerated Death Benefit RidersMany life insurance policies issued today include an Accelerated Death Benefit Rider . Under an Accelerated Death Benefit Rider, the carrier will pay part of the death benefit to a policy owner if the insured is proven to have an illness anticipated to result in the death of the insured within a specified time period. While the Internal Revenue code allows for life expectancies as long as 24 months, most carriers will trigger the rider only with a mortality period of less than 6 months. The amount of the life insurance death benefit available is determined by the company according to a predetermined formula or percentage of the policy face amount. In general the carriers work to keep their benefits tax free, but tax treatment and program requirements within a company by state. <br />
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For a young middle aged family with an upper middle class networth, we can often structure a program using a finite payment plan on a No Lapse Guaranteed Universal Life policy to guarantee both disaster management coverage while the couple is younger, and a guaranteed pool of long term care funding for their final years.<br />
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It is generally prudent to consult with a tax attorney and medicaid planning expert before taking an accelerated death benefit disbursement. Even just owning a policy with an accelerated benefit product might affect your eligibility for these programs. In addition, exercising the option to accelerate death benefits and receiving those benefits before you apply for these programs, or while you are receiving government aid, might affect your initial or continued eligibility. You should always check with the Medicaid Unit of your local Division of Medical Assistance and the Social Security Administration.<br />
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An accelerated death benefit is not a long-term care policy or nursing home insurance policy. The amount paid out isn’t guaranteed to cover medical, nursing home or other bills. The money you receive can be used for any purpose, and is not earmarked for actual patient care. Unlike conventional life insurance proceeds, accelerated benefits might be taxable.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-5623024312402755512012-03-25T16:43:00.005-05:002012-03-25T20:09:03.011-05:00Whole Life Insurance Policy FAQsWhen you think of life insurance the whole life insurance policy is the first type of insurance that comes to mind. It can be considered a staple in the life insurance industry and has been so ever since the concept of life insurance was thought up. The whole life insurance policy is the do all of life insurance. It builds true value and provides benefits that most insurance buyers have not even thought of. <br />
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Death Benefit: The whole life policy provides a level guaranteed death benefit which is usually free of Federal Income Taxes. If, however, it is part of your estate it is subject to Federal Taxes. Talk to your accountant or attorney to confirm this. Your death benefit can never be canceled as long as you continue to pay the required premiums.<br />
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Premiums: Premiums are guaranteed to remain level. They never increase, except in the case of a modified whole life insurance policy which starts out with a premium that is lower than the actual premium should be. <br />
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Cash Values: Whole life insurance policies earn cash values which accumulate tax-deferred. Policy owners can take tax free loans from the cash values of their policies. <br />
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Dividends: If these policies are participating life insurance policies they are eligible to earn dividends. Dividends can be used in varying ways. <br />
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•Paid Up Additions: Dividends can be used to purchase paid up additions. Each year your dividend can be used to purchase an additional single premium whole life policy which would added to your original policy. This is the option usually used by most life insurance companies if the policy owner does not otherwise elect. Dividends are not guaranteed.<br />
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•Cash: Each year your dividend can be paid to you in cash. If this dividend option is elected, each year on the following anniversary, a check will be mailed to the policy owner in the amount of the dividend.<br />
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•Premium Reduction: Dividends can be used to reduce premiums. The insurance company will advise you that your premium for that year is less than the premium contracted for. It has been reduced by the dividend. After your whole life policy has been in force for a long time dividends have been known, not only to reduce premiums for that given year, but in some cases to totally eliminate the premium. <br />
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•Dividend Accumulation: Dividends can be left to accumulate interest. This is a very good option to use as you can apply the cash to so many things. You can use it to fund college education for children, or may be to pay off the balance of an outstanding mortgage. <br />
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Modified Whole Life <br />
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•The whole life insurance policy is so flexible that many policies have been derived from it; some of them are quite commonplace today. The policy that is usually referred to as a modified life policy is one for which you would pay a lower premium for about 5 years or so. This was, I believe, especially designed for young people, may be in college, who do not have much free cash, therefore limiting the amount available to pay a life insurance premium. When they graduate, and are gainfully employed, they will have more spendable income and will be able to pay the regular premium. <br />
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•Another modification of the whole life policy is the limited payment policy . The policy owner buys a policy for which he only pays a premium for a certain number of years. The 10 pay life is a good example. With this policy the premium payer only pays premiums for 10 years. The face amount of the policy remains level for the entire life of the policy. The policy earns cash values and accumulates dividends just like any permanent life insurance policy. <br />
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•Another modification of the whole life policy is the single premium life insurance policy You pay one premium for this policy and never pay another premium for as long as you live. The death benefit remains level throughout. You have cash values and earn dividends like any other whole life policy. Some people like to take care of their important needs and not think about them for a while. This policy would serve that person well. <br />
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There are many other variations or modifications to the whole life insurance policy which will not be discussed here as they vary from company to company. <br />
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Riders <br />
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There are several riders that you can add to your whole life insurance policy that would enhance your benefits. <br />
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•Waiver Of Premium <br />
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One of the most commonly used riders to the whole life insurance policy is the waiver of premium disability rider. If you should become permanently disabled, while you own this policy, the life insurance company will pay your premiums for you. With most companies you must be disabled for a minimum of six months for the waiver of premium to take effect. <br />
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•Accidental Death Benefit <br />
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The accidental death benefit rider, otherwise known as the double indemnity rider, affords the policy owner double the death benefit upon his or her death in an accident. If, for example, you are insured for $1,000,000, you selected the accidental death benefit rider, and you should die in an automobile accident, your beneficiaries would receive $2,000,000 from the insurance company. <br />
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•Term Life Insurance <br />
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Some life insurance companies allow you to add term insurance riders to your whole life insurance policy. Let us say you like the cash value feature of the whole life policy but you need additional death benefit to protect your family you may add a 5 or 10 year term rider or an increasing premium rider to meet that need. When you can put your hands on more cash, or have more spendable income, you can convert the term insurance rider to whole life insurance. <br />
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•Living Benefit Rider <br />
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If you should become terminally ill and are in need of immediate cash it would be good that you had a living benefit rider on your policy. The insurance company would pay to you a portion of your death benefit before you die.<br />
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•Spouse & Child Riders<br />
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You could buy term life insurance for your spouse and children separate from your own life insurance policy. Some life insurance companies allow you to add these policies as riders to your whole life policy at a reduced cost.<br />
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•Future Policy Purchase Option<br />
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As you get older you may find it more difficult to get new life insurance because of the state of your health. Some insurance companies can add a rider to your whole life insurance policy which would allow you to purchase additional insurance in the future regardless of the state of your health.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-17432927796109327642012-03-25T16:12:00.005-05:002012-03-25T20:11:32.430-05:00Why Buy Paid-Up Additions in Life Insurance?Paid up additions are bought using the Dividend earned by the base policy. Using these dividends, an insured person has an option to buy an additional policy which will be basically cheaper than buying a new one. Hence, your benefit i.e. the sum insured amount is increased. This helps the insurer by not paying tax for his dividend income and it helps the company too as the dividend what it pays comes back to them.<br />
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Paid up additions are a very common dividend option for <a href="http://life-insurance-broker.ca/life-insurance-2/whole-life-insurance/" title="Whole Life Insurance Page">whole life insurance</a> policies.<br />
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When electing the Paid Up Additions (PUA) as your dividend option you use 100% of the dividends being paid out each year to buy you additional blocks of permanent whole life insurance, paid up for life. For example, you received a dividend of $500 in the first year, it might buy you $2,000 of permanent paid up whole life insurance. Therefore, your total amount of life insurance has now increase buy $2,000. The cash value of the policy has only increase by $500, not the full $2,000 of additional death benefit.<br />
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As time goes on the dividends increase. This is common of all maturing whole life insurance policies. A more mature policy has a larger cash value and produces more dividends. Also, the additional paid up whole life insurance blocks you are buying throughout your life are also eligible for dividends, so a growing policy will produce larger dividends over time.<br />
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As you age, the cost of insurance also continues to up. So, the same amount of money paid out in the dividend 10 years ago will not buy you the same amount of permanent life insurance now. The fact is your annual dividends are increasing faster than your cost of insurance which means that your total amount of whole life insurance tends to accelerate throughout your life, not decline. All I’m trying to say here is that your age cost of life insurance coverage will temper this increasing death benefit. It will always be very healthy and higher than you ever thought possible, but it will never become exponential growth.<br />
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The cash value inside a whole life insurance policy is based on the guaranteed cash value which all whole life policies have and a variable cash value. Together they produce the total cash value. The variable cash value amount is based on the cash dividends paid out. As in the example above, if the insurance company pays out a $500 dividend, then your variable cash value increases by $500. As time goes by that $500 helps your policy grow. This is because the total cash value inside a whole life insurance policy increase the amount of dividends paid on that policy in the next year. This is reflective of getting an interest rate on your cash value inside the policy. In effect, the bigger the policy and the larger the cash values, the bigger the returns on that policy the following years, as reflective of an increased dividend.<br />
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If you would like to know how you can buy a whole life insurance policy with a guaranteed premium and a growing amount of coverage, we can show you how this is done. Participating in the dividend scale of a life insurance company can be one of the safest and best steady returns in your investment portfolio. <br />
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Paid up additions are one of the most common dividend options chosen by whole life insurance policy holders today. It will turn your whole life insurance policy into a high performing, long term growth product which creates substantial wealth for your estate over time.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-48217846860130416562011-01-15T16:20:00.000-06:002011-01-15T16:20:31.050-06:00A Potential Solution Using Critical Illness InsuranceCritical illness insurance is a source of funds you can use to help cover the indirect costs that arise when a serious illness strikes. By providing money when you need it most, upon diagnosis of a serious illness (as defined in the policy), critical illness insurance can help relieve worry about your finances so that you can focus on getting well.<br />
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Critical illness insurance pays you a lump sum of money upon diagnosis of a covered condition. This money is yours to use for any purpose, with no restrictions. For example, critical illness insurance proceeds can be used to pay:<br />
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<ul><li>Mortgage or rent payments, as well as any other bills you may have;</li>
<li>Health insurance deductibles, coinsurance and/or co-payments;</li>
<li>The costs of receiving out-of-network medical treatment, including possible travel and lodging expenses;</li>
<li>Treatments not covered by traditional health insurance;</li>
<li>Child care expenses during treatment or hospitalization;</li>
<li>Modifications to your home or vehicle; and/or Shorter-term home health care.</li>
</ul><br />
Since the premiums paid for critical illness insurance are not tax deductible, the benefits are not considered as income and are received 100% free of income tax.<br />
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Critical illness insurance helps you to survive financially while physically recovering from a serious illness!Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-75122156865151444062011-01-15T16:17:00.000-06:002011-01-15T16:17:41.570-06:00If a Critical Illness Strikes You Ask Yourself…If a life-threatening illness strikes you:<br />
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<ul><li>How long can you survive financially without a regular paycheck?</li>
<li>How will your regular bills be paid?</li>
<li>Will you have sufficient funds available to pay for: Any insurance co-payments and deductibles;</li>
<li>Alterations to your home and/or automobile to meet any special needs;</li>
<li>Out-of-town transportation and lodging for medical treatment;</li>
<li>Additional household and child care expenses;</li>
<li>Treatments not covered by traditional health insurance; and/or</li>
<li>Shorter-term home health care during your recuperation?</li>
</ul>Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-79223213222976927092011-01-15T16:11:00.001-06:002011-01-15T16:12:27.540-06:00Special Needs Planning: Legal PlanningIn planning for a special needs child, there are four primary legal issues that should be addressed:<br />
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<ol><li><strong>Wills:</strong> The primary purpose of a will is to state how you want your assets distributed at your death.</li>
<li><strong>Guardian:</strong> If your child's condition warrants it, careful thought must be given to a future guardian or conservator for your child, after both parents are gone. Guardian of the person may be different from the trustee of financial assets</li>
<li><strong>Letter of Intent:</strong> A letter of intent serves as a blueprint of what you want your child's life to be when you can no longer care for your child.</li>
<li><strong>Special Needs Trust:</strong> A type of trust that can receive and manage assets for the benefit of your disabled child, without disqualifying the child from receiving government benefits. Boilerplate wording from an attorney not experienced in this field will not suffice. Special Needs Trusts should be specific and include exact wording, so as not to disqualify the individual from receiving government support. As your child reaches adulthood, you may lose authority to make decisions for him or her. Items 5 and 6 below provide you with an opportunity to continue assisting your adult child in making appropriate decisions throughout his or her lifetime. Both documents should refer specifically to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This allows disclosure of medical and hospital records and information to the “agent” and are not subject to federal regulation of privacy rules. Don’t forget to identify “alternate agents” to carry on for you after you are no longer able to do so.</li>
<li><strong>Power of Attorney:</strong> A Power of Attorney is a legal instrument that is used to delegate legal authority to another person, giving that person the authority to make property, financial and other legal decisions for the person who executes the Power of Attorney.</li>
<li><strong>Medical Directives:</strong> In addition to recording the treatments an individual wishes to have or not have should he or she become unable to make those decisions, a medical directive also appoints a proxy…someone to make medical decisions for a person who cannot make medical decisions on his or her own.</li>
</ol>Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-5841157649064940702011-01-15T16:06:00.000-06:002011-01-15T16:06:58.297-06:00Special Needs Planning: Medical PlanningThe medical treatment required for special needs children can be expensive, often beginning at or shortly after birth. Without insurance, the cost of medical care is staggering!<br />
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<strong>If you have private health insurance</strong>, make certain you understand what the policy will and will not cover, particularly in regard to any specialized services, equipment or therapy. Make sure you obtain prior authorizations, or you could end up paying the bill. If your coverage is provided through a health maintenance organization (HMO) or preferred provider organization (PPO), confirm that the specialists needed by your child are part of the network. Understand when you can seek out-of-network care and what the cost will be to you. If a claim is denied, get a written explanation of the reason…you may want to appeal and resubmit the claim. Finally, a helpful tip is to request that a case manager be assigned to your child, which will then enable you to work consistently with someone who is familiar with your child's situation and needs.<br />
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<strong>Many private health plans cover students and disabled persons only until their 22nd birthday.</strong> By no later than September 23, 2010, however, all young adults under age 27 may be able to continue health care coverage through a parent’s policy. Some health insurance plans will provide extended coverage beyond age 22 (or 26) to a disabled dependent. Check with your benefits department or insurance company!<br />
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<strong>If your private health insurance stops covering your child at his or her age 22 (or 26),</strong> your disabled child may be eligible for Medicaid coverage. Check with your county health or Social Security office. (In some states, disabled children can receive Medicaid coverage as early as age 14.)<br />
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<strong>If you do not have private health insurance,</strong> check with your county social services or Social Security office to determine what assistance may be available. Medicaid is a health care program for people with low incomes and limited assets. In most states, children who get SSI (Supplemental Security Income) benefits qualify for Medicaid. In many states, Medicaid comes automatically with SSI eligibility. In other states, you must sign up for it. Also, some children can get Medicaid coverage even if they don't qualify for SSI. In addition, the State Children's Health Insurance Program (SCHIP) enables states to insure children from working families with incomes too high to qualify for Medicaid, but too low to afford private health insurance. Your state Medicaid agency can provide more information about SCHIP.<br />
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<strong>Beginning at your disabled child's age 18,</strong> Medicaid benefits are payable based on the child's own assets and income, even if your child is still living at home with you.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-23565742210471894242011-01-15T16:02:00.002-06:002011-01-16T05:53:09.741-06:00Special Needs Planning: Future NeedsPlanning for the Future:<br />
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Once an initial assessment of the situation is complete, the care and well being of children (be they minor or adult) who are mentally, physically or developmentally disabled can be greatly enhanced by your planning in areas such as:<br />
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<b>Legal Planning</b> How will your estate be distributed when you die? Who will care for your special needs child when you're no longer able to do so? How can your estate be arranged to provide for your child, but not disqualify your child from receiving government benefits?<br />
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<b>Medical Planning</b> How can you best obtain and pay for the specialized medical care your child may require? Who will oversee your child's medical care when you're no longer here?<br />
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<b>Financial Planning </b>What steps can you take to guarantee that your child will have a financial safety net? What financial aid is available? How should your assets be arranged to best provide for your child's future financial needs?<br />
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<b>Education Planning</b> What steps can you take to make sure that your child receives the best possible education?<br />
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Planning for special needs children is a complex process. Particularly when it comes to legal planning/legal documents, you are strongly advised to consult an attorney with experience in estate planning for families with children with special needs.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-75023459381982307342011-01-15T15:54:00.000-06:002011-01-15T15:54:53.850-06:00Special Needs Planning: Education PlanningUndoubtedly, you want your child to receive the best education possible. To assure this outcome requires that you become your child's advocate and a participant in your child's education plan. Step one is an understanding of the education laws that apply to children with disabilities.<br />
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Individuals with Disabilities Education Act (IDEA) The Individuals with Disabilities Education Act requires that special needs children receive:<br />
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<ul><li>A free appropriate public education from ages 3 through 21.</li>
<li>Education provided as close to home as possible with children who do not have disabilities.</li>
<li>Additional services, such as speech therapy, occupational therapy or a classroom aide, which are designed to meet their unique needs and prepare them for employment and independent living.</li>
<li>An assessment to determine their needs.</li>
</ul>The law provides two guarantees:<br />
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<strong>Individualized Education Plan (IEP) </strong>The IEP is a written statement of your child's abilities and impairments. It's developed by a team that includes you, school district personnel and educational professionals who have evaluated your child and his or her abilities. The IEP must be reviewed at least annually.<br />
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<strong>Due Process</strong> As a parent, you have both rights and responsibilities in relation to your child's IEP. Due process provides a mechanism for resolution of any disagreements regarding a child's IEP.<br />
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Before your child approaches age 22, you are advised to have a plan in place to address the issues that are sure to arise as your child transitions out of the public education system. Depending on the nature of your child's disability, this plan may include additional educational or vocational services, work, or ongoing rehabilitation and medical services. Planning for these needs requires research done on your part years before your child reaches age 22. Many special needs children are of average or above average intellect. There are many colleges whose programs may be appropriate for your son or daughter. If he or she can obtain a college degree, it will greatly enhance employability.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-79519691516985718062011-01-15T15:48:00.001-06:002011-01-15T15:49:28.546-06:00Special Needs Planning: Financial Planning<strong>Government Benefits</strong><br />
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Supplemental Security Income (SSI) benefits are payable to adults or children who are blind or disabled. SSI supplements a person's income up to a certain level, which varies from state to state.<br />
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In the case of disabled children under age 18, the parent's income and assets are considered when deciding if the child qualifies for SSI benefits.<br />
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Beginning at age 18, SSI benefits are determined based upon the disabled person's income and assets. As a result, a child who was not eligible for SSI before age 18 may become eligible at age 18. To qualify for SSI benefits, the disabled person cannot have "countable resources" (assets) in excess of $2,000 or "countable income" in excess of the maximum Federal benefit rate.<br />
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In addition, financial resources may be available through state and community programs. Consult with the appropriate federal, state, county and/or local agencies for assistance.<br />
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<strong>Other Financial Considerations</strong><br />
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A special needs trust with no assets is worthless in providing for your child's future care and well being. These are some sources that you can consider for funding a special needs trust:<br />
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<ul><li><strong>Savings:</strong> Based on your estimate of your child's future financial needs, begin a regular savings program.</li>
<li><strong>Investments and Retirement Plans:</strong> You may want to name a special needs trust as the beneficiary of an investment program and/or retirement plan.</li>
<li><strong>Life Insurance:</strong> Many special needs trusts are funded, at least in part, by life insurance. Why? Because life insurance is the only alternative that can produce a stated amount of money exactly when needed…at your death. Life insurance death benefits are generally paid free of income tax and, if ownership is properly structured, can be removed from your estate for estate tax purposes. Another advantage of funding a special needs trust with life insurance is that the rest of your estate can then be preserved for other family members.</li>
</ul>Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-7875843430388350972011-01-15T15:21:00.000-06:002011-01-15T15:21:31.697-06:00Special Needs Planning: Special Needs TrustThe purpose of a special needs trust is to provide financial assets for your child's future care and well being, while maintaining the child's eligibility for government benefits.<br />
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Under current federal law, an individual with more than $2,000 in assets is disqualified from most needs-based government benefits. State assistance programs may also be based on need. If your child were to receive an inheritance from you directly, it's highly probable that the inheritance would disqualify your child from receiving needed benefits. Do not leave assets to the child directly.<br />
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With a special needs trust, however, you leave assets to the trust. The trust is managed by a trustee, who then can use trust assets on your child's behalf. Special needs trust requirements are stringent, so it's important that you consult with an experienced attorney in setting one up.<br />
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In a properly-structured special needs trust, the trust holds title to the property for the benefit of the disabled child or adult. The assets in the special needs trust can then be used to provide for the needs of the disabled individual, as well as to supplement benefits received from government assistance programs. For example, trust assets can be used for:<br />
<ul><li>transportation, including purchase of a vehicle;</li>
<li>training, rehabilitation or education programs;</li>
<li>equipment;</li>
<li>medical, dental and eyesight expenses;</li>
<li>entertainment;</li>
<li>insurance premiums;</li>
<li>companion/home health aide expenses; and</li>
<li>items to enhance quality of life/self esteem.</li>
</ul>A special needs trust can hold cash, as well as title to stocks, bonds, mutual funds, real estate and personal property. In addition, it can own and/or be the beneficiary of life insurance policies. Another use for special needs trusts is to receive any proceeds from personal injury settlements without jeopardizing eligibility for government benefits.<br />
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In order to retain eligibility for government benefits, it's important that wellintentioned family members, such as grandparents, understand that their will should bequeath assets to the special needs trust, and not directly to the disabled individual.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-68113950057165027492011-01-15T15:15:00.001-06:002011-01-15T15:16:08.853-06:00A Role for Life Insurance…The Wealth Replacement Trust<strong>The Problem:</strong><br />
<br />
Through a charitable remainder trust (or charitable gift annuity), a charitably-minded person can realize certain income and estate tax objectives, while ultimately providing assets to a favorite charity. In doing so, however, the donor's family will be deprived of those assets that they might otherwise have received.<br />
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<strong>A Potential Life Insurance Solution:</strong><br />
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In order to replace the value of the assets transferred to a charitable remainder trust (or charitable gift annuity), the donor establishes a second trust - an irrevocable life insurance trust - and the trustee acquires life insurance on the donor's life in an amount equal to the value transferred to the charitable remainder trust or charitable gift annuity. Using the charitable deduction income tax savings and the annual cash flow from the remainder trust or gift annuity, the donor makes gifts to the irrevocable life insurance trust that are then used to pay the life insurance policy premiums. At the donor's death, the life insurance proceeds generally pass to the donor's heirs free of income tax and estate tax, replacing the assets that then belong to the charity.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-3660561629101195402011-01-15T15:09:00.000-06:002011-01-15T15:09:04.811-06:00How Can an Irrevocable Life Insurance Trust Be UsedAn irrevocable life insurance trust can be put to a variety of uses:<br />
<ul><li>If your estate is likely to face a federal estate tax liability, an irrevocable life insurance trust can replace funds used to pay the estate tax, without the death proceeds also being subject to the estate tax.</li>
<li>If your heirs are likely to need additional estate liquidity after your death, such as to continue a family business, an irrevocable life insurance trust can provide that liquidity, again without the insurance proceeds being subject to the federal estate tax.</li>
<li>If you want to control how death proceeds are distributed, you can do so through the provisions included in an irrevocable life insurance trust.</li>
<li>If you have children from a prior marriage, but want your current spouse to be the primary beneficiary of your estate, naming your children the beneficiaries of an irrevocable life insurance trust can provide them with a distribution at your death, rather than at your surviving spouse's later death.</li>
<li>If you want to leave your loved ones a substantial life insurance estate, an irrevocable life insurance trust can be used to pass the full value of life insurance proceeds to your heirs estate tax free.</li>
<li>If you want to make a substantial bequest to a charity, either during your lifetime or at your death, an irrevocable life insurance trust can play a wealth replacement role, with the proceeds from the trust replacing for your heirs the value of assets given to charity.</li>
</ul>If you are considering use of an irrevocable life insurance trust, however, it is important that you also evaluate the potential drawbacks of this arrangement:<br />
<ul><li>Since the trust is irrevocable, you relinquish control of the life insurance policy and annual gifts made to the trust. In addition, once the trust document is executed, you cannot change the terms or terminate the trust.</li>
<li>If the trust contains the Crummey withdrawal provision in order to qualify the gifts to the trust for the annual gift tax exclusion, a beneficiary may exercise his or her right to demand a withdrawal.</li>
<li>There is some expense involved. In addition to possible trustee fees, you should consult with an attorney experienced in estate planning in order to avoid unforeseen tax and distribution consequences.</li>
</ul>Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-12822877340470285792011-01-15T14:56:00.000-06:002011-01-15T14:56:43.486-06:00What Is Unified Federal Estate and Gift TaxationThe federal estate tax is a transfer tax imposed on the privilege of transferring property at death, while the federal gift tax is imposed on the transfer of property during the property owner's lifetime. Both taxes are levied on the right to transfer property, and not on the property itself. The amount of tax payable, however, is measured by the value of the transferred property.<br />
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Elements of Unified Federal Estate and Gift Taxation<br />
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<strong>Unlimited Marital Deduction</strong> The estate and gift tax marital deduction is unlimited, meaning that any amount can be transferred from one spouse to the other spouse, either during lifetime or at death, without being subject to federal gift or estate tax, so long as certain conditions are met.<br />
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In addition, the 2010 Tax Relief Act provides for "portability" of the maximum exclusion between spouses. This means that a surviving spouse can elect to take advantage of any unused portion of the estate tax exclusion of his or her predeceased spouse. As a result, with this election and careful estate planning, married couples can effectively shield up to $10 million from the federal estate and gift tax.<br />
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<strong>Federal Estate and Gift Tax Rates</strong> The federal estate and gift tax rates consist of a single unified table that is progressive and applied to the cumulative value of all taxable lifetime gifts and to transfers at death. In 2011 and 2012, the unified rates begin at 18% of a taxable gift or estate that does not exceed $10,000 and increase to 35% of a taxable gift or estate that exceeds $500,000.<br />
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Note: Due to a "sunset" provision in the 2010 Tax Relief Act, the current marital deduction and estate and gift tax rules terminate at the end of 2012, at which time, without future Congressional action, the federal estate and gift tax rules revert to those in effect in 2001.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-61486000619836079472011-01-15T14:45:00.000-06:002011-01-15T14:45:45.759-06:00What Is the Potential Impact of a State Death TaxWhile the federal estate tax has a potentially substantial impact on larger estates, many estate owners fail to plan for the impact of a state death tax, even though many more estates incur a state death tax liability than are subject to the federal estate tax.<br />
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There are <strong>three</strong> categories of state death taxes:<br />
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<strong>Inheritance Tax</strong> Levied on the right of heirs to inherit property from a deceased person; imposed on and measured by the share of the estate each heir receives; varies in amount based on the heir's relationship to the deceased.<br />
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Connecticut Louisiana New Hampshire Delaware Maryland North Carolina Indiana Michigan Pennsylvania Iowa Montana South Dakota Kansas Nebraska Tennessee Kentucky<br />
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<strong>Estate Tax</strong> Imposed on the right of the deceased to transfer property to his or her heirs; levied on the value of the net taxable estate.<br />
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Massachusetts Ohio Rhode Island Mississippi Oklahoma South Carolina New York Puerto Rico<br />
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<strong>Credit EstateTax</strong> In place of an inheritance or estate tax, the state death tax is equal to the maximum state death tax credit allowable under the federal estate tax.<br />
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Alabama Idaho Oregon Alaska Illinois Texas Arizona Maine Utah Arkansas Minnesota Vermont California Missouri Virginia Colorado Nevada Washington District of Columbia New Jersey West Virginia Florida New Mexico Wisconsin Georgia North Dakota Wyoming Hawaii<br />
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Some state death tax statutes provide exemptions or special treatment for property passing to the decedent's spouse or children.<br />
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An analysis of the potential impact of your state's death tax is an important element in your estate planning. In addition, while there was a credit against federal estate taxes for death taxes paid to a state through 2004, the credit was replaced with a deduction for state death taxes beginning in 2005. Since the 2010 Tax Relief Act contains a "sunset" provision, without future Congressional action, the state death tax credit will be reinstated in 2013.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-64059269998952085652011-01-15T14:21:00.000-06:002011-01-15T14:21:44.408-06:00How Can the Estate Tax Bill Be PaidThe federal government will not accept a percentage of your estate as payment for your estate tax bill. Instead, your estate tax bill must be paid in cash, and it must be paid within nine months after your death.<br />
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There are <strong>FOUR</strong> ways to provide your estate with the cash needed to pay your estate tax bill:<br />
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1. <strong>100% Method</strong> You could accumulate enough cash in your estate to pay your estate tax bill outright. Rarely, however, does a successful person accumulate such large sums of cash. Instead, the reason for financial success is usually due to the investment of cash in appreciating assets, rather than accumulating it in a bank.<br />
<br />
2. <strong>100% Plus Method</strong> Your estate could borrow the cash needed to pay your estate tax bill. This, however, only defers the problem, since the money will then have to be repaid with interest.<br />
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3. <strong>Asset Liquidation Method</strong> Your estate could liquidate sufficient assets to pay your estate tax bill. This choice may make sense if your estate owns considerable assets that can be readily sold for a gain following your death. Keep in mind, however, that if a forced liquidation is necessary, it may bring only a small fraction of the true value of your assets. In addition, sales expenses are bound to be incurred.<br />
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4. <strong>Discount Method</strong> Assuming you qualify, you can arrange now to pay your estate tax bill with life insurance dollars. For every dollar your estate needs, you can give an insurance company from approximately one to seven cents a year, depending on your age and health. No matter how long you live, it is unlikely you will ever give the insurance company more than 100 cents on the dollar. In addition, the life insurance policy can frequently be structured to accommodate your unique premium payment requirements.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-56663909496799905862011-01-15T14:16:00.000-06:002011-01-15T14:16:44.678-06:00What Is a TrustThe word "trust" is applied to all types of relationships, both personal and business, to indicate that one person has confidence in another person.<br />
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For our purposes, a trust is a legal device for the management of property. Through a trust, one person (the "grantor") transfers the legal title to property to another person (the "trustee"), who then manages the property in a specified manner for the benefit of a third person (the "trust beneficiary"). A separation of the legal and beneficial interests in the property is a common denominator of all trusts.<br />
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In other words, the legal rights of property ownership and control rest with the trustee, who then has the responsibility of managing the property as directed by the grantor in the trust document for the ultimate benefit of the trust beneficiary.<br />
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A trust can be a living trust, which takes effect during the lifetime of the grantor, or it can be a testamentary trust, which is created by the will and does not become operative until death.<br />
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In addition, a trust can be a revocable trust, meaning that the grantor retains the right to terminate the trust during lifetime and recover the trust assets, or it can be an irrevocable trust, meaning that the grantor cannot change or terminate the trust or recover assets transferred to the trust.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-78992656854663923682011-01-15T14:12:00.001-06:002011-01-15T14:12:59.904-06:00What Are the Types of Charitable TrustsThere are two types of charitable trusts, each of which treats the income interest and remainder interest differently:<br />
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<strong>Charitable Remainder Trusts</strong> A beneficiary named by the donor receives the income interest for life or for a stated number of years, after which the remainder interest is donated to the charity.<br />
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<strong>Charitable Lead (or Income) Trusts</strong> The opposite…the charity receives the income interest for a stated period of time, with the remainder interest then going to a beneficiary named by the donor.<br />
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While each type of charitable trust satisfies different objectives, they share certain common features:<br />
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<strong>During Life</strong> In order to realize maximum tax benefits, most people create charitable trusts during their lifetime, especially during their highest income-producing years.<br />
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<strong>Irrevocable </strong> Once a charitable trust is created and becomes operational, it is irrevocable…you cannot regain ownership of property given to the trust.<br />
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<strong>Tax-Exempt Charities</strong> The gift must be made to a tax-exempt charity approved by the IRS in order to provide the desired tax benefits.<br />
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<strong>Income Tax Deduction</strong> A split-interest gift to a charitable trust results in a current income tax deduction, assuming the taxpayer itemizes.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-39193090367007953362011-01-15T14:05:00.008-06:002011-01-15T15:03:47.517-06:00What Is an Irrevocable Life Insurance TrustWhile there are many different types of trusts, an irrevocable life insurance trust is a trust with the primary purpose of owning a life insurance policy in order to remove life insurance proceeds from the taxable estate and, as a result, avoid paying estate taxes on those proceeds.<br />
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While life insurance proceeds usually pass to the beneficiary free of federal income tax, they are subject to federal estate tax if included in the insured's estate at death.<br />
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If the estate exceeds a certain value, this means that a portion of the life insurance proceeds, if included in the taxable estate, could go to pay federal estate taxes instead of being available to the beneficiaries:<br />
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If you die in: And the value of your estate exceeds: Your taxable estate is subject to tax rates from/to:<br />
2011 $5 million 18%/35%<br />
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2012 $5 million 18%/35%<br />
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2013 or later $1 million 18%/55%*<br />
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* The 2010 Tax Relief Act provides a maximum 35% estate tax rate and a $5 million unified credit exemption equivalent, but "sunsets" at the end of 2012. This means that, without future Congressional action, the 2001 federal estate tax rules will be reinstated in 2013 with a maximum 55% estate tax rate and a $1 million unified credit exemption equivalent.<br />
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The objective of an irrevocable life insurance trust is to remove life insurance proceeds from the taxable estate so that the beneficiaries receive the entire amount, undiminished by estate taxes.<br />
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<br />
<strong>Ask Yourself…</strong><br />
<ul><li>Do you want to protect the value of your estate from shrinkage due to the payment of estate settlement costs at your death?</li>
<li>Do you want your family to have funds available to replace your earning power at your death?</li>
<li>Do you want to make plans to provide for your children from a prior marriage at your death?</li>
<li>Will your heirs need cash to continue operating a family business at your death?</li>
<li>Do you want to make a substantial gift to charity, without depleting the size of your estate that passes to your heirs?</li>
<li>Would you like the value of insurance proceeds on your life to pass to your heirs transfer tax free and outside of probate?</li>
</ul>If the answer to one or more of these questions is "yes," then an irrevocable life insurance trust may be the solution.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-1107557792389496782011-01-15T13:51:00.000-06:002011-01-15T13:51:16.393-06:00What Are the Potential Costs to Settle an EstateRegardless of the size of an estate, certain cash outlays to settle the estate are inevitable. The size of these outlays and the resulting estate shrinkage, however, usually vary with the size and complexity of the estate.<br />
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Estate settlement costs can arise from some or all of the following:<br />
<br />
1. <strong>Final Expenses:</strong> Final expenses can include medical, funeral and burial expenses, plus the payment of debts owed by the estate owner.<br />
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2. <strong>Estate Administration Expenses:</strong> The costs to administer an estate may include bonding costs, attorney and/or executor fees, appraisal fees, brokerage or sales fees or commissions, court costs and any costs associated with maintaining or improving estate assets for sale.<br />
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3. <strong>Taxes:</strong> Even estates that escape the federal estate tax may be subject to state death taxes.<br />
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Payment of these estate settlement costs can siphon off anywhere from 10% to as much as 60% of an estate's value, considerably reducing the inheritance ultimately received by the heirs.<br />
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A solution to the estate shrinkage dilemma is to use life insurance to create a source of funds to pay estate settlement costs, preserving the value of the estate for the heirs.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-42816699194924937852011-01-15T13:46:00.001-06:002011-01-15T13:47:12.495-06:00The Estate Planning Process<strong>What Is Estate Planning?</strong><br />
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Estate planning is the process of accumulating, preserving and distributing assets to achieve the financial goals of people during their lifetimes, and to provide for their heirs according to the estate owner's wishes at death. As such, estate planning is not a one-time event. Instead, it is an ongoing process designed to accomplish accumulation, preservation and distribution objectives, both during your lifetime and after your death.<br />
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<strong>Estate Planning Objectives:</strong><br />
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<strong>Accumulation</strong> Estate accumulation objectives involve accumulating assets and net worth during your lifetime by systematically channeling money into savings, insurance and investment plans.<br />
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<strong>Preservation</strong> Estate preservation objectives include protecting your ability to earn an income during your working years and planning to minimize and offset estate shrinkage at your death.<br />
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<strong>Distribution</strong> Estate distribution objectives deal with identifying and implementing the tools and techniques that will distribute estate assets to your heirs in an advantageous manner that is consistent with your wishes.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-69511248789965041822011-01-15T10:39:00.001-06:002011-01-15T10:39:55.921-06:00Features of Cash Value Life InsuranceCash Value Life Insurance Features Include:<br />
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<strong>Immediate Death Benefit </strong>During your working years, your family is protected by the life insurance. In the event of your premature death, income-tax-free benefits are paid to your family.<br />
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<strong>Tax-Deferred Growth</strong> Under current law, the annual growth of the cash value in a cash value life insurance contract is not subject to current income tax.<br />
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<strong>Flexibility</strong> Certain types of cash value life insurance allow you to increase or decrease your premium payments, or make large, single premium payments.<br />
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<strong>Access to Cash Values </strong>You can borrow or withdraw life insurance cash values prior to age 59-1/2 without tax penalty.*<br />
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<strong>Ownership</strong> Since you own the policy, benefits are not affected by changes in employment or by changes in Social Security or employer-provided pensions.<br />
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<strong>Disability Protection</strong> If you become disabled, the waiver of premium benefit can take over your premium payments for you.<br />
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<strong>Tax-Advantaged Retirement Income </strong>The cash value in the policy can be converted to a retirement income that is partially or fully free from federal income tax.*<br />
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* Withdrawals and loans will reduce the policy’s death benefit and cash value available for use.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-7409331814163782002011-01-15T10:17:00.001-06:002011-01-15T10:18:22.183-06:00How Does Cash Value Life Insurance Provide Lifetime Financial SolutionsCash value life insurance is the only financial product with the flexibility to provide benefits:<br />
<br />
<strong>If You Die...</strong> Should you die prematurely, the death benefit is available to help replace your earning power.<br />
This means that funds are available to provide your family with an income, enable them to remain in their home, help pay for an education for your children...whatever the financial needs that arise at your death, funds will be available to help meet those needs.<br />
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<strong>If You Become Disabled...</strong> With the waiver of premium benefit, your plan can become self-completing in the event of your disability. This means that if you are sick or hurt and unable to work, policy benefits will remain available just as though you were paying the premiums.<br />
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<strong>If You Live to Retirement...</strong> Most of us can expect to live to retirement age, at which time cash value life insurance can serve as a source of retirement income, while still maintaining needed life insurance protection.* This means that the same life insurance that protected your family’s financial security during your working years can continue to play an important role in helping to provide retirement security.<br />
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* Withdrawals and loans will reduce the policy’s death benefit and cash value available for use.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0tag:blogger.com,1999:blog-2064396320575771408.post-34366030498585141442011-01-15T10:11:00.002-06:002011-01-15T10:14:18.894-06:00What Role Can Cash Value Life Insurance Play in Your Retirement PlanningCash value life insurance brightens your financial picture with flexibility, accessibility to cash values, tax-deferred growth and an immediate death benefit. In addition, there are a number of roles that cash value life insurance can play in your retirement planning:<br />
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<div><strong>Source of Retirement Income </strong>At retirement, the cash value available in the policy can be:</div><ul><li>taken in a lump sum by surrendering the policy;</li>
<li>converted into a guaranteed lifetime income; or</li>
<li>periodically withdrawn and/or borrowed to supplement your retirement income (withdrawals and loans will reduce the policy’s death benefit and cash value available for use).</li>
</ul><br />
<strong>Retirement Income Protection </strong>At retirement, you can elect the maximum life annuity pension option from your pension plan and use life insurance death benefits to help replace your pension income for your spouse, if you should die first. You and your spouse then enjoy a higher pension income while both of you are alive, with the knowledge that if something should happen to you, your spouse will have a continuing source of retirement income.<br />
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<strong>Accelerated Death Benefits </strong>Many life insurance companies make it possible for policyholders to collect a portion of a policy’s death benefit early, if the policyholder is terminally ill, stricken with a specific catastrophic illness or requires long-term care in a nursing home.Avivahttp://www.blogger.com/profile/16159310890418201583noreply@blogger.com0