Don’t make the mistake of assuming that life insurance is an entirely separate asset outside of your estate plan. Many people set up their life insurance policy early on in their working years and use it to think about income and mortgage payment replacements during this time. However, as your needs evolve, your life insurance policy may need to evolve as well. You may need an additional policy or you may trade in an old life term insurance policy for a universal life policy.
A full review of your estate plan should be conducted on a regular basis in order to evaluate where your life insurance policy simply is not performing the way that it needs to, to be in line with your estate planning goals. The ‘set it and forget it’ mentality often associated with a life insurance policy puts individuals at risk of making mistakes. A client might be under the impression that life insurance is totally outside of their other assets and may fail to appropriately account for this asset in the estate plan, missing opportunities to provide for your beneficiaries. If you have an underperforming or old policy that has higher administrative costs or yields lower interest rates than a current policy, there’s a good chance that you need a fresh look. Furthermore, you might get benefits from using an irrevocable life insurance trust and you should always take a look as we get closer to the end of the year, whether or not you have nonexistent or outdated beneficiary designations.
Some of the most common mistakes in this area include naming a former spouse, a deceased individual, omitting children who were born after the policy was issued, or naming a minor grandchild or child. Reach out to an experienced estate planning attorney today to talk about setting up a consultation to ensure that your life insurance is in line with the rest of your estate planning goals.
If you do not have significant assets but already have a life insurance policy in order to help provide income protection if you were to suddenly pass away, you may be curious about additional ways to fund an inheritance for your children or grandchildren. Leaving behind an inheritance for your loved ones is certainly a worthy goal and it can factor into the overall estate planning for you and your spouse. Life insurance can help to close the gap if you believe that you may need to access some of your own assets in order to support your retirement. You might even establish an irrevocable life insurance trust.
The first step to take in this process is to inventory all of the assets you have and to determine with your financial planning advisor and your New Jersey estate planning attorney, what portion of those assets need to be allocated towards supporting you in retirement. From this point on you may determine that additional funds inside retirement or investment accounts could be passed on to your loved ones.
You may also decide, however, that additional life insurance is a good way to support and leave behind a legacy for your loved ones. You would need to decide what kind of insurance is most appropriate in this situation. The most affordable type of life insurance is known as term life because it can be obtained relatively inexpensively and provide protection for you and loved ones, if something were to happen to you over a specific period of time. You can speak with your New Jersey estate planning attorney to learn more about how life insurance may fit into the scope of your long-term estate planning needs.
Many business owners have a buy-sell arrangement set up for the future. It’s helpful to draw out these directions in advance, especially when there is the potential that future owners or part-owners might get gridlocked with one another. In these situations, buy-sell directions can help disputing parties move forward.
It’s possible that you’ve already heard about a shotgun buy-sell arrangement, but a quick draw agreement is a bit different. Under a shotgun, the offering individual stipulates a price. The offerree then has the option to buy those shares or to sell their own shares to the offeror. The exact timing isn’t a major issue in this situation, since the offeree retains the option to either buy or sell. In some ways, this can even be seen as a disincentive to pull the trigger.
All that changes under a quick draw arrangement. Under a quick draw, either side can provide a notice to purchase the other’s shares at a price that is determined through an appraisal process. This can happen after a contractually defined “trigger event”, but the timing of the trigger pull is essential in quick draw. Simply put, timing is everything.
Under quick draw, buyer and seller designation is determined simply by who submits their notice to purchase the other’s shares first. A difference of even just minutes can determine who gets to buy and who gets to sell. This complex process was recently held up in Mintz v Pazer, in which the judge supported this out of the box buy-sell arrangement.
If you’d like to learn more about your buy-sell options and put a plan for the future in motion today, reach out to us at 732-521-9455 or email us at email@example.com
If you wish to protect your money or assets or are about to receive a sudden windfall such as an inheritance, you may want to consider a number of strategies to protect yourself from lawsuits. Simple reason: “The Deep Pockets Theory”; the people with the money are the people who are sued.
1) Increase your liability insurance. If you are about to inherit $3 million, call your broker and increase your liability policy to protect that additional $3 million. Do it before you get the money. Rates are inexpensive.
2) Consider separating assets. You may not want your spouse to have access to your new windfall. If you put the money in a joint account, that is what will happen.
3) Protect yourself from renters. If you have rental property or are going to get rental property, put the property into a business entity such as an LLC to shield your assets from a disgruntled tenant. That way, they can sue the entity for what it has, but cannot go after you and what you have.
4) Create a trust and/or business entity to shield your assets. If you do part-time work you probably are operating as a sole proprietorship. But all of your assets are at risk if you are sued.
5) Be careful with partnerships. If you have an informal partnership, you are responsible for the actions of your partner. Form an LLC or other entity to provide legal protection.
Many investors are so focused on their return on investment that they fail to consider or implement asset protection strategies. As a recent article explains, an investor who has not protected his investments is a mere sitting duck. If you haven’t considered asset protection for your investments, below are four strategies you should consider:
1. Insurance: This is an important part of any asset protection plan because it shifts the risk of loss to somebody else. Insurance can be purchased for almost any asset or activity.
2. Wait for Social Security: Social security is an important safety net for an individual or couple as they age. By waiting as long as possible before withdrawing benefits, an individual or couple can increase their ultimate return.
3. Execute and Update an Estate Plan: An estate plan accomplishes many tasks. Not only does it provide for your loved ones after your death, but it can also utilize various tools to reduce the tax liability on your estate and your heirs.
4. Consider Business Ownership for a Favorable Tax Rate: Ownership of assets by a business entity rather than an individual often means a lower tax liability on the assets. If you have a home business or simply a large amount of assets, consider forming a corporate entity to lower your tax liability.
Asset protection planning is an important part of any estate plan. Incorporating asset protection strategies into an individual’s estate plan is the best way to ensure that he or she is able to leave the bulk of his or her assets to his or her heirs, rather than his or her creditors. A recent article discusses several rules of asset protection.
First, realize that everything sees the light of day. An individual should craft his asset protection plan with the knowledge that his or her creditors will eventually become aware of the plan and purpose. Typically, the use of secrecy in asset protection planning can only lead to trouble.
Second, it is important to begin such planning before claims arise. An asset protection strategy will work best if it is implemented early and reviewed often. Typically, after a claim arises, it will be too late to take any asset protection measures, as they may be considered fraudulent transfers.
Finally, realize that asset protection planning cannot substitute for purchasing insurance. Having an asset protection plan in place should not deter a person from purchasing liability and professional insurance. Instead, planning should be seen as a supplement to that insurance.
As a recent article explains, high net worth families are increasingly turning to tangible assets to hold their wealth. A 2012 report cited in the article explains, “high net worth individuals hold an average of 9 percent of their wealth in tangible assets.” More than half of those surveyed stated that a large reason they purchase rare collectables and memorabilia is for the investment value of the items. Additionally, unlike a bank account, these assets have aesthetic benefits. Despite their many benefits, tangible assets do not come without some form of risk. Therefore, it is important to consider these assets as part of your overall asset protection strategy.
Asset protection for a tangible asset begins with an accurate appraisal. If you need help finding a qualified appraiser, consult an appraisal industry association such as the American Society of Appraisers. After you have gotten an appraisal, the next step is to confirm that you have proper insurance coverage. Most insurance companies offer a valuables policy, which allows a person to declare their valuable items individually and list the value of each piece or collection within the policy. Additionally, for tangible assets subject to price variation, many policies will guard against this by covering the item for its market value at the time of loss up to 50 percent over the value indicated on the policy.
While insurance is important, most people would rather not have to deal with loss of a valuable item in the first place. Therefore, it is also important to meet with a risk consultant with the goal of preventing loss altogether. Through working with a risk consultant, families can assess risk factors and provide more security for their items.
Many elder Americans are not prepared for the high costs of long-term care. This is causing a financial crisis, as too many Americans are relying on the federal and state governments in order to provide for this care. As a recent article explains, one way to avoid this crisis is by purchasing long-term care insurance.
According to the article, the two biggest fears of the baby boomer generation are (1) outliving the finances they have saved for retirement, and (2) being forced to depend on another person for care. Unfortunately, many seniors do not understand how the Medicare/Medicaid systems work, and believe that the federal programs will pay for any long-term care that becomes necessary.
In fact, Medicare has many limitations. For example, Medicare will only cover a stay in a skilled nursing facility if the stay is 100 days or less and is medically necessary. Of course, determining whether a stay is medically necessary will depend on Medicare standards that may be confusing.
Long-term care insurance, therefore, can fill in where Medicare leaves off. Long-term care insurance allows policy-holders to select which types of care they would like to receive. And what if long-term care insurance is not an option? Then it may be time to consult with an Elder Law attorney to discuss options, such as Medicaid “spend-down”, that can help with payment of long-term care.
We will die, our debts will not. Many people falsely believe that any debts they have incurred will dissolve when they die. Unfortunately, this is not the case. A new article discusses steps you can take to ensure that your debts do not eat away at the assets you had intended would go to your heirs.
One important move you can take now to protect your heirs later is to do what you can to pay down your debt. Speak with a financial advisor about how much debt you have, and how you can responsibly continue to pay it down while you are still alive. If you have a large amount of debt, consider cutting your spending now so you have more money to put towards your debts.
You may also want to consider loan protection insurance. This type of insurance is offered in a declining-term policy that will pay off specific loans if you die or become otherwise unable to pay through disability. Whether you need insurance for your home loan, credit card balances, or car loan, loan protection insurance may be a good option for you. These types of loans are often offered from lenders who provide mortgages, and may be a sensible solution for some individuals and couples.
Without addressing insurance considerations while forming a trust or limited liability company, a person may face an unexpected and catastrophic loss of insurance coverage. All insurance policies, no matter what type, are written to provide the owner or titleholder of an asset with coverage. Problems may occur, therefore, when assets are transferred to a trust or LLC.
For example, a person may transfer ownership in their home to a trust fund, LLC for various reasons including estate planning, tax considerations, or protection from creditors. Upon making such a transfer, the homeowner must be sure to change the homeowner’s insurance policy to reflect the fact that the home is now owned by the trust or LLC. Should the previous homeowner fail to make this change and the home is damaged, the insurance company may question the ownership change. Without making the appropriate changes, therefore, a homeowner could become potentially liable to pay any arising damages out-of-pocket.