When you die, the way in which your property is handled will depend on the type of documents (or lack thereof) you’ve set up before your death. The following is a summary of the ways your property transfers to heirs when you pass away. Life Insurance. At death, life insurance proceeds are passed to your beneficiaries (and in most cases, tax free). For example, if you have a life insurance policy with a face amount of $500,000, when you die, your beneficiaries receive the $500,000 face amount tax free. When you purchase life insurance, you name your beneficiary or beneficiaries – those who receive the death benefit when you die. Most married couples will name each other as beneficiaries on their respective polices, some will name charities, and other will name other relatives, individuals, or trusts. Life insurance contracts generally avoid probate (the legal process of validating a will and […]
estate planning
Estate Planning Essentials
How many of you reading this have an estate? If you think you have an estate, then please keep reading – this should be you and everyone else reading this. That is, everyone has an estate. Many individuals believe that to have an estate they must have a certain amount of “stuff”, net worth, income, social status, etc. Furthermore, these same individuals may feel estate planning involves complex documents, high legal fees, considerable time. While this may be true for some estate plans, it’s not always the case. Additionally, many individuals feel that estate planning involves planning for incapacity or death. Although not pleasant to discuss, planning for one’s incapacity or death is an important part of their overall financial plan. Having these discussions before incapacity arises (a possibility) or death occurs (a certainty) can help ease the stress for loved ones dealing with these situations of and when they […]
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529 vs. Life Insurance
Over the past few weeks I have been asked (and pitched) the idea of whether cash-value life insurance makes sense as a vehicle for saving and paying for college. By cash-value life insurance, I am including whole life, variable life, universal life and variable universal life policies. First, in almost all cases, it does not. The very few cases where it may make sense will be covered shortly. Here are some reasons why a 529 college savings plan is better than cash-value life insurance. 529 plans have very high contribution amounts. Depending on your state, the total amount you can contribute to your 529 plan is very high, and the annual contribution amounts are high as well. From a federal tax perspective, you are allowed to contribute up to $14,000 annually without incurring gift tax consequences. This amount doubles to $28,000 annually if you’re married and elect to split the […]
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Why Young People Need Estate Planning
Many young individuals and couples think that the time to start thinking about estate planning is when they’re older, or perhaps if they ever have “estates”. On other occasions, the impetus to plan may be due to a recent death of a friend or family member without an estate plan or as my friend Tom, an estate planning attorney says, “Right before they take a trip over water.” However, many young individuals should start thinking and “doing” some estate planning right away. Before we get to specific recommendation, let us first understand what estate planning is – and, what your “estate” is. Essentially, your estate is everything you own. This includes your home, personal property, life insurance policies, invested assets, etc. Deciding how these assets are controlled and divided in the event of your death is called estate planning. Additionally, estate planning includes who will care for your children if […]
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Do You Have The Will?
Statistics show us that approximately 70% of all Americans don’t have a valid will. Are you one of them? With that statistic, chances are that you don’t. This means that in a circle of four people, three probably don’t have a will. This situation begs an obvious question: Do I need a will? One simple way to determine if you need a will is if you can’t truthfully answer “No” to both of the following questions: Do you care who gets your money and property when you die? Do you care who is appointed guardian of your minor children if you die? If you answered “Yes” to either or both of those questions, you need a will! Otherwise, state laws will determine the outcome of those situations – and it’s not likely that you would have made the same decisions that the state would. Why should you have a will? A will […]
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The Designation Everybody Should Be Aware Of
At some point in your life you have probably started a new job, applied for life insurance, started an IRA or retirement account, or opened a bank account. You may remember when filling out the paperwork that the form asked for a beneficiary – both primary and contingent. This is simply telling the account’s custodian to whom you want your account to go to should you pass away. Your primary beneficiary is the first (hence the name primary) that receives account balance or death benefit. The contingent is who receives the account balance in the event your primary beneficiary predeceases you. When choosing beneficiaries you had the choice of allocating a certain percentage to the primary and some to the contingent if needed. You may have even had two or more primary beneficiaries that you allocated a certain percent of your account to totaling 100% Then you may have forgotten […]
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Book Review: Facing the Finish–A Roadmap for Aging Parents and Adult Children
One of life’s only sureties, we all will eventually come face-to-face with the end of our life. Sometimes it comes quickly with no warning, and sometimes end of life comes more slowly, over the course of many months or years. In either case, after life there are many things to deal with (for those that remain) – and in the cases where the final chapter of our life is a lengthy one, there are many more decisions to make and situations to deal with. Regardless of how swiftly or drawn out the event is, we can all benefit from planning out many of the inevitable decisions in advance. This book is an excellent guide for folks who are either nearing that final transition in life (referred to by the author as Older Adults), or who are helping our parents or grandparents with this transition (referred to as Adult Children). Most […]
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Book Review: The Other Talk
A Guide to Talking with Your Adult Children About the Rest of Your Life This book, a relatively short read at 176 pp before appendices, is a nice guide for folks facing (or in) retirement and dealing with those end of life issues that we all must face at some point in our lives. As the subtitle implies, this book guides the reader through the process of having the “other talk” with our children. The first talk is about the birds and the bees, and the analogy between that talk and the “other talk” is apt. The subject matter is profoundly difficult and emotional for both parties, but avoiding the talk (either one) can have serious impacts for both parties as well – because avoiding either talk will not keep the “event” from occurring. The author Tim Prosch relies on many personal experiences as well as a great deal of […]
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Book Review: How to Give Financial Advice to Couples
Subtitle: Essential Skills for Balancing High-Net-Worth Clients’ Needs This book, by Kathleen Burns Kingsbury, is a very good book for all financial advisors to read – even if your clientele isn’t “high-net-worth” clients. I’ve had my share of client-couples who had difficulty in reconciling financial concerns with one another, and (as you probably know) the number of digits on the couple’s bottom line net worth has nothing to do with it. Author Kingsbury, a wealth psychology expert, has a great deal of experience and knowledge on the subject to share. She covers the issues that couples face when dealing with monetary subjects, which can range from having opposite but complementary skills and mindsets regarding money to having basic problems in dealing with conflict with one another. Every couple has areas where they’re not completely in concert with one another – it would be really unusual if everything about a couple […]
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A Stable Pyramid
One of the basic fundamentals regarding financial planning and saving money revolves around what is known as the financial planning pyramid. You may hear other names such as the wealth management pyramid, the financial house, etc. You may also see different stages or “building blocks” added here or there, but I’ve broken it down for the purpose of this book to three basic levels for easier understanding. The first level is where we see risk management. This is the foundation of your plan. It’s important to have a strong base to build off of, otherwise the slightest of breezes or tremors can send it toppling. Risk management can be simply seen as your insurance – and this can range from your auto, home, renters, life, health, disability, and umbrella insurance, to your will, emergency fund, and debt management. The reason why insurance is the base is due to the fact […]
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The Qualified Terminable Interest Property (QTIP) Trust
Often we come up against situations in planning finances for folks where some special tools are necessary. One of those situations, quite common these days, is when one or both members of a couple has children by a prior marriage. The situation brings about some interesting questions when considering how the marital assets will be divided when one member of the couple has passed on. Daryl has three children by a prior marriage, and his wife Toni also has three children by a prior marriage. Both Daryl and Toni have considerable assets from before their marriage – each has a investments and retirement accounts in their own name: Toni’s accounts are worth $350,000, and Daryl’s accounts are worth $300,000. Given their lifestyle, they will not be needing much of their accounts early in retirement – but it’s quite likely that later in life they may need the accounts for medical […]
Sterling Raskie, MSFS, CFP®, ChFC®
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