Family Protection Strategies

14 Aug

Protecting Your Loved Ones with Life Insurance

Posted by: Ken Himmler / Category: Life Insurance

How much life insurance do you need?

Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you’re young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.

Here are some questions that can help you start thinking about the amount of life insurance you need:

What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
How much of your salary is devoted to current expenses and future needs?
How long would your dependents need support if you were to die tomorrow?
How much money would you want to leave for special situations upon your death, such as funding your children’s education, gifts to charities, or an inheritance for your children?
What other assets or insurance policies do you have?

Types of life insurance policies

The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.

Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash value account. During the early years of the policy, the cash value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow–tax deferred–as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you’ll be entitled to receive the cash value, minus any loans and surrender charges.

Many different types of cash value life insurance are available, including:

Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.
Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.
Universal variable life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value goes up or down based on the performance of investments in the subaccounts.

With so many types of life insurance available, you’re sure to find a policy that meets your needs and your budget.

Choosing and changing your beneficiaries

When you purchase life insurance, you must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, you should also designate an adult as the child’s guardian in your will.

Review your coverage

Once you purchase a life insurance policy, make sure to periodically review your coverage–over time your needs will change. An insurance agent or financial professional can help you with your review.

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20 Jul

Coordination of Long-Term Care with Government Benefits

What does "coordination with government benefits" mean?

In the context of long-term nursing home care, a number of governmental (and governmentally regulated) programs and tools exist to help you pay for this care. Medicare, Medicaid, Medigap, and long-term care insurance (LTCI) (combined with Medicare) can each assist you to pay for your long-term nursing-home care, assuming you meet their respective qualifications.

What is long-term care?

Long-term care refers to a broad range of medical and personal services designed to assist individuals who have lost their ability to function independently. The need for this care often arises when physical or mental impairments prevent you from performing certain basic activities, such as feeding, bathing, dressing, transferring, and toileting.

Long-term care may be divided into three levels:

· Skilled care–continuous "around-the-clock" care designed to treat a medical condition. This care is ordered by a physician and performed by skilled medical personnel, such as registered nurses or professional therapists. A treatment plan is established, and it is usually contemplated that the patient will recover at some point.

· Intermediate care–intermittent nursing and rehabilitative care provided by registered nurses, licensed practical nurses, and nurse’s aides under the supervision of a physician.

· Custodial care–care designed to assist one perform the activities of daily living (such as bathing, eating, and dressing). It can be provided by someone without professional medical skills but is supervised by a physician.

What is Medicare and to what extent does it subsidize long-term care?

Medicare is a federal health insurance program for people age 65 and older, certain disabled individuals under age 65, and people of any age with permanent kidney failure. Medicare is divided into two parts: Part A is a hospital insurance program, and Part B is a medical insurance program:

· Part A covers: (1) inpatient hospital care, (2) inpatient care in a skilled nursing facility (SNF), (3) home health care, and (4) hospice care

· Part B covers: (1) doctors’ services, (2) home health care services (for persons not covered by Part A), and (3) certain other outpatient medical services and supplies not covered by Part A

Medicare was not designed to address custodial and intermediate long-term care needs at institutional facilities. Although Medicare will subsidize skilled medical care in nursing facilities, it will pay for only a certain number of days per year and requires a co-payment after a period of time. In addition, numerous rules exist governing when a beneficiary will qualify for benefits. To qualify for Part A’s SNF care benefit, the patient must have been hospitalized for at least three days before entering a Medicare-approved SNF. (The patient has 30 days from his or her hospital discharge date to enter the SNF.) Furthermore, a doctor must certify that the patient needed and received skilled nursing care or skilled rehabilitation on a daily basis at the SNF. Assuming these conditions have been met, Medicare will pay for skilled care in the following manner:

· Medicare will pay the full cost of SNF care for the first 20 days in each benefit period (year).

· The patient must pay a daily co-payment for days 21-100. This co-payment figure increases each year and amounts to $133.50 per day in 2009 ($128 in 2008).

· After the 100th day of SNF care, the patient must pay all costs.

What is Medigap insurance and to what extent does it subsidize long-term care?

Medigap is supplemental insurance sold by private insurance companies to fill in some of Medicare’s gaps in coverage. Medigap is an individual health plan that provides benefits for all or part of the deductible and coinsurance amounts not covered by Medicare. Certain benefits not covered by Medicare, such as payment for prescription drugs, may also be covered under particular Medigap plans.

With respect to long-term care, some (but not all) Medigap plans will subsidize the $133.50-per-day co-payment for days 21-100 of skilled nursing home care under Medicare Part A. Thus, your first 100 days in a given year of skilled care provided in an SNF will be free of charge. However, you will still have to pay the full cost out-of-pocket for the rest of the year. And bear in mind that Medigap will not pay for intermediate and custodial care in nursing homes.

What is Medicaid and to what extent does it subsidize long-term care?

Medicaid is a joint federal-state program providing medical assistance to low-income individuals who are aged, disabled, or blind (and to needy, dependent children and their parents), and who cannot otherwise afford the necessary care. Medicaid pays for a number of medical costs, including hospital bills, physician services, and long-term nursing care.

To qualify for Medicaid’s long-term care benefits, you must be financially and medically eligible. Financial eligibility is based on the amount of your income and assets, and although many people are not financially eligible for Medicaid when they first enter a nursing home, many states allow elders to "spend down" their assets to become eligible.

Typically, Medicaid beneficiaries must require some skilled medical care (e.g., intravenous feeding, treatment of dressings), but a medical condition requiring assistance with activities of daily living can also be part of the eligibility requirements. Thus, intermediate care in an institution will be subsidized in most states, as will home health care and personal care services at home.

Medicaid is the largest single payor of nursing-home bills in America and is the last resort for people who have no other way to finance their long-term care. Unfortunately, however, because Medicaid mandates income and asset thresholds, many people are forced to exhaust their lifetime savings to become eligible for Medicaid. For information about Medicaid planning, see Planning Goals and Strategies.

What is long-term care insurance (LTCI), and to what extent does it subsidize long-term care?

Long-term care insurance (LTCI) pays a selected dollar amount per day for a set period for skilled, intermediate, or custodial care in nursing homes and other long-term care settings. Because Medicare and other forms of health insurance do not pay for intermediate care in a nursing facility and custodial care in general, many nursing home residents have only three alternatives for paying their nursing home bills: cash, Medicaid, and LTCI.

Most policies will let you select the amount of coverage you want, typically running anywhere from $40 to $150 or more per day. A very comprehensive LTCI policy will cover skilled care, intermediate care, home care, adult day care, hospice care, and assisted living care.

Most policies provide that benefits will be "triggered" by certain physical and/or mental impairments. The most common method for determining when benefits are payable is based upon your inability to perform activities of daily living (ADLs). The most common ADLs are eating, bathing, dressing, continence, toileting, and transferring. Typically, benefits are payable when you’re unable to perform a certain number of the ADLs, such as two out of the six or three out of the six.

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16 Apr

Insurance Companies Go For The Gold

Posted by: Ken Himmler / Category: Economy and Stock Market, Health Insurance, Life Insurance, Long Term care Insurance

The government’s bailout money is not up for grabs. Large insurance companies that qualify for the government’s bailout money have made applications. So far Hartford life, Prudential and Metropolitan are some of the ones that have made the application. They may be eligible for billions that may help bolster their corporate bond positions. Most insurance companies make money on the spreads that they get from buying corporate bonds and government bonds. Just like a bank makes a spread on the money they payout on Cds and savings accounts versus the amount they charge on loans. Insurance companies make money the same way – on their portfolios.

The problem was when the recession – depression hit many companies either stopped their interest payments on their bonds or outright defaulted. This has put a crunch on some insurance companies that may have been leveraged to highly. This new seed of investment help from the government should help these companies buy up more corporate and government bonds. While it still makes sense to have insurance companies as a part of an overall investment plan it also makes sense to diversify between different companies and different insurance products. You also want to check your state to find out what the actual coverage is in case an insurance company does go into receivership. As an example in Florida the amount each person is covered for is $100,000 for an annuity contract.

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07 Sep

How does a Cash Value in a Life Insurance Policy Really Work?

Posted by: Ken Himmler / Category: Life Insurance

What is cash value?

Term insurance charges an increasing premium (annually or in bands) to reflect the fact that the insured is aging and, each year, more likely to die. Cash value life insurance has a level premium that is larger than necessary in the early years of the policy to offset the increased costs of insuring the individual in the later years. This excess premium is invested and kept in an account known as the cash value account. In the event that you surrender the policy before death, this excess premium and its earnings are returned to you.
Read more…

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19 Aug

Revocable Living Trust

Posted by: Ken Himmler / Category: Estate Planning, Family Protection Strategies

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Summary:
A revocable living trust can be a useful and practical estate planning tool for certain individuals, but not for everyone. This type of trust is most commonly used to avoid probate because, unlike property that passes by will, trust assets are distributed directly to heirs. This type of trust is also used as a way to maintain management of one’s financial affairs during a period of incapacity because someone else can immediately take charge when needed. A revocable living trust does not minimize income, gift, or estate taxes, nor does it shelter trust assets from creditors in most cases.

What is a revocable living trust?

A revocable living trust (also known as an inter vivos trust) is a separate legal entity created to own property, such as a home or investments.

The trust is called a living trust because it’s meant to function while the grantor is alive. The trust can continue after the grantor’s death, but the trust becomes irrevocable the moment the grantor dies.

Revocable living trusts are used to accomplish various purposes:

To ensure that property continues to be properly managed in the event the grantor becomes incapacitated
To reduce costs and time delays by avoiding probate
To lessen potential challenges to or elections against a will
To maintain privacy
To avoid ancillary administration of out-of-state assets

Qualified Terminable Interest Property (QTIP) Trust

Posted by: Ken Himmler / Category: Family Protection Strategies

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Summary:

In general, transfers of property between spouses can be made federal gift and estate tax free under the unlimited marital deduction. However, transfers of terminable interests to spouses are disqualified from the marital deduction. A terminable interest is one that terminates or fails at a certain time or upon an occurrence or lack of occurrence of a certain event or contingency. A QTIP trust is an exception to this rule.

A QTIP trust is used when a spouse or both spouses want property of the first spouse to die to qualify for the marital deduction and provide lifetime income to the surviving spouse, but also want that property to be preserved and ultimately passed on to other beneficiaries.

What is a QTIP trust?

A QTIP trust (also called a marital deduction trust) is an irrevocable marital trust used to ensure that a decedent’s property will provide lifetime income to his or her surviving spouse and then pass to other beneficiaries. A QTIP trust qualifies for the unlimited marital deduction, allowing the surviving spouse to use his or her federal gift and estate tax exemption (also called the applicable exclusion amount–$2 million in 2008) and/or federal generation-skipping tax exemption (same amount as the applicable exclusion amount).

A QTIP trust is designed to transfer property free of transfer taxes under the marital deduction just as an outright transfer would. The result, as in an outright transfer, is that the property will then be subject to taxes in the surviving spouse’s estate, but can be offset to the extent of the surviving spouse’s available exemption(s). Another advantage of a QTIP trust is that the property does not pass outright to the surviving spouse–it passes to an independent trustee who controls and manages the property on behalf of the surviving spouse for his or her life, and then passes to beneficiaries (typically children and grandchildren) named by the first spouse to die. Read more…

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15 Aug

Life Insurance: Estate Planning

Posted by: Ken Himmler / Category: Life Insurance

What is life insurance?

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A contract

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Technically, life insurance is a contract between the policy owner (which can be you, “the insured,” or a separate party) and an insurer. The policy owner agrees to make premium payments, and the insurer agrees to provide a specified sum to a designated third party (the beneficiary) upon your death.

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Tip:�� Contracts, including life insurance contracts, are governed by state law.

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And a will substitute

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Because proceeds are paid directly to the beneficiary, life insurance can bypass the probate process, saving both expense and delay.

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Purchased for four primary reasons

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Life insurance is one of the biggest players in the estate planning game. For some, it is the only way to ensure that family members will be able to support themselves after the death of the primary wage earner. For those with larger estates, life insurance can provide the funds needed to pay estate taxes (and other costs) without liquidating estate assets. For those with a business interest, life insurance can be used as a vehicle for business succession. Finally, for those with a generous spirit, life insurance can permit you to make charitable gifts.

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Advance planning needed to avoid taxes

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Although life insurance proceeds are generally received by the beneficiaries income-tax free, they may be subject to estate taxes if you do not plan in advance.

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For more information on estate planning or life insurance to pay estate taxes you can go to http://kenhimmler.com.

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12 Aug

Life Insurance: Protection Planning

Posted by: Ken Himmler / Category: Life Insurance, Uncategorized

What is life insurance?

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Life insurance is a legal contract between an insurance company and a policyowner and is governed by state law. Under the terms of the policy contract, the policyowner pays premiums in exchange for the promise of payment of a specified amount of money to a named beneficiary when the insured dies. The policy itself contains provisions specifying the rights and obligations of the parties under the contract.

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The specific purpose of life insurance is to replace the economic loss resulting from a person’s death using money from a pool of funds to which many people contributed a relatively small amount.

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