MD Estate Tax Revision Headed To the Governor’s Desk

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Categories: Media Commentary

A bill gradually increasing the Maryland estate tax exemption to $5.25 million passed the Maryland State Senate and is headed to the governor’s desk. The bill previously passed the Maryland State House of Representatives. It is unclear if the soon-to-be law will further couple the Maryland Estate Tax Exemption to the Federal Exemption by increasing the estate tax exemption with inflation each year. Please see this Washington Post article for more information.

When signed into law, it will cause many Maryland households to revisit the need for trust-owned life insurance to help finance estate taxes. Governor Martin O’Malley has been previously skeptical of increasing the Maryland Estate Tax Exemption; however, with the bill easily passing both the Maryland Senate and House, there will be pressure for him to sign.

Contact David Wexler for more information about estate planning.

Can we talk about long-term care?

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Categories: Industry Awareness

Long-term care is a serious issue that will affect most people.  However, it is a very difficult conversation to have and here are some of the reasons:

  1. Confusion – it is difficult to understand the costs and what is covered by Medicare, Medicaid and private insurance.
  2. Denial – Many think they will never need it, however 70% of people of 65 will need some form of care.
  3. Mistrust – will the company be around when they need the care?
  4. Discomfort – it is simply too unpleasant to think about becoming ill and needing care.

Those who have considered and purchased long-term care insurance have done so for the following reasons:

  1. They do not want to be a burden on their families.  In fact, people are 5 times more concerned about being a burden than dying.
  2. They want quality care in the setting of their choice.
  3. They want to protect their loved ones quality of life and financial security. (49% of primary caregivers report an average lost income of 40%.

At GWE we help clients consider the risks, costs and possible solutions to this problem. Contact Keith Eig to discuss long-term care and if it’s right for you.

60 is the new 40

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Categories: Industry Insights

The other day, a friend of mine said, “Don’t you know that 60 is the new 40?” Well, if that’s true – and I hope it is – then there is good news and bad news. The good news, of course, is that we can look forward to enjoying active lifestyles for a longer period of time. The bad news is, if we’re going to live longer, how will we pay for “stuff” if we outlive our retirement savings???

Now – and I mean right now – is the time to focus on increasing wealth through tax-saving strategies and maximizing qualified retirement plan savings. And guess what? They go together.

If you are a business owner, partner in a firm or tax advisor, listen up! There are three things you can adopt today that can really have a significant impact on the success of your qualified retirement account above and beyond a traditional 401k plan. And thus, increase the odds of having a successful outcome to secure your lifestyle through retirement.

First – make sure your current 401k plan is running at maximum efficiency. Are you able to put away every dime you can up to the limit? Or are you restricted by low employee participation?

Second – think about using flexible profit sharing plans that allow you to put money into your retirement account even if other partners or colleagues don’t share your retirement goals. Your retirement contribution wagon does not need to be hitched to theirs!

Third – use a defined benefit or cash balance plan to supercharge your retirement account. This will allow you to stockpile significant, tax-deductible, contributions today for use in retirement.

Contact Greenberg, Wexler & Eig today to see how we can help you develop a successful retirement outcome. The success of your future is our business today.

This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intednded to replace the advice of a qualified attorney, tax advisor or plan provider.

Attention To Detail

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Categories: Industry Insights

In today’s post, I would like to focus on a contractual provision of term life insurance contracts. In today’s marketplace most of the major carrier’s term insurance contracts have a contractual provision called the “conversion option”. In its simplest form, this provision allows the policy owner to exchange his/ her term life policy for some form of permanent life insurance coverage without medical evidence of insurability.

The consideration is that not all conversion options are created equally and their language can differ substantially. The following are things that we consider when comparing contracts:

1. How many years / what age you may convert the contract to permanent coverage

2. What types of permanent coverage you are allowed to convert to in the carrier’s portfolio of products

For example, certain carriers only permit you to convert for the first ten years of the policy, some carriers for the full length of the term, while others may restrict the conversion to a specific age (such as 65 or age 70).

While these differences seem subtle at the onset of policy during the purchasing phase of the process, for longer term planning and flexibility, they can prove to be quite substantial.

We at Greenberg, Wexler, & Eig take pride in paying attention to the details for our clients. Contact us today to find out more information about converting your existing term life policy.

Personal Financial Security – Life Insurance As A Risk Management Tool

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Categories: Industry Insights

This is part 1 of a series discussing life insurance as personal financial security. You can find part 2 here.

 

The primary purpose of life insurance is the transfer of financial risk of death to a life insurance company in exchange for premium payments.  This is simple in concept.  However, life insurance products, contract forms and how they are designed for use are deceptively complicated.

In the simplest of terms, there are two type of life insurance policy forms: temporary coverage called term life insurance and permanent coverage.

  • Term life insurance is coverage that pays a death claim if you die during the term of coverage.  For example a 10 year term policy provides coverage for 10 years and terminates at the end of 10 years.  Term coverage does not accrue any cash value.
  • Permanent life insurance pays a death when you die.  It also accumulates cash value.

The first planning tenant for personal financial security is “it is more important to have the right amount of life insurance than the right kind of life insurance.”   For personal financial security, the amount of life insurance is determined by quantifying objectives for final expenses, paying off debts, educating children, replacing lost wages and family members with special needs.  Then liquid assets are deducted from the quantified objectives and the gap is filled with life insurance.  This gap is frequently filled with term life insurance on the theory that over a long period of time debts get paid off, children complete their education; wealth is created by savings, investments, retirement plans and business interests.

Over time, if enough wealth is accumulated then the family may have sufficient resources to self-insure their financial security and the need to life insurance may become superfluous.  However, if the accumulated wealth is insufficient, then it would be prudent to continue life insurance coverage (more on coverage continuation options later).

Please contact David Wexler, CLU, ChFC, AEP to find out more about planning for Personal Financial Security

Personal Financial Security – Life Insurance As A Long-Term Asset Class

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Categories: Industry Insights

This is part 2 of a series. View part 1 here.

 

As tax rates on individuals and trusts increase, people are looking to life insurance as a tax preferred asset accumulation vehicle.

Life insurance is treated differently than other asset classes for tax purposes.  Some of the tax treatment advantages include:

  • the annual increase in cash value is income tax deferred
  • a withdrawal of cash value is tax free up to basis
  • policy loans are generally income tax free
  • the death benefit is income tax free

Depending on the type of policy it is possible to do a tax free exchange of the accumulated cash value for an annuity that provides lifetime income.

Determining the best design and most suitable product for a client’s objectives is a process.  For those looking to shield investments from current taxation or for a non-qualified vehicle to accumulate supplemental retirement income, life insurance may be worth looking at.

Please contact David Wexler, CLU, ChFC, AEP to find out more about planning for Personal Financial Security.

Do you rent or own your life insurance?

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Categories: Industry Insights

Let’s take a look at the two basic types of life insurance.
 

YOU’RE A RENTER

 if you have a term insurance policy. Term insurance, such as level premium tern insurance, provides temporary coverage for a specific period of time (i.e., 20 years) and only offers death benefit protection. There is no cash value component. Premiums for term insurance coverage are initially lower than permanent insurance for the same amount of permanent coverage, so it is popular for families or new businesses.
 

YOU’RE AN OWNER

 if you have a permanent insurance policy. Permanent insurance, such as Whole Life and Universal Life, offters lifetime protection, which means that your beneficiaries will receive a death benfit when you die, not if you die. Permanent life insurance usually has a cash value accumulation component that can be used to offset future premiums, act as a personal or corporate sinking fund, or help out when life throws you a financial curveball.
 
In the end, life insurance is simply a financial tool to help you build the best plan for your family and/or business. Many people find that a combination of both permanent and term coverage helps provide the insurance protection and asset accumulation they need, at a price they can afford. Just remember, it is more important to have the right amountof insurance than the right type.

For more information on renting or owning your life insurance, contact us at info@gwellc.com or reach out to Scott Greenberg.

Making good decisions for retirement

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Categories: Industry Insights

Baby Boomers are retiring every day and have important decisions to make.  Last year, the Government Accountability Office (GAO) offered two pieces of advice for retirees:

1. Delay the age when you elect to start receiving Social Security payments

Most people should avoid the temptation to begin payments early. While it may be tempting to start receiving Social Security payments early, you are most likely to receive a greater lifetime income if you wait until your full retirement age. Statistically if you live 12 years of more after you retire, delaying payments would make sense. Remember that Social Security does not provide enough income for most retirees so it is important to accumulate assets in other plans (i.e., IRAs and employer sponsored plans).

2. Convert your cash-balance defined benefit pension into a lifetime income annuity rather than take a lump-sum payment upon retirement

Only one third of Americans are covered by a defined benefit plan.  The rest are accumulating assets in a retirement plan and will receive a lump sum distribution.  Of course, even if an employer retirement plan only offers a lump-sum payment, retirees can go to an insurance company and buy their own annuity. However, statistics show that most retirees who are required to put in the effort themselves to find an annuity do not do so.  Converting at least a portion of a lump-sum retirement-plan payout into a lifetime income annuity may substantially increase the odds of achieving a comfortable retirement.

You can read the full article about the GEO report here.

DC Realizes What LTC Insurance Providers Have Known For Years

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Categories: Media Commentary

People with long-term care needs would prefer to receive assistance in the comfort of their own homes. Beyond that, it’s less expensive in many cases to provide home care assistance than it is to have someone enter a nursing home. This Washington Post article highlights what the District is doing to provide more home health services to people with long-term care needs through Medicaid and other programs.

Your loved ones don’t have to spend down their assets enough to qualify for government assistance in order to receive long-term care assistance at home. Most long-term care policies that are available today offer home health care benefits to insureds who qualify with no elimination period! Additionally, most long-term care carriers provide a complimentary concierge service to help families navigate care options. Long-term care insurance can provide not only financial protection but also logistical assitance when your family needs it most.

IRS Extends Tax Benefits to Married Gay and Lesbian Couples

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Recently, the Internal Revenue Service announced that legally married same-sex couples will be treated the same as heterosexual couples for federal tax purposes, regardless of where they currently reside.

The Treasury Department, following up on the Supreme Court’s ruling in June of 2013, which struck down a key section of the 1996 Defense of Marriage Act, announced that same-sex married couples can file joint federal tax returns.

One of the most significant decisions is that the government will allow gay and lesbian couples to file joint returns even if they have moved to states that do not permit same-sex marriage; however they may have to file their state tax returns as if they were not married, depending on state laws. Additionally, Social Security will only recognize couples living in states that allow same-sex marriages.

Thirteen states and the District of Columbia permit same-sex couples to marry, including California, Connecticut, Delaware, Iowa, Main, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington.

The new rules, which take effect September 16, will provide “clear, coherent tax-filing guidance for all legally married same-sex couples nationwide.” Internal Revenue Service guidelines will apply to all federal taxes, including income, gift, and estate taxes. They affect personal and dependent exemptions and deductions, employee benefits, IRA contributions, and tax credits.

The biggest financial bonanza for wealthier couples will be the ability to take advantage of the unlimited marital deduction and higher exemption limits for estate tax purposes. A more common benefit will come in the form of the tax exclusion for employer-paid help insurance, which many same-sex spouses previously bought on an after-tax basis and will result in a typical tax savings of about $1,000 per year.

It is important to note that the new guidelines will not affect couples who are in civil unions or domestic partnerships rather than legal marriages.