Presidential Estate Planning

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Categories: Media Commentary

Earlier this week, on June 18, the Washington Post published an article on an estate planning technique used by Bill and Hillary Clinton. The article described the use of a Qualified Personal Residence Trust (QPRT), which is an “estate reduction and freeze” technique. Local estate planning attorney (and our friend) Alban Salaman was quoted in the article and helped explain this planning technique, which is used to reduce estate taxes.

In summary, this strategy allows the donors to give away the home at its current value, but they still get to live there for a fixed number of years. If the donors survive the fixed number of years, the home will pass free of estate and gift taxes to the beneficiaries of the trust. If the donors die during the term, the value of the residence the day of their death reverts back to the estate.

To minimize the tax consequences in the event of a reversion, it makes sense to purchase term life insurance within the QPRT on the donors as a hedging strategy. Should they die during the term, the QPRT would have assets to purchase the property from the estate and inject the estate with liquidity.

For questions about this technique, please contact us at GWE.

MD Update: Governor O’Malley Approves MD Trust Act and MD Estate Tax Exemption Increase

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Categories: Media Commentary

News went out earlier this week regarding Maryland’s Uniform Trust Code and Increase in Estate Tax Exemption. We previously mentioned the bill passing in both the House and Senate and would go to Governor O’Mally to be signed to law.

On May 15, 2014, Governor O’Malley signed the two bills to increase the Uniform Trust Code and the Maryland Estate Tax Exemption.

You can find the text for Maryland’s Uniform Trust Code, also referred to as Maryland Trust Act on LegiScan. The text for the Maryland Estate Tax Exemption can be found on General Assembly of Maryland. This article from Venable, LLP briefly highlights the changes in the estate tax law on Lexology.

Contact David Wexler for more information about estate planning.

Long-Term Care Insurance… Does It Pay?

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Categories: Industry Insights

YES.

Last year, long-term care insurance companies paid nearly $7.5 billion in claims to 273,000 individuals. Total payments increase by 13% over the prior year and the number of claims increased by 3.4%. Over 7,000,000 Americans own a long-term care policy. Approximately 70% of claims begin in the insured’s home or an assisted living facility. “Today a long-term care policy is really a nursing home avoidance policy.”

Contact Keith Eig for more information on long-term care insurance and if it’s right for you.

Planning Retirement in a Rising Tax Environment

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Categories: Industry Insights

Francis J. Lojewski wrote an article for The Wealth Channel® Magazine’s Spring 2014 edition titled, “Planning Retirement in a Rising Tax Environment“. In his article, Frank discusses challenges that retirees face and steps that may prove helpful for your clients and practice. The actual article seen from The Wealth Channel® can be found here.

Francis is a partner of Atlas Advisory Group, LLC, an M Member Firm.

Life Insurance Product Trends for the Ultra-Affluent Market

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Categories: Media Commentary

Wayne Tonning from M Financial Group wrote an article for The Wealth Channel Magazine titled, “Life Insurance Product Trends for the Ultra-Affluent Market: What’s Selling and Why.” In this article, he provides insight on what is trending for life insurance products by discussing specific products, historical market trends, and why certain product may or may not be attractive to ultra-affluent buyers.

Wayne Tonning is the Director of Product Management, Sales Support, and Advanced Market Insights at M Financial Group.

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