Should Older Millennials Buy Life Insurance?

We’re all going to die someday. That’s one of the only certainties in life, along with taxes. However, a recent study by Budget Insurance found that 82% of millennials don’t know the purpose of life insurance—despite the fact they’re aging, starting families and dealing with more complex financial situations.

Forbes’ article, “Why Older Millennials Need To Start Taking Life Insurance Seriously,” notes that, although most millennials may not have given life insurance much thought before, it’s now time to begin taking life insurance and other estate planning more seriously. To help with this, more companies are starting to take millennials seriously, when it comes to financial matters. The result? It’s getting easier than ever before to get life insurance.

Life insurance is used to protect your family financially, in case of your death. That is important for millennials who are starting families that depend on them financially.

According to Pew Research, 60% of families depend on dual incomes and just 31% of families rely on a single income.  A total of 91% of families in the U.S. require the income of at least one spouse to survive. However, what happens if one (or both) die? That’s where life insurance comes into play.

Because millennials are still relatively young, getting life insurance is very cost effective. In addition, for the vast majority of millennials, a simple term life insurance policy will do the job.

Term life policies are very inexpensive and can be a financial relief, if they’re ever actually needed.

It’s possible to get a $1,000,000 term life insurance policy for about $40 per month, depending on your age and health. That is quite a bit of insurance for little expense.

With the increase in millennials who require life insurance, many insurance companies are making buying life insurance very easy.

These companies have online or app-based solutions that focus on speed and ease of use. These companies leverage technology and keep human interaction to a level that most millennials like.

Reference: Forbes (January 26, 2019) “Why Older Millennials Need To Start Taking Life Insurance Seriously”

 

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Why Do I Need Estate Planning If I’m Not Rich?

Many people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t an enjoyable activity, without it, you don’t get to direct who gets everything for which you’ve worked so hard.

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets. Without an estate plan, the courts will decide who will receive your property.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will and guardianship clause, a judge will decide this important issue.

Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe she deserves more than another. This type of fighting can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you become mentally incapacitated or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

 

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No Matter How Young—Or Young at Heart—You Need End-of-Life Planning

Two out of every five people over 45 years old don’t have a prepared will. Many of them have not thought about estate planning. It doesn’t take that much to do the planning necessary to help family members who survive you, according to the Lebanon Democrat’s article “End-of-life planning beneficial no matter your age.”

The planning you do will also help your family avoid the nasty disagreements that so often happen, when no one has been told what is going to occur after a parent dies. It will help your loved ones who may not know what you would have wanted after you pass: a funeral, a big memorial service, graveside services only or even cremation.

If you die without a will, which is known as dying “intestate,” all of your assets, from bank accounts to your favorite table saw could be awarded to someone, based on the judgment of a court-appointed administrator. This person won’t know that you had a nephew who you’d promised your woodworking tools and that would include the table saw.

Start by meeting with an estate planning attorney in your community. The laws that govern estate planning are based on your state’s law, so an attorney from another state may not be familiar with the big or small differences in your state versus another state. The same goes for online wills: unless they are reviewed by an attorney in your state, you won’t know if they are valid. Your family will find out, after you have passed, and they can’t make changes. That’s probably not how you want to be remembered.

If there’s a senior citizen in the family, ask them if they have prepared a will. It’s best to do this, while they are still competent. You never know what tomorrow might bring–and that holds true for people of all ages. Many people become incapacitated unexpectedly, at all ages and stages of life. Prior planning prevents a bad situation from becoming much worse.

Here’s what your estate planning attorney will speak with you about:

Who do you want to be in charge of your estate? It should be someone who you trust without reservation. That person will become your executor, when you die.

Who do you want to receive certain possessions? We tend to think about who will inherit a house or a car, but many families argue over sentimental possessions, like jewelry or art. Epic battles have occurred over items with little monetary value.

Your estate planning attorney will ensure that you also have a living will, since you’ll need this, if you have to go to the hospital or long-term care facility and are not able to speak up for yourself.

Update your will as time goes on. Families grow and shrink, and your will needs to reflect your changing life. What if the person you named as executor dies, or moves far away? You’ll want to make sure there are people who can carry out the responsibilities you want.

Don’t forget to tell your executors that they have been named and make sure they are up for the tasks. If you have an argumentative family, will your executor be able to stand up to them? Personality is as important as understanding legal and financial issues.

Your estate planning attorney will be able to guide you through any rough spots, or issues you might be struggling with. It is better for you and the ones you love to have an estate plan, regardless of your age or health. Life changes come quickly, and it’s best to be prepared.

Reference: The Lebanon Democrat (Jan. 18, 2019) “End-of-life planning beneficial no matter your age”

 

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What Do I Need to Know About Estate Planning After a Divorce?

The recent changes in the tax laws created increased year-end activity for those trying to finalize their divorces by December 31—prior to the effective date of the new rules.

The new tax laws stipulate that alimony is no longer deductible by the payor, and it’s no longer taxable by the receiver—this creates a negative impact on both parties. The payor no longer receives a tax deduction, and the receiver will most likely wind up with less alimony because the payor has more taxes to pay.

Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that if you were one of those whose divorce was finalized last year, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans. Let’s look at some of the issues about which you should be thinking.

See your estate planning attorney. Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.

Health care proxy. This document lets you designate someone to make health care decisions for you, if you were incapacitated and not able to communicate.

Power of attorney. If you had an old POA that named your ex-spouse, it should be revoked, and you should execute a new POA naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.

Your will and trust. Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee.

Guardianship. If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by the judge to be unfit. While you can select another responsible person, be sure to leave enough cash in a joint bank account (with the trusted guardian you name) to fund the litigation that will be necessary to prove your ex-spouse is unfit.

A trust for your minor children. If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children, if you pass away.

Life insurance. You may have an obligation to maintain life insurance under the divorce agreement. Review this with your estate planning attorney and with your divorce attorney.

Beneficiary designations. Be certain that your 401K and IRA beneficiary designations are consistent with the terms of your divorce agreement. Have the beneficiary designations updated. If you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear.

Prenuptial agreement. If you’re thinking about getting remarried, be certain you have a prenuptial agreement.

It’s a great time to settle these outstanding issues from your divorce and get your estate plan in order.

Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”

 

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Got a Will? Put it on Your Schedule for 2019

A Power of Attorney is just one part of your estate plan. Don’t have an estate plan? Instead of making the same old New Year’s resolutions, try making a will and an estate plan your top priority in 2019, says the Toronto Sun in the article “Where there’s a will, there’s a way.” We are reminded that when we do select a person to serve as our Power of Attorney (POA), we better make sure to appoint someone we trust.

Many people insist that they are fine and not old enough to need a POA. However, life holds surprises. Parents whose adult children are injured in a sport or accident, discover they can’t manage their kid’s finances because there was no POA in place.

Anyone over the age of 18 needs a POA and a will. The POA is used while you are alive, if you should become incapacitated and the will is used after you die. You’ll want to speak with an estate planning attorney to create both documents and an overall plan, since this is a complex area of the law and every person’s situation is different. There is no such thing as a one-size-fits-all document. The problem is, you won’t know that until it’s too late.

Another reason for an estate plan is to protect the emotional integrity of a family. Estate battles don’t just happen to celebrities. They happen to “regular” people as well. Families often fracture, when grandparents or parents neglect to share details of their financial situation or reasons for their estate plan.

Let’s say you come home from the hospital after a serious operation and find that a member of your family, without your knowing it, has decided to prepare all your belongings for your demise.

Everything in the house has a sticker on it, bearing either the name of a person who was expecting to inherit the item, or a price for an estate sale. No plans about your will were ever discussed with your children, so they had no idea what you wanted. From their perspective, they were expecting you to pass and just making sure things were properly taken care of.

Those kids probably won’t get a penny, since their eagerness was excessive. They were concerned more about possessions than their parents.

A better way to go is to work with an estate planning attorney to create a holistic plan that addresses your wishes, while you are living and the distribution of your assets when you have passed. You might want to consider holding a few family meetings with the attorney, so that everyone’s on the same page. You don’t want to come home from a hospital stay, to find your home ready for a yard sale!

Reference: Toronto Sun (Dec. 30, 2019) “Where there’s a will, there’s a way”

 

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No Estate Taxes? You Still Need an Estate Plan

Increases in the estate tax exemption has an impact on how some people are thinking about life insurance, says ThinkAdvisor in the article “Estate Planning Is Still Important.” However, before making any changes, consider the larger picture and think long, not short, term.

Let’s start with why many people buy life insurance policies. As young parents, they buy life insurance so a surviving spouse and family will be able to continue to live in their home, pay the mortgage and send children to college. Another reason for life insurance is to cover the cost of estate taxes.

Remember the new higher estate tax exemption is federal. Your heirs may still have state estate taxes and inheritance taxes, depending upon where you live. Having an insurance policy will still help with the costs of settling an estate and paying any taxes that are due.

The new tax exemption also has a sunset date. The year 2026 may seem far away. However, it will arrive, while we are busy with our lives. It may be much harder and more expensive for an individual to purchase a life insurance policy in 2026 than it is right now.

If someone is very old or in ill health, they have a different window of time for planning. However, if you are in your middle years or relatively healthy, now is not the time to put off purchasing life insurance or to let an existing policy lapse.

We know that political landscapes change. If they do, and you want to buy a policy, there may be additional obstacles in the future.

Life insurance also serves as a tool for your estate. If your estate plan seeks to distribute an inheritance equally from assets in a traditional IRA, life insurance can become an equalizer. Let’s say one child is in a much higher tax bracket than the others. Upon receiving the IRA, they will have to pay more in taxes than the others. The child in the lower bracket will end up with a larger sum of money, having lower taxes on their inheritance. This could lead to sibling arguments, which are not uncommon when brothers and sisters become heirs. The insurance policy proceeds can be used to make up the difference.

Another point to consider is who owns the insurance policy? If it is owned by a trust, you may not have the legal right to make a change. If the trustee does not agree that the policy should be liquidated or cancelled, they may not allow the change to go forward.

Your estate planning attorney will be able to review your life insurance policies, when she reviews your overall estate plan. Each part of an estate plan works best, when all parts work in concert.

Reference: ThinkAdvisor (Jan. 11, 2019) “Estate Planning Is Still Important”

 

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The Right Documents for Estate Planning

Having a properly prepared estate plan, that includes all the important documents, including a will and power of attorney, is one of the most important ways to protect your family and yourself. Despite this fact, many adults still neglect to take care of this important task, reports Consumer Reports in its article “8 Essential Steps for Estate Planning.”

A survey from Caring.com showed that as many as 60% of adults don’t have estate planning documents. When they asked families with young children, fewer than one in ten have even designated a guardian to take care of their children, if both parents should die.

What happens when there’s no planning in place? Even the simplest things become more complicated, and complicated things become financial and legal nightmares. When there’s an emergency and decisions need to be made, the entire family is subjected to more stress and costs than would otherwise be necessary.

Here are the eight steps you need to take, right now, to protect your family:

  1. Get the professional help you need. The change to the tax law may or may not impact your family and your estate plan, but you won’t know until you sit down with an estate planning attorney. Trying to do this online, may seem like a simpler way, but you will not have the same peace of mind as when you sit down with an experienced attorney—and one who knows your state’s laws.
  2. Create a will. This is a legal document that explains how you want your assets to be distributed after you die. It names an executor to carry out your instructions. If you have minor children, this is an especially important document, since it is used to name their guardian. If you have no will when you die (called dying “intestate”), then the laws of your state determine how your assets are distributed and who rears your children. Depending on where you live, your spouse might not automatically inherit everything.
  3. Discuss whether you need a Revocable Living Trust. In most states, when you pass away, your estate goes through a process called “probate.” The courts basically review your estate plan and determine whether everything looks right. The problem is that your will becomes a public document—and so does information about your assets. Some people prefer to keep their lives private by transferring assets to a revocable living trust, which distributes assets according to your instructions at your death. Titles to the assets must be changed, so they are “owned” by the trust. This is known as “funding” the trust. You still retain complete control of your assets, since you are the trustee. However, if you fail to retitle assets, the estate goes through probate. You will also still need a will to protect your minor children.
  4. Review your beneficiaries. Whether you remember it or not, when you open many different kinds of accounts—banking, investment—you assign a beneficiary to receive the assets upon your death. Your will does not override the beneficiary designation. Therefore, if you haven’t changed your life insurance beneficiary, for instance, and your ex-wife is still named on the document, she’ll get the entire proceeds of the life insurance policy when you die. This is a very important task.
  5. Have a Durable Power of Attorney (DPOA) created. This is something that protects you, while you are living. If you should become incapacitated, having a durable power of attorney in place will allow that person to manage your financial affairs. Make sure the institutions that have your accounts accept your attorneys’ POA form; you may need to get the one that the institution uses.
  6. Don’t forget the Advance Directive. This is also known as a Living Will. It explains your wishes for medical procedures, if you are unable to communicate and explains what you want for end-of-life care. Make sure that your family members know that you have such a document and keep it accessible in case of an emergency.
  7. Pick a Healthcare Proxy. The Healthcare Proxy, also known as the Durable Power of Attorney for Healthcare, names someone to convey your healthcare wishes. It should include a HIPAA release clause. This allows medical personnel to release your medical records and speak with the named person about your care.
  8. Get it all organized. Think of this step as creating a user’s manual for yourself. All these plans won’t do any good, unless your loved ones know they exist and know where to locate them. Don’t put your estate planning documents and records in a bank safe deposit box, in case it is sealed on death. Your attorney will likely have an original, and you should have your original in a fire-proof safe in a secure location in your home.

Reference: Consumer Reports (Oct. 24, 2018) “8 Essential Steps for Estate Planning”

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Make Estate Planning Simpler with a Checklist

Ask an average person to define estate planning, and chances are good they’ll start describing long meetings with a lot of paperwork and complicated forms. However, that doesn’t have to be the case, says this article from InsuranceNewsNet.com, “A simple way to simplify estate planning.” It focuses on the use of beneficiary designations on a number of accounts that can make an estate plan a much simpler experience in many situations.

Beneficiary designations are primarily used on the following types of accounts:

  • Employer-sponsored retirement plans, like 401(k)s
  • IRAs
  • Life insurance policies
  • Annuities
  • Transfer on death investment accounts
  • Pay-on-death bank accounts
  • Stock options
  • Executive deferred compensation plans

Making sure to keep track of the person who has been named the beneficiary and keeping that information up to date is extremely important. It’s not always done correctly. The consequences of having the wrong person named on the asset can be infuriating and, unfortunately, permanent.

The importance of the beneficiary designation means you’ll want to:

  • Remember who you have named a beneficiary of what account. People usually name their spouse as a primary and a child as a contingent. If you only have a primary, consider a charity that has meaning to you as the contingent beneficiary.
  • Update your beneficiary designations, as life events occur. That includes births, deaths, marriages, divorces, etc.
  • Read the instructions on the beneficiary designation. Not all forms are alike.
  • Don’t name your estate as a beneficiary.
  • Understand the tax implications of naming the beneficiaries. Not every asset has the same tax treatment.

Speak with your estate planning attorney to ensure that your beneficiary designations align with your estate plan. Remember that beneficiary designations supersede any provisions in your will. You should also talk with your beneficiaries—you may learn that they don’t want to inherit your asset (i.e., a person who is considering a divorce may not want the additional complication of a large inheritance).

Reference: InsuranceNewsNet.com (Nov. 2, 2018) “A simple way to simplify estate planning”

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