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Friday, August 12, 2011

Financial Friday: Why I Don't Want to Buy Life Insurance

 

If you’re like most people, it’s not that you don’t appreciate the value of life insurance. In fact, most everybody I come across believes they need more coverage. You probably wouldn’t mind owning additional life insurance. It’s just that you don’t want to buy, the thought of paying for it literally immobilizes you from inquiring about it.

Thinking, talking, listening, and reviewing whether to buy life insurance makes many people feel uncomfortable. Below are many of the reasons why you might be putting off buying life insurance you need and eventually come to want.

I was told life insurance was only for married couples with young children

Life Insurance is owned by all people of all ages (0-100), married couples and non-married partners, business partners, and the like. Although each situation is unique, they all share in common a need and desire to own life insurance.

I don’t have enough time

You’ll get around to buying life insurance, just not today. You have a lot of things to do before you can get to it; buying life insurance often becomes relegated to a low priority—just another thing you ought to do. Not to mention, the whole idea of discussing life insurance isn’t a whole lot of fun. Who wouldn’t rather go on a bike ride, go shopping, and chat with a close friend?

Nonetheless, buying life insurance is really an important task that should be addressed. Life insurance can help ensure that your family or partner will have enough money to meet their financial obligations in the event of your death.

The subject scares me

If you really don’t like to think about death, you’re not alone. Death is an unpleasant subject, and life insurance raises issues of our own mortality.

It doesn’t have to be that way. People who do act on their life insurance needs tend to focus on the positive aspects: meeting their responsibilities and understanding their big picture planning. They also recognize that life insurance is for the living, it’s a love product.

I wouldn’t know where to begin

I don’t have a clue about what type of policy, how much life insurance I need, etc. Actually, few understand life insurance: why we need it, how much, what type of policy is best for your situation, how benefits are paid, how it should be coordinated with all your other assets, how and when it’s paid, tax questions, etc.

That’s okay. It’s not your job to understand everything about life insurance, that’s the job of an insurance and planning professional to be able to show you what you need and want and how it fits into your budget.

Bottom Line

It’s easy to understand why people tend to put off purchasing the life insurance they know they need. Take the first step and make it a priority to look into it, find an experienced professional to meet with that is willing to have an open-ended discussion, and make that appointment. What could be better knowing you have peace of mind that your loved ones are protected, even if you’re no longer around to provide and for them.

 

 

 

 

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Thursday, August 11, 2011

What Does Gay Marriage Mean for Domestic Partnership Benefits?

I had intended to complete the second half of my business succession planning series when I happened to read an interesting article about what state by state recognition of gay marriage will mean to domestic partnership benefits. As you know, I’ve never been entirely thrilled with state-only recognition of gay marriage because I feel that it creates a mess of legal problems for unique families like my own. Because there are no Federal laws that support gay marriage, gay and lesbian families must continue to file taxes separately regardless of whether or not they live in a state that recognizes gay marriage, gay and lesbian couples continue to be denied many of the federal tax incentives present for straight married couples in everything from insurance, business and estate planning. Now, while gay and lesbian families who enough live in “gay marriage states” may see their domestic partnership benefits dry up unless they chose to become married in their state.

I don’t want to always be the voice of Doom, but it is possible that we could see companies slowly withdraw domestic partnership benefits across the board in anticipation of state recognition. Hopefully, this will not happen, but at a time when businesses are struggling to stay afloat you cannot always expect them to choose an ethical approach over one that saves them money.

State-by-state gay marriage amendments certainly boost morale and have the power to create a social awakening, but unfortunately they do very little to provide financial and legal equality for gay and lesbian families.


Monday, August 8, 2011

Business Succession Planning Part I: Vital for Unique Familes

Shops

Business succession planning is a practice or set of estate planning practices used by business owners to ensure that a“family” business can run successfully in the event of their death or should he/she become incapacitated and unable to manage or operate the business.   I receive a lot of inquiries on this topic.  People want to know if they need a business succession plan or if they are somehow covered by wills and living trusts.  I usually walk people through a basic set of questions that go something like:

  1. If you die or become incapacitated, can your family/lover/partner run your business successfully without your guidance and support?
  2. Would your loved ones be able to hire an appropriate person to run the business without your assistance?
  3. Are there partners involved in this business?  I’m going to come back to this one in Part II 
  4. Do you want this business to “stay in the family” or would you want it to be sold to support your family?

While I ask these questions and more, I have to be honest and say that I already know what the answer should be.  Yes, you need a Business Succession Plan because as “they” say: an ounce of prevention is worth a pound of cure.  Even if you believe your family is well-equipped to handle things if/when you are gone, you really don’t (and won’t) know until that time comes.  Having a well-thought out Business Succession Plan at least eliminates a great many of the questions that your family would have to ask someone (at a high hourly rate) should something happen to you.

For a unique family (or non-traditional) this becomes even more important because, at times, there is not always a support system in place that your partner can fall back on nor legal safeguards the likes of which are available to traditional families.  In short, if something happens to your partner you are swimming upstream unless the two of you have created an air-tight business succession plan.  The business won’t just naturally fall to your partner unless you’ve created the appropriate legal documents that name him or her as the owner/operator in the even of your death or injury.

Just recently one of my clients became incapacitated and the Business Succession Plan he and I created “kicked in”.  His partner is now able to operate the business and keep it running until he is back on his feet again because we successfully planned for it.  Had we not prepared so thoroughly it is possible that the salon would have closed within a month.  Think about it, who would pay the utilities?  The rent?  Salaries?

Business Succession Planning is vital for any family, but it is especially important when your family is non-traditional, or as I like to say: unique.  For more information on this topic contact our office today.

 Image via Wikipedia

 

Friday, August 5, 2011

Financial Friday: Both Permanent Life Insurance and Invested Assets are the Pillars of Financial Stability and Wealth Building

It is pivotal to most people to have integrated a solid relationship between retirement assets and permanent life insurance assets in both preretirement and retirement. These two pillars working together are unbeatable in maximizing the use of your money today and well into your retirement.  This is especially true for non-traditional families who may not have access to other streams of revenue via a partner’s social security or pension benefits.

What do we all want out of our retirement?

The answer: The ability to take the highest income streams possible and perpetuate them throughout our retirement under all economic circumstances.

There are four types of permanent life insurance

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 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 Universal Life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits).

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.

Out of the four types of permanent life insurance, there is only one can ensure income on a guaranteed basis, that’s Whole Life.

To find out more how permanent whole life insurance fits into your wealth building call Jay Dworsky, Dworsky Agency, 612-327-1599. Or email: jaydworskyagency@gmail.com

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Creative Commons License photo credit: WisDoc


Wednesday, August 3, 2011

Caring for Your Partner in the Golden Years

The other day I blogged about elder care and how a child can financially care for a parent who has been diagnosed with Alzheimer’s or showing signs of dementia.  But what if there are no children to care for the senior?  Many gay and lesbians who grow old together find that they have no support chain to lean on outside their own community; many do not have children or close family members that can care for them.  Consider the bankruptcy case in California of two long-term “married” partners who tried (successfully) to file bankruptcy as a married couple due to medical bills associated with the terminal illness of one of the men.  Their entire support network was comprised of the two of them.  Now, by no means am I suggesting that gays and lesbians are the only people who face these difficulties, but we have more than our proportionate share of legal hurdles when it comes to trying to provide care for our partners and loved ones.  What do you do when your aging partner has been diagnosed with dementia and/or Alzeheimer’s disease?  As I said in my last post and several posts before that, having a Power of Attorney is a high priority for unique families, as is a health care directive, and HIPAA waiver.

However, caring for each other as you grow older is a bit more complicated than that.  What happens when the Alzheimer’s actually settles in?  When your loved one needs more care than you can provide by yourself?  Assisted living facilities, the good ones that you want to send family to, are not cheap.  My mother had to make a decision recently in regards to putting my grandmother in an assisted living home.  The monthly cost of this care facility is several thousand dollars, a figure my mother is willing to pay so that her mother can receive compassionate care.  Understanding the rising costs of healthcare is an absolute necessity for unique families.  You cannot wait until your fifties to start thinking about it.

I like to think that my practice, Unique Estate Law, is more than just a law firm.  I consider myself an advocate.  I went into this practice area because there are so many unique families out there that must struggle to achieve what comes (relatively) easy for others.  Call me today to get yourself on the path to a safe and secure future.  I can put you in touch with financial planners that can help you plan for your later years, as well as, help you secure the documents you need to help care for your partner and your partner for you.


Friday, July 29, 2011

Financial Friday: The Different Types of Life Insurance

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.
  • Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as your life insurance needs will depend on a number of factors; including whether you’re married, the size of your family, the nature of your financial obligations, your career stage, and your goals.?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. With so many choices, understanding which policy meets your needs and your budget can be navigated with a trusted life insurance professional. The Dworsky Agency can find the right policy for your needs and budget without a fee for service.

 

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Monday, July 25, 2011

Life After Death, Part 2: Protecting the Lives of Loved Ones After your Death

In this second part of my two-part blog series, I’d like to talk about the documents I feel are the most necessary to provide your family with the protection it deserves in the event of your death.

Pulling Together the Necessary Documents

I believe that it goes without saying that everyone should have a will. What is true of most families is doubly so when it comes to members of unique families. A will is your last opportunity to direct the state of your affairs, allocate monies or items to those you wish, and to provide your desires regarding the guardianship of your underage children. Naturally, your first order of business after creating the will is to place the original will in a location where it will be easily obtainable and found—not a copy! Copies can prolong the probate proceedings and therefore prolong the length of time before your assets can be distributed to their intended receiver. As I’ve already stated, wills sometimes appoint the guardianship of your children, therefore it is extra important—especially for unique families to have original and appropriate paperwork designating the custody of children.

Finding a home for the original document depends, certainly, upon your financial situation. Not everyone can afford a safety deposit box.  I offer  inexpensive storage of your documents as part of my estate planning package, not all attorney’s do, however.  Still, depending upon the circumstances you are in there are safe storage methods for original documents, such as safe’s or lockboxes.  Any location will do as long as it can easily be found by the right people and is easily retrievable in the event of your death.  That means no burying it in the backyard like pirate’s treasure or putting it in the freezer (yes, this happens).

Many estate planners such as myself advocate the use of a revocable living trust by families that are concerned that their wishes and desires could be overruled, or that their assets would be delayed distribution in probate. Living trusts are harder to dispute in a court of law because (you) are the first “trustee” and as such establish a precedent for how you wish the trust to be managed.  As with the will, the original document is absolutely 100% necessary for your beneficiaries and trustees to have on hand.

I cannot over-emphasize the importance of these two documents for any family, but especially for unique families.  I have witnessed some of the most heart-breaking atrocities happen after people pass on.  Children are taken away from the only living parent that they have ever known.  Partners who worked to help support a family have lost homes and possessions.  I don’t mean to scare anyone—well, maybe just a little—I honestly feel that in this rather uncertain political climate those of us with unique families must take those extra steps to provide for the people we love and cherish the most.  Having an original will and/or revocable living trust helps us do just that.


Friday, July 22, 2011

Financial Friday: Protect your Loved Ones With Life Insurance

I previously introduced you to Jay Dworsky, a guest blogger who will be covering financial topics for Unique Estate Law. We will be featuring Jay in our new Financial Friday series: each Friday we will be bring you Jay’s expertise on financial issue that affect your unique family. Jay continues his series on life insurance considerations for unique families with a post on questions to as in determining your life insurance needs.

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?

These are just a few questions to get you started thinking about your life insurance needs.  My next few posts will discuss different types of life insurance and why it can be critical for non-traditional families.

Creative Commons License photo credit: amypalko


Thursday, July 21, 2011

Grantor Retained Income Trust: An Option for Unique Families

I’m asked quite often how I feel about the state-by-state recognition of same-sex marriage. On one hand, I’m delighted to see it happening at all, but the attorney in me can’t help but see all of the headaches come tax season.  There is no Federal recognition for same sex marriage.  That means doing tax returns 80 million different ways (I exaggerate), and it still means that when someone’s same-sex partner or spouse dies there will be tax and distribution issues when it comes to their combined estate.  I know, I know.  Always the voice of gloom in the middle of everyone’s victory dance.  Well, that’s how we lawyers are. 

One method of equalizing the Federal tax benefits extended to heterosexual, married couples is to create a Grantor Retained Income Trust (one of the few advantages that same-sex couples and other non-marrieds have over married traditional couples).  The US tax code prohibits “family members” from utilizing GRITs.  And since the federal government refuses to recognize same-sex couples – legally married or not – as “family members”, we are actually provided with a small benefit.

A Grantor Retained Income Trust (GRIT) is a tax-saving trust in which the grantor of the trust places assets or transfers property into an irrevovable trust. The terms of the trust requires all of the income to be paid to the grantor for a specified period of time. At the end of the term, the remaining property is transferred to the beneficiary as named in the trust. The benefit to this is that, at the end of the term, your partner will receive this property free of any gift or estate taxes on the appreciated value of the property.  However, should you die before the termination of the trust a proportionate share of the trust will be included back into the grantor’s estate.

A GRIT is a good strategy for someone who has not utilized his/her lifetime gift tax exemption (now tied to the Estate tax amount of $5 million).  It is also a valuable tool for someone who wishes to gift property to another while maintaining some control, continue to use the property or receive some income from the property.

GRITS and GRATS (Grantor Retained Annuity Trust) – more on that later—are a few of the tricks we attorneys specializing in unique families have up our sleeves to help protect the rights and assets of unique families.  While I am encouraged by the mini-revolution occurring in the states when it comes to gay marriage I am still in watch mode to see how it all plays out against the background of DOMA.  Until such time that the Federal government recognizes same-sex marriage, unique and non-traditional families will have to take extra steps to protect their rights and the rights and happiness of their loved ones.


Monday, July 18, 2011

Life After Death Part 1: Protecting the Lives of Loved Ones After your Death

I was doing a little home office cleaning the other day when I happened to notice my “In Case of Emergency Break Glass” file.  This is a group of documents that I’ve collected, grouped, and stored away that will provide our unique family with legal legs should the worst (or inevitable) happens. It is important to not only have your estate plan(s), medical directive(s), and other end-of-life instructions established in as close to airtight legal guidelines as possible, but to make others aware of exactly where the documents are located should circumstances prove necessary. The last thing your loved ones need while they are grieving is a legal battle, which is why I’ve decided to create a four part blog series to cover this very important topic.

Without sounding alarmist, having this collection of emergency documents is essential to the future well-being of unique families.  The court system is not necessarily prepared for or fully supportive of those families that lay outside of the “traditional” majority.  Part of why I do what I do is because so many unique families like my own have had to wage long, uphill legal battles just to protect their families and property.  I am a lawyer and I cannot emphasize enough my own frustrations with how much documentation I had to create just to protect my own family should something happen to either myself or my partner.  And yet…regardless of my anger with the system, I have accepted that this is my current reality and have taken the appropriate steps needed to protect my family.

For those of you out there who are members of a unique family: GLBT families, single mothers, grandparents raising minor children… having your legal documents in a secure, easily obtainable place that is well-known by all vested parties is absolutely essential to your family’s future security and happiness.  Trust me, you do not want to have to fight for your children or the home you helped to pay for in a court of law.

It is my hope that this series of posts will help you create our own “emergency” legal repository so that when/if the worst should happen your loved ones are taken care of in the manner that you intended for them.

Creative Commons License photo credit: Tin Star Self Storage

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