Wednesday, May 08, 2013

Family Business: Preserving Your Legacy for Generations to Come

A Twin Cities Business Lawyer Discusses How You Can Protect Your Family Business

Your family-owned business is not just one of your most significant assets, it is also your legacy. Both must be protected by implementing a transition plan to arrange for transfer to your children or other loved ones upon your retirement or death.

More than 70 percent of family businesses do not survive the transition to the next generation. Ensuring your family does not fall victim to the same fate requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Below are some steps you can take today to make sure your family business continues from generation to generation.

  • Meet with an estate planning attorney to develop a comprehensive plan that includes a will and/or living trust. Your estate plan should account for issues related to both the transfer of your assets, including the family business and estate taxes.
  • Communicate with all family members about their wishes concerning the business. Enlist their involvement in establishing a business succession plan to transfer ownership and control to the younger generation. Include in-laws or other non-blood relatives in these discussions. They offer a fresh perspective and may have talents and skills that will help the company.
  • Make sure your succession plan includes:  preserving and enhancing “institutional memory”, who will own the company, advisors who can aid the transition team and ensure continuity, who will oversee day-to-day operations, provisions for heirs who are not directly involved in the business, tax saving strategies, education and training of family members who will take over the company and key employees.
  • Discuss your estate plan and business succession plan with your family members and key employees. Make sure everyone shares the same basic understanding.
  • Plan for liquidity. Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company. Estate taxes are based on the full value of your estate. If your estate is asset-rich and cash-poor, your heirs may be forced to liquidate assets in order to cover the taxes, thus removing your “family” from the business.
  • Implement a family employment plan to establish policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
  • Have a buy-sell agreement in place to govern the future sale or transfer of shares of stock held by employees or family members.
  • Add independent professionals to your board of directors.

You’ve worked very hard over your lifetime to build your family-owned enterprise. However, you should resist the temptation to retain total control of your business well into your golden years. There comes a time to retire and focus your priorities on ensuring a smooth transition that preserves your legacy – and your investment – for generations to come.

Thursday, June 21, 2012

Utilizing Family Limited Partnerships as Part of Your Estate Plan

Utilizing Family Limited Partnerships as Part of Your Estate Plan

Designed to preserve family businesses for future generations, Family Limited Partnerships (FLPs) can help shelter your assets and reduce overall estate and gift taxes. FLPs are commonly used as part of business succession planning, business continuity plans, and often serve as an integral component of an estate plan for high net worth individuals.

A Family Limited Partnership is typically established by married couples who place assets in the FLP and serve as its general partners. They may then grant limited-partnership interests to the children, of up to 99% of the value of the FLP’s assets. When this occurs, the assets are removed from the general partners’ estates, thus saving on future estate taxes. The general partners keep control of the FLP and its assets, even though they may own as little as just 1% of the asset value.

Limited partners may receive distributions from the FLP, and enjoy certain tax benefits. Asset protection is another attractive feature of the FLP. The partnership’s assets are shielded from the limited partners’ creditors. The interests in a FLP can be easily divided among family members, who may each own different amounts. The FLP enables ownership of a business to transfer to the younger generation, while allowing the senior generation to continue conducting operations and mentoring and grooming the young owners.

One of the significant benefits of a properly established and maintained FLP is that it can reduce the value of gifts to your children and grandchildren.  The value of each limited partnership interest which you give away decreases the value of your taxable estate and, consequently, any tax which your heirs would have to pay upon your death. The gifts are made using the annual gift tax exclusion, so you may not have to pay any gift tax on the transfer.  

Since limited partners do not have the ability to direct or control the day-to-day operation of the partnership, a minority discount can be applied to reduce the value of the limited partnership interests which you are gifting.  Therefore, the value of the partnership interests transferred to your beneficiaries may be far less than the corresponding value of the assets in the partnership.  Furthermore, because the partnership is a closely-held entity and not publicly-traded, a discount can be applied based upon the lack of marketability of the limited partnership interest.  This allows you to leverage the FLP as a vehicle to transfer more wealth to your beneficiaries, while retaining control of the underlying assets.  

With these significant tax benefits, it’s no surprise that many FLPs have attracted scrutiny from the IRS. Others have run into various problems due to mistakes or outright abuse. Care must be taken to ensure your FLP is properly established and operated.Specifically, the IRS may look at the following issues when assessing the viability of the FLP:

  • It’s not all about taxes. You stand a better chance of avoiding – or surviving – a challenge from the IRS if you can show a significant, legitimate non-tax-related reason the FLP was created. Tax savings are an important consideration, but you must be able to demonstrate that there are other reasons, as well.
  • Keep you personal assets out of the FLP. You can reasonably expect to transfer closely held stock or interests in commercial real estate into a Family Limited Partnership. However, personal property such as cars or residences will not fare well against an IRS challenge. Similarly, the FLP’s assets should not be used to pay for any personal expenses. The FLP must be a legitimate business entity operated to fulfill business purposes.
  • Have your FLP’s assets professionally appraised. Partners or family members should not determine the valuations or discounts for any assets transferred into the FLP. A qualified appraiser has a much better chance of withstanding IRS scrutiny.
  • Don’t push it. Many are tempted to put as many assets into the FLP as possible, to maximize the asset protection and tax savings benefits. Unfortunately, if the FLP is successfully challenged, a significant portion of a partner’s net worth could be vulnerable to taxes or lawsuits.



Thursday, March 15, 2012

Cancer Treatment Often Leads to Bankruptcy

Cancer Treatment Often Leads to Bankruptcy

These days, it seems like everything under the sun, and even the sun itself, causes cancer. A recent study shows that cancer may cause yet another hardship for those diagnosed—Bankruptcy.  There are a number of reasons for this.  A patient may be unable to work during treatment or only able to earn an income during periods of remission. However, the primary cause is the enormous medical expense associated with the treatment of cancer, especially for those who are uninsured or under insured.

The study, “Cancer diagnosis as a risk factor for personal bankruptcy,” published in the Journal of Clinical Oncology, examined 231,799 cancer patients, and found that 4,805 of them, or 2.1 percent sought bankruptcy relief under Chapter 7 and Chapter 13 in the years following their cancer diagnoses. This corresponds to about a 700% increase in the incidence bankruptcy filings over that of the general population.

The study also found that certain types of cancer resulted in significantly higher rates of bankruptcy. Patients afflicted with lung, thyroid and leukemia/lymphoma cancers were most likely to seek bankruptcy protection, with 7.7 percent of lung cancer patients filing for bankruptcy within five years of being diagnosed. The study also found that surgery and chemotherapy increased the risk that some cancer patients would file for bankruptcy.

Researchers concluded that medical bills are a primary cause of the connection between cancer and bankruptcy because younger cancer patients sought bankruptcy relief at higher rates than older cancer sufferers. They believed this was due to the fact that older Americans have access to Medicare, and therefore do not bear the same costs for cancer treatment as younger patients.



Monday, February 27, 2012

Important Issues to Consider When Setting Up Your Estate Plan

Important Issues to Consider When Setting Up Your Estate Plan

Often estate planning focuses on the “big picture” issues, such as who gets what, whether a living trust should be created to avoid probate and tax planning to minimize gift and estate taxes. However, there are many smaller issues, which are just as critical to the success of your overall estate plan. Below are some of the issues that are often overlooked by clients and sometimes their attorneys.

Cash Flow
Is there sufficient cash? Estates incur operating expenses throughout the administration phase. The estate often has to pay state or federal estate taxes, filing fees, living expenses for a surviving spouse or other dependents, cover regular expenses to maintain assets held in the estate, and various legal expenses associated with settling the estate.

How will taxes be paid? Although the estate may be small enough to avoid federal estate taxes, there are other taxes which must be paid. Depending on jurisdiction, the state may impose an estate tax. If the estate is earning income, it must pay income taxes until the estate is fully settled. Income taxes are paid from the liquid assets held in the estate, however estate taxes could be paid by either the estate or from each beneficiary’s inheritance if the underlying assets are liquid.

What, exactly, is held in the estate? The owner of the estate certainly knows this information, but estate administrators, successor trustees and executors may not have certain information readily available. A notebook or list documenting what major items are owned by the estate should be left for the estate administrator. It should also include locations and identifying information, including serial numbers and account numbers.

Your estate can’t be settled until all creditors have been paid. As with your assets, be sure to leave your estate administrator a document listing all creditors and account numbers. Be sure to also include information regarding where your records are kept, in the event there are disputes regarding the amount the creditor claims is owed.

Beneficiary Designations
Some assets are not subject to the terms of a will. Instead, they are transferred directly to a beneficiary according to the instruction made on a beneficiary designation form. Bank accounts, life insurance policies, annuities, retirement plans, IRAs and most motor vehicles departments allow you to designate a beneficiary to inherit the asset upon your death. By doing so, the asset is not included in the probate estate and simply passes to your designated beneficiary by operation of law.

Fund Your Living Trust
Your probate-avoidance living trust will not keep your estate out of the probate court unless you formally transfer your assets into the trust. Only assets which are legally owned by the trust are subject to its terms. Title to your real property, vehicles, investments and other financial accounts should be transferred into the name of your living trust.



Friday, December 16, 2011

Financial Friday: The Basics of Disability Insurance: What is it and Why Does it Matter?

Once again Unique Estate Law brings you a financial topic from Jay Dworsky on this Financial Friday. Today Jay explains disablity insurance.

Disability insurance pays benefits when you are unable to earn a living because you are sick or injured. Most disability policies pay you a benefit that replaces only a percentage of your normal earned income when you are unable to work. Very simply, that’s what it does.

Why do you want disability insurance?

The probability of you ever being disabled for longer than three months is much greater than your chances of dying prematurely, because of the advancements in medicine can keep the most desperate of situations alive. The likelihood of suffering a disability by age 50 is 25% (Source: 1985 Commissioner’s Individual Disability Table A).

Think about what would happen if you suffered an injury or illness and couldn’t work for days, months or even years. Maybe your single, do you have the savings or other means to keep paying the mortgage, groceries and medical bills. If you are married, can you rely solely on your spouse’s income? It’s highly likely if you’re married there are children or other dependents. With that information, one might come to the conclusion there is more than enough evidence to want the protection of disability insurance. However, as human beings we have the greatest capacity to rationalize why we make the decisions we make all day long, minute by minute, second by  second and moment to moment. It’s actually quite amazing.

The fact is our health is the most important asset we have going for us. We need to protect our health as it is our lifeblood and earning potential. We can take all the steps to healthy living, self-preservation and the like but that may not prove to be enough, life happens. Our last line of defense is to place rubber-bumpers and safety nets underneath our plan with disability insurance, i.e. income protection.

Disability Insurance and Business Owners

If you own a business, disability insurance can help protect you in several ways. You can protect your own income with a policy on yourself. You can also purchase a policy on key persons to reduce the negative (or devastating) impact that the person's disability may have on the business. Lastly, you can buy a disability policy on a business partner which could enable you to buy his or her interest in the event that he or she cannot work.

Further, if you are an employee of a company, you might have access to group disability or you can always get coverage privately. The thing to do is get educated, contact Jay to discuss any of your questions and concerns.



Monday, December 12, 2011

6 Events Which May Require a Change in Your Estate Plan

6 Events Which May Require a Change in Your Estate Plan

Creating a Will is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, has changed. As 2011 winds to a close, it's a great time to reflect back on the changes in your life.  Keep in mind that there are a number of life-changing events that require your Will to be revised, including:

Change in Marital Status: If you have gotten married or divorced, it is imperative that you review and modify your Will. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. During a divorce it is a good practice to revise your Will, to formally remove your soon-to-be ex spouse as a beneficiary. Under Minnesota law, a divorce will remove your ex spouse as a beneficiary of your will even if you don't actively change your will. The law treats the ex as if he or she predeceased you (insert sarcastic comment here) so you shouldn't worry that your ex will inherit via your will once the divorce is complete. But what about during the divorce?  Most clients with whom I've worked on these matters do not want their spouse to inherit while the divorce is pending, but that does not happen by law or inaction.  If you are going through a divorce, you must take active steps to ensure that the spouse you are divorcing will no longer inherit through a will that hasn't been updated to reflect your current status. While you’re at it, you should also change your beneficiary on any life insurance policies, pensions, or retirement accounts as these trump even your will. You may have disinherited your spouse from your will but if you forgot to change your life insurance policy he or she will still received the proceeds of that policy until you state otherwise. Estate planning is complicated when there are children from multiple marriages, and an attorney can help you ensure everyone is protected, which may include establishing a trust in addition to the revised Will.

If one of your Will’s beneficiaries experiences a change in marital status, that may also trigger a need to revise your Will.

Change in Relationship Status: If you enter or end a serious relationship in which you plan(ned) to leave your unmarried partner assets, you should meet with an estate-planning attorney who is well versed in the complexities of planning for unmarried couples.  I handle many unmarried clients who have planned their estates together and if they ever break up, they will need to take active steps to revise their plans. Unlike for legally married couples, there is no law to automatically disinherit a partner after a breakup.  While I do carefully draft these plans to include such provisioins, they will still be interpreted in court, which may lead to a lengthy and expensive court battle over those assets. This is the exact situation these couples attempted to avoid by coming to me in the first place. If you are entering a relationship that is not legally recognized, you should also meet with an attorney upon deciding to leave assets to each other OR if you want that person to handle medical or financial decisions on your behalf. I have experience handling nontraditional estate planning and can help you draft the right plan to protect your family.

Births: Upon the birth of a new child, the parents should amend their Wills immediately, to include the names of the guardians who will care for the child if both parents die. Also, parents or grandparents may wish to modify the distribution of assets provided in their Wills, to include the new addition to the family.

Deaths or Incapacitation: If any of the named executors or beneficiaries of a Will, or the named guardians for your children, pass away or become incapacitated, your Will should be revised accordingly.

Change in Assets: Your Will may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset. You may want to modify the distribution of other assets in your estate, to account for the changed value or disposition of the asset. Further, you may wish to set up a trust to handle some of your assets to as to avoid probate or leave them to a minor.

Change in Employment: A change in the amount and/or source of income means your Will should be examined to see if any changes must be made to that document. Retirement or changing jobs could entail moving to another state, thus subjecting your estate to the laws of that state when you die. If the change in income modifies your investing, saving or spending habits, it may be time to review your Will and make sure the distribution to your beneficiaries will be as you intended.

Changes in Probate or Tax Laws: Wills should be drafted to maximize tax benefits, and to ensure the decedent’s wishes are carried out. If the laws regarding taxation of the estate, distribution of assets, or provisions for minor children have changed, you should have your Will reviewed by an estate planning attorney to ensure your family is fully protected and your wishes will be fully carried out.



Friday, October 21, 2011

Financial Friday: Check Your Beneficiary Designations

Unique Estate Law brings you another post from financial advisor, Jay Dworsky.  This week he discusses the importance of properly filling out, and timely review of, beneficiary designation forms. This is a crucial part of your estate plan and you should work with both your estate planning attorney and a financial advisor to ensure that your plans are not thwarted by imporoper forms for  your life insurance policy or retirment plans.

What is a beneficiary designation?

September was life insurance awareness month. If you didn’t buy that policy you’ve been thinking about, at the very least check your beneficiaries.  A beneficiary is the recipient of funds, property, or other benefits, as from an insurance policy or will. If you own a life insurance policy or participate in a retirement plan, such as an IRA, 401(k) plan, or 403(b) plan, you are asked on the application to name a beneficiary to receive the proceeds of your plan at your death. A beneficiary designation allows you to transfer the proceeds without going through probate. You can choose your spouse, a child, another adult, a charity, a trust, a partner, or your estate as a beneficiary. If you're married, however, the law may restrict your choice. Certain retirement plans require you to name your spouse unless he or she signs a form waiving this right.

How are some advantages of beneficiary designations?

  • If you own a life insurance policy or a retirement account, you get to name the beneficiary of the proceeds from those accounts
  • You are able to avoid the expense, delay, disruption, and lack of privacy of court proceedings
  • ?It is easy to do - simpley fill out a form
  • Simple to set up, change designations, costs nothing
  • Avoids probate; proceeds automatically pass to your beneficiary after your death
  • You own the property until your death
  • You can change the beneficiary at any time, subject in some cases to certain spousal rights
  • Trumps your will or Minnesota intestacy laws
  • Difficult to challenge

What else should I know about beneficiary designations?

  • Retirement plan proceeds frequently are subject to income tax
  • Proceeds of retirement plans or insurance contracts may be subject to estate tax
  • Choice of beneficiary is a factor in determining how quickly the funds of retirement plans are distributed after you die
  • Some plans don't allow alternate beneficiaries
  • You lose control of the funds payable under a retirement plan or insurance contract after your death, unless you designate a trust as beneficiary

In summary, please take the time to ensure your beneficiary designation forms are set up properly.  This is a simple - free - way to know that your assets are going to your chosen beneficiaries.  Having these in place allows your heirs to avoid probate for any assets directed through these forms and will trump your will or intestacy statutes so that you can direct the funds to anyone (with some restrictions on retirement assets if you are married as noted above). 



Friday, September 30, 2011

Financial Friday: Children and Your Family's Financial Future

Today's Unique Estate Law brings you a Financial Friday post by Jay Dworsky on the topic of the emotional and financial cost of raising children and ways to ensure a better financial future for your family.

Our children often times can be our greatest pleasure and frustration all in the same minute. One thing for sure is they will always be our greatest responsibility and probably our most expensive commitment.
We are charged with divine responsibility from the minute of conception. Often parents (both new parents and veteran caregivers) cannot conceive of being in charge of the health and well being of another human until the baby arrives.

As our children travel this long and never-dull road from infancy to adulthood, we nurture them, worry about them, discipline them and, of course, love them. Most of all, we try to protect them. We want them to grow up in a stable world, one in which they are physically safe, emotionally nurtured and financially secure. We would do anything in their power for the sake of their children so they can receive the best life has to offer.

The cost of raising a child

According to Forfiled, “The United States Department of Agriculture estimates that the average nationwide cost of raising one child from cradle to college entrance at age 18 ranges from $205,960 to $475,680, depending on income. (Source: Expenditures on Children by Families, 2009) Then, when they turn 18, add in college expenses, and your financial outlay can get even worse. How much worse? According to the College Board, for the 2010/2011 school year, the average cost of one year at a four-year public college is $20,339 (for in-state students), while the average cost for one year at a four-year private college is $40,476. Even if those numbers don't go up (and they have increased each year for decades), that would come to $81,356 for a four-year degree at a public college, and $161,904 at a private university.”

Fortunately, as long as we remain alive we somehow find a way to provide for our children. We know from the real life stories, like the widows of 911 victims, the baby is on her way whether we are there or not. It may not be appropriate cocktail-party conversation but the fact is things happen and we need to plan for them. Remember we brought this child into the world and his or her life goes on whether ours does or not.

Review your life insurance coverage

Life insurance is one of the most effective ways to protect your family from the uncertainty of premature death. Life insurance can help assure that a preselected amount of money will be on hand to replace your income and help your family members--your children and your spouse—maintain their standard of living. With life insurance, you can select an amount that will help your family meet living expenses, pay the mortgage, and even provide a college fund for your children. Best of all, life insurance proceeds are generally not taxable as income.


Thursday, August 18, 2011

Business Succession Planning Part II: What Goes Into the Plan

Sorry folks that this one is a little late.

Part I of this series on Business Succession Planning dealt with whether or not you need to create a business succession plan.  A quick recap: a business succession plan is needed by anyone who owns and operates their own business, whether you want to keep it in the family or not.  My reasons/justification is this: what happens if you should be injured and unable to run things?  Who keeps it going while you are incapacitated?  How do they know what to do?  Who is legally able to open, pay, or dispute bills in your absence?

Now, it is time to talk about what going into a Business Succession Plan.

A Business Success Plan should be able to articulate the following in such a manner that there is no equivocation:

  1. The ultimate goals for the business with respect to the owner(s) and the company.
  2. The transition of ownership (when transition occurs and to whom)
  3. Facilitation measures (who will assist (if anyone) the successor(s), funds transfer, etc)
  4. Relinquishment of owner(s) (acknowledgement and instructions)

The plan should outline what the original owner(s) intended for the business, who has a claim to ownership (this includes if there are partners to the business), roles and responsibilities of successor and partners, is there “life insurance” or other funds set aside to provide transition funds should the owner die (versus become incapacitated), transition triggers, acknowledgement of plan by business owners and successors.  A business succession plan should include any “Cross Purchase Agreement” between owner/partners and a how the price should be determined.  Lastly, for companies that are being handed down or will be entrusted to family members (as opposed to sold) a business success plan should include those steps required to educate the new owner/operator in business operations and any consultants or temporary managers that will assist during the transition process.

They aren’t particularly complicated documents to produce, but they must be thorough.  The best business succession plans are those that establish some transition measure prior to the owner’s death OR provide for the taxes and other expenditures that will arise.

I work with families to put together and file the appropriate legal documents required to ensure the legality of the business success plan.  I do recommend that businesses work with financial consultants to ensure that the appropriate funds and management support are available to make the plan a reality.

Next month I will post a Business Succession Planning eGuide that should clarify the content of this very important blog series in more detail.

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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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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From within Hennepin County Unique Estate Law represents estate planning and elder law clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park. The Minnesota law firm of Unique Estate Law focuses on all aspects of estate planning, including specialized wills, trusts, powers of attorney and medical directives for married couples, young families, blended families, single parents, gay families and those going through a divorce. Unique Estate Law also handles probate administration, asset protection, Medical Assistance planning, elder law, business succession planning, adoptions and cabin planning.

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