Life Insurance

How Life Insurance Works Best in an Estate Plan

Published on: February 15, 2019 | By McCulloch & Miller, PLLC

Life insurance can help heirs avoid having to incur expenses like estate taxes, funeral costs and similar expenses. However, it also gives heirs breathing room, so they can make the best use of other assets.

Here is an example of how life insurance should work. A father, Howie, dies and leaves a large estate to daughter Eva. The estate is large enough that it triggers a huge estate tax. However, the bulk of his assets are tied up in an IRA and real estate properties, some of which could be put on the market quickly, but not quickly enough for tax deadlines.

With that scenario, Eva might not want to immediately force a sale of the real estate. However, if she accesses the inherited IRA to raise money, she’ll have to pay income tax on the withdrawal and lose a terrific opportunity for extended tax deferral.

Millennials Need an Estate Plan Too

Published on: January 29, 2019 | By McCulloch & Miller, PLLC

Live long enough, and you learn that life can change in a heartbeat. Young adults don’t always know this, but they need to have an estate plan as much as older people.

Whether you are a Baby Boomer or a Millennial, you need to have an estate plan. With the help of a good estate planning attorney, someone in their 20s and 30s can get their estate plan done easily enough. Even if they think they’re immortal, says Wealth Advisor in, “Estate Planning Isn’t Only for the Old and Wealthy,” young adults need estate plans.

First, people can draft a will to provide directions regarding what happens to their assets, such as who will inherit both financial and personal items. Virtual assets like social media accounts should also be included. You should make a list of usernames and passwords for all your accounts and be sure that a trusted relative or friend has access.

The Difference Between Per Capita And Per Stirpes – Beneficiary Designations

Published on: January 17, 2019 | By McCulloch & Miller, PLLC

Out-of-date beneficiary designations could completely undo your entire estate plan. It happens often, since people often neglect these ‘fine print’ details.

We hope that you have a will to ensure that your assets are distributed according to your wishes after you pass. However, if you are like most Americans, many of your assets are not distributed through your will, but through a beneficiary designation, which you may have not thought about since opening up the account, retirement account, 401(k), IRA or SEP or taking out a life insurance policy. A word of warning: regardless of what’s in your will, the beneficiary designation takes precedence.

Benzinga’s recent article addresses this question: “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?” Have you changed the beneficiary designations, since the account or policy was first started? If you need to update your beneficiary designation, talk to the company responsible for maintaining the account. They’ll send you a form to complete, sign and return. Keep a copy for your own records.

Is Your Estate Plan Working for You?

Published on: December 20, 2018 | By McCulloch & Miller, PLLC

Remember that estate planning is not just for the wealthy, and now that the federal exemption is so high, not just for the billionaires either. Estate planning is also much more than a will.

Your estate plan has a lot of work to do for you, both while you are alive and for your family when you have passed. A good article that explains it all comes from Investopedia, “How to Get Your Estate Plan on Track.” There are three key objectives that your estate plan needs to do:

End-of-life health care decisions are documented in a legally binding document;

One Dozen Must-Have Documents

Published on: November 6, 2018 | By McCulloch & Miller, PLLC

To make sure that your wishes are carried out, you’ll have to do your homework. Make sure that you cover these most important documents.

The last thing you want to do, is leave a bureaucratic mess for your loved ones when you die. Not only will it cause the family stress during a difficult time, it could change how your family thinks of you. That should be more than enough reason to get this done in advance!

US News & World Report’s recent article, “12 Documents to Prepare Now for Your Heirs,” says that when people don't have their paperwork ready, it can be a huge headache for the family. A family can be left with all kinds of paperwork to sort out while dealing with grief. Even worse, heirs may forfeit life insurance proceeds and tax deductions or overlook accounts they don't know exist. That's why it's critical to have important documents ready for loved ones. Here are the documents you should start preparing right away:

How Does Life Insurance Work in Farm Estate Planning?

Published on: November 2, 2018 | By McCulloch & Miller, PLLC

Life insurance can be useful in paying off debt, covering funeral costs and serving as a useful resource so that estate proceeds or any one person’s savings don’t have to be tapped.

Life insurance may be the least sexy part of the transition from one farming generation to another, but this financial tool can be very valuable. If parents or grandparents have planned properly, the proceeds from the life insurance may provide the funds that permit the farm to stay in the family. The proceeds, which are not subject to estate taxes, can be used to buy out the non-farming siblings so that the family ownership of the land can continue to another generation.

Successful Farming’s recent article, “Using Life Insurance in Estate Planning,” quotes David Bau, a University of Minnesota Extension educator based in Worthington, Minnesota. He says, “Life insurance is expensive, but it’s still a very good tool in the process. The farming heirs can have insurance on their parents, and they can use that money to buy out the estate.”

How Much Life Insurance Do You Need?

Published on: October 10, 2018 | By McCulloch & Miller, PLLC

Everyone’s needs are different. For most people, one large policy is enough. However, what if your life is not like everyone else’s? How do you know how much coverage you need?

Most people never really think about adding more life insurance, once they buy a policy. They figure they have that policy and insurance through their job. However, what if you wanted to have more coverage? This recent article from Nerd Wallet, “Can You Have More Than One Life Insurance Policy?” explains some life insurance basics.

First, you can own several policies from different companies. However, when you apply, insurance companies will inquire about your existing coverage to make certain that the amount you want is reasonable.

Single Parents Need to Plan and Balance for Financial Stability

Published on: September 27, 2018 | By McCulloch & Miller, PLLC

Without the security of a spouse’s income, single parents must balance their children’s needs with their own retirement savings goals.

Single parents who have to say no to their children over and over again, struggle with wanting to say yes when money is tight and there’s no room in the budget for the latest fashions or games. However, the last thing a single parent wants to do is convey a lack of financial discipline. A financial plan can help a single parent stay on track.

CNBC’s recent article, “Five financial essentials for single parents,” says that when single parents try to satisfy their kids, it can lead to a severe unintended consequence: placing their children ahead of their own retirement needs.

Why Your Estate Plan Should Include Life Insurance

Published on: May 15, 2018 | By McCulloch & Miller, PLLC

We insure our homes, our cars and even our ability to work. We also buy life insurance, which could be the most important insurance policy you own and not just for when you have passed away.

People typically think of life insurance as a means of paying final expenses, such as funeral costs and leaving some money to family members. However, life insurance is more than a policy your heirs cash in when you pass. It can also work as a financial tool while you are living.

Benzinga’s recent article, “Life Insurance Costs and Payouts at Different Ages,” explains that a life insurance policy is a contract you have with an insurance company. You pay them a premium, and they will give a lump-sum payment to your beneficiaries when you die.

Proper Planning for the Distribution of an IRA

Published on: April 10, 2018 | By McCulloch & Miller, PLLC

The rules for IRA distributions can be complicated. Unforeseen circumstances can make things even more complex. Understand the rules, so the money goes where you want it to.

What happens if you designate each of your two adult children as 50/50 beneficiaries of your IRA, and then one of them dies? Will the funds go to your grandchildren?

MarketWatch answered that question in its article, “Who gets your IRA when you die? It’s not so simple.” The answer to what happens to the IRA money is dependent upon what the beneficiary designations say and when one of the children passes away. The beneficiary designations state how it will be distributed. However, that may not be what is written in your will.