How to Use Life Insurance as an Executive Benefit
By:  Steve Kobrin, LUTCF  February 6, 2017
As a business owner, you invest copious amounts of time, money and energy into your employees. Don’t you want your investment to pay off? Employee turnover can be extremely costly to your business, and this is especially true when it comes to key executives.
The Costs of Turnover for the Business

When you lose indispensable employees, money has to be reallocated to provide for recruiting, training, orientation and management of a new hire. It can also take a lot of time to ensure that you find someone who is the best fit for the role. The longer the recruitment process takes, the more the business is exposed to a setback. (For related reading, see: The Cost of Hiring a New Employee.)

This is why companies spend significant amounts of money on compensation packages for key executives. The longer they can get these men and women to stay in their employment, the better return they get on their investment in them. Employers are always looking for benefits that can be legitimately offered to selected personnel only. How does life insurance fit into this equation?
Life Insurance as a Benefit

Life insurance is frequently at the top of this select benefit list. If a number of factors fall into place, then the use of this product can be a big win for both the executive and the firm. Here are some factors that will ensure the success of life insurance for this purpose:
The executive should have a need for life insurance for personal reasons, such as family protection and retirement planning.
The executive qualifies for a policy that can provide both significant cash accumulation and a sufficient survivor benefit.
The executive is willing to let the firm control policy proceeds.

If your executives meet these criteria, what are some tips to take into consideration?
The Importance of Underwriting

The lower the cost of the insurance, the higher cash value and survivor benefit a policy will provide. If the executive qualifies for a comparatively low rate, then additional money can be paid into the policy for use in retirement, as well as for the protection of beneficiaries. If the executive has a chronic illness or another higher-risk factor that drives up the cost of coverage, a policy may still be a worthwhile bonus from the employer. Be sure to contact your life insurance provider to talk through any extenuating circumstances and how they could affect the policy. (For related reading, see: How Cash Value Builds in a Life Insurance Policy.)
Seek Advice on Premium Payments

The whole point of this benefit is for the employer to subsidize the cost of a life insurance policy that can have a major impact on the life of the executive. Because these policies can cost substantial amounts of money, the employer will take on a considerable expense in financing them. Make sure your financial experts talk to your insurance advisor about how to minimize the tax impact for both your firm and your executive. (For related reading, see: Understanding Taxes on Life Insurance Premiums.)
Implement Sensible Policy Controls

The primary purpose of providing this benefit is to lock executives into a commitment that protects the business. What kind of stipulations can be applied to ensure the benefit pays off? One option is to build controls into the executive’s contract that give access to increased policy benefits over time. Secondly, provisions can be made to reimburse the employer for the expense while still providing the executive with a lucrative cash account and survivor benefit. Speak to your business advisor to review your options in this regard.

You build your business to be successful and a major piece of that success is in holding onto key personnel. Don’t overlook the importance life insurance can play to ensure loyalty from your chief executives. (For more from this author, see: How to Buy Life Insurance With an Alcohol History.)
Read more: How to Use Life Insurance as an Executive Benefit | Investopedia http://www.investopedia.com/advisor-network/articles/020617/how-use-life-insurance-executive-benefit/#ixzz4c6CyMS5T

When and How to Insure Your Income

By Leslie Kramer | April 4, 2016 — 10:52 AM EDT
Life is full of calamities. That’s why insurance was invented — people buy life insurance, auto insurance, flood insurance. But what about the one asset you have that allows you to pay for all those insurance policies? That would be your income, which most people don’t think about insuring.

It’s understandable that most workers envision or at least hope that they will remain strong, healthy and able to continue working up until retirement. But unfortunately, that is not always the case. If misfortune does strike, a steady flow of income may be the only way to get through it financially.

Here are some things to think about when it comes to insuring your income. (For related reading, see: 7 Issues to Consider When Determining Life Insurance Coverage.)

Benefits of Disability Insurance

There are many types of income insurance; disability insurance is the most common as it provides a way for people to insure their income and protect their family’s assets if an illness does occur. Many people mistakenly believe that once they have purchased a life insurance policy, they have sufficiently protected their family financially in the case of an untimely death. That may be true, but what if that income earner becomes injured in a car accident or contracts a long or short-term illness and is unable to continue working? In this scenario, life insurance won’t be of much help.

That’s why more and more financial advisors are suggesting that their clients purchase disability income protection insurance, which will typically replace a portion of one’s income if the policyholder suddenly becomes unable to work due to an accident, illness or a disability. There are many different types of these policies available and while their terms may differ, most will continue to pay one’s salary until the policyholder can start working again or passes away.

Typically, there’s a waiting period before a disability policy kicks in, but it will usually start paying out immediately after any sick pay from an employer ends. The amount a policy pays out may decrease over time, but most will continue to cover the policyholder during the period of time that their illnesses leaves the policyholder unable to work. Some payouts may only continue until the policy expires, which may be at the end of a stated period, or when the person reaches retirement age. (For related reading, see: Understanding the Different Types of Life Insurance.)

In this way, disability income policies differ from critical illness insurance, which pays just a single lump-sum payment if the policyholder is impacted with a serious or life threatening disease. Short-term disability income protection insurance may also differ from a more standard plan in that it pays out a monthly sum in relation to one’s income for just a set or limited period of time.

High Costs of Being Sick

The high day-to-day costs of maintaining a household while out of work can be daunting, but many people are shocked to find out how much an illness can end up costing them in terms of medical bills — even if they have health insurance. There are often additional doctor bills and hospital costs that are not covered by insurance, and these costs can add up to the point of being overwhelming.

The various types of disability income insurance can help cover those costs and can help a family avoid going into bankruptcy in the most extreme cases.

Disability insurance is not the only type of insurance that can help protect one’s income during difficult times. There are also income insurance products that only kick in when someone becomes unemployed. Unemployment protection insurance, also referred to as redundancy insurance, protects policyholders’ incomes if a person suddenly loses their job for any variety of reasons; it pays out a monthly sum for a set period of time. These policies typically cover the portion of a person’s weekly salary that is not covered by government unemployment benefits. (For related reading, see: Choosing the Best Disability Insurance.)

Mortgage payment protection insurance is another type of insurance that can be extremely beneficial if a person loses his or her income. These policies protect policyholders by paying out the equivalent of their monthly mortgage payments during any period in which they become unable to work.

The Bottom Line

No one’s ability to keep producing income is guaranteed. That’s why purchasing income insurance may be the best way to protect one’s assets in the event of any type of devastating loss. (For related reading, see: Let Life Insurance Riders Drive Your Coverage.)
Read more: When and How to Insure Your Income | Investopedia http://www.investopedia.com/articles/personal-finance/040416/when-and-how-insure-your-income.asp#ixzz4c6EbkV1d

Facing scaled-back benefits and premium hikes, baby boomers can use several strategies to help cover future costs.

By Kimberly Lankford, From Kiplinger’s Retirement Report, March 2014
Baby boomers are facing a dilemma: At a time when long-term-care insurers are shrinking coverage, more boomers than ever are recognizing the need to protect their retirement savings from potentially devastating costs. Big players have withdrawn from the market, and those that remain are scaling back benefits, tightening eligibility and hiking premiums, especially for women.
Still, individuals in their fifties and sixties who want coverage do have some options. They can engage in strategies—from sharing benefits with spouses to reducing inflation protection—that can help them cover part of their costs in the future while keeping premiums manageable.

As boomers help their aging parents, many are experiencing firsthand the overwhelming costs of long-term care. And they want to protect their own children from these crushing responsibilities if they end up needing care themselves. “People who have had a personal experience either with a family member or a friend’s parent are saying this could be an issue down the road,” says Leonard Wright, a certified public accountant in San Diego, Cal.

Indeed, the costs can be exorbitant. The median rate for a private nursing-home room is $230 a day, or $84,000 a year, according to an annual report by insurer Genworth. (Find the cost of care in your community at www.genworth.com/costofcare.) The median cost of a home health aide is $19 an hour. A stay in an assisted-living facility costs a median $3,450 a month.

Stephanie Lee, a certified financial planner at East Rock Financial Services, in San Francisco, where the annual median cost of a private nursing-home room is more than $200,000, says she raises the issue with every client. She explains that they should either buy insurance or set aside savings to cover expenses.

Couples who do not want to pay premiums for care they may never need should reserve $200,000 to $400,000 or more to cover potential care, Lee says. The amount “depends on what return they can expect on their investments, the inflation rate of long-term care for the area, and the length, type and timing of care they anticipate.”

To decide on which route to take, Lee first looks at the amount of care that the couple wants to cover—say, three years in a nursing home. Then she looks at the amount of guaranteed income—Social Security and pension benefits—that could cover long-term-care costs as well as other expenses. The couple would either need enough savings or long-term-care insurance to fill in the gap. “They may decide that spending $2,500 per year on premiums for 30 years is preferable to setting aside $300,000 for care,” she says.

In her calculations, Lee usually assumes that the first spouse who becomes ill will need home health care for three years, while the other spouse will need nursing-home care for three years. She also discusses the possibility of moving to a less-expensive community.

Becky Snow, 58, of Las Vegas, has experience with the high cost of care. Her father was diagnosed with Alzheimer’s disease seven years ago. He lived with her for three months and then moved to a nursing home. “I took over everything because he couldn’t do any of that himself,” Snow says. “He was single, and I knew nothing about his financial situation.”

Her father’s pension didn’t cover the full nursing-home tab. “We had to gradually sell off everything he owned to pay for his care,” she says.

After he died two years ago, at 79, Snow started to think about what would happen if she needed care. She was divorced in 2012. She asked her 33-year-old daughter, a paramedic, to handle medical decisions if she needed help, and told her 27-year-old son that he would be in charge of her finances. “I wanted to make sure my son knew my financial situation so he could step in and not be in the dark like I was,” she says.

Snow bought a Northwestern Mutual long-term-care insurance policy in 2013 and used her father’s experience as a guide when choosing how much coverage to get. She calculated the income she’d get from Social Security and other sources and how much she could afford to pay from savings. She bought a policy that will pay a daily benefit large enough to cover the balance. Because her father, like many Alzheimer’s patients, needed care for five years, she bought a six-year benefit period as an extra cushion. “I hope I never have to use it, but I need to be prepared,” she says.

Buying a policy is an increasingly tough decision as insurers impose higher premiums, especially on women. Features once standard are now very expensive or have been replaced with skimpier alternatives.

Women pay more. Becky Snow bought her policy just before most insurers started to charge women higher premiums than men. Genworth, the largest long-term-care insurer, announced the change about a year ago, followed by big players John Hancock, Transamerica and Mutual of Omaha. Most other companies have already moved or are expected to move to gender-distinct pricing in the next year. The reason: Women generate more long-term-care claims than men, and their claims tend to be more expensive, says Beth Ludden, vice-president of long-term care at Genworth. They are often their husbands’ caregivers, but they may later need to pay for long-term care for themselves.

Many single women now pay about 50% more than single men, says Claude Thau, a long-term-care insurance consultant in Overland Park, Kan. Regulators in some states have not yet approved the changes for some insurers. (Genworth, for now, still offers unisex rates in California.) “I told my female clients that they should consider locking this in before [more insurers] switch to gender-based pricing,” Lee says.

Get price quotes from several insurers. Women should also check out any policies offered by their employer because they may still use unisex rates.

One way that a married woman can save money is to buy with a spouse. Most insurers offer discounts of about 30% to couples, Thau says. Genworth, for example, charges a 55-year-old man in the best health category $2,190 a year for a policy with a $150 daily benefit that rises 5% compounded per year, a 90-day waiting period and a three-year benefit period. That policy would cost a woman $2,966 a year. But with the discount, each spouse would pay $1,854.

Couples can hedge their bets with shared benefits. For example, if each spouse gets a three-year shared-benefit policy, they have six years in coverage between the two of them. Spouses can split the coverage any way they want. Sharing benefits tends to boost premiums by about 15%—but women could end up with more than half of the coverage if they provide caregiving to an ill husband.

Women also should consider hybrid policies. John Ryan, a Greenwood Village, Colo., specialist in long-term-care insurance, recommends that single women compare the cost of traditional long-term-care insurance with a policy that combines long-term care and life insurance. “I’ve never been a real fan of combo policies, but with the new higher rates for women, the combos are looking a little better for them,” Ryan says. Women tend to pay less than men for life insurance so that brings down the costs.

With a combination policy, you usually pay a lump sum. If you don’t need long-term care, your beneficiaries will receive a death benefit that is worth about 1.5 times your initial investment. If you need long-term care, the insurer will pay out about four times the initial investment. Any long-term-care benefits you use will reduce the death benefit.

For example, if a 60-year-old single woman invests $100,000 in a Lincoln Financial MoneyGuard combo policy, she would get $6,374 in monthly long-term-care benefits for six years, totaling $458,913. If she dies before needing care, her heirs would get $152,971.

This is not the type of policy to buy if you want to leave heirs a large death benefit. But unlike a traditional long-term-care policy, heirs do get some money if you never need care.

Eligibility tightens. Besides controlling risk by raising rates for women, insurers are rejecting more applicants who have medical conditions—both women and men. Lee says she recommends that her clients buy coverage “before they have any major health issues.” A study by the American Association for Long-Term Care Insurance found that 12% of applicants below age 50 were rejected, as were 17% of those 50 to 59; 25% of those 60 to 69; and 44% of those in their seventies.
Also, the older you are when you purchase a policy, the higher the premium. According to the association, a 55-year-old couple who buys a policy with a $150 daily benefit, three-year benefit period and a 3% compound inflation adjustment will pay an average annual premium of $3,275, while a 65-year-old couple will pay $5,940.

Health requirements vary by company, so it pays to shop around. Long-term-care insurance specialists can help. “They’ll know which insurer will give them the greatest opportunity to get a preferred or standard rate,” says Mike Skiens, president of Master Care Solutions, in Portland, Ore., who works with about eight long-term-care insurers. “We can do a prequalification of that person’s health and ask the insurer about the rating class” before a client applies.

You can find long-term-care specialists at www.aaltci.org. You may also want to contact a few large insurers, such as Northwestern Mutual and New York Life, which only work with their own agents.

If you’ve been rejected in the past, you may be able to get coverage later if your health improves, even if you had something significant like cancer surgery. “After a couple of years, once they’ve been symptom free, we can often issue policies,” says Steve Sperka, vice-president of long-term care at Northwestern Mutual.
Benefits are cut. In the past, most policies boosted benefits by 5% compounded each year for inflation. But those promises turned out to be more expensive than insurers had expected. Now insurers are also offering cheaper policies that raise coverage by 3% a year or by changes in the consumer price index.

A healthy 55-year-old man who buys a Genworth policy with 5% compound inflation protection would pay $2,190 a year for a $150 daily benefit for three years. The same policy with a 3% adjustment would cost $1,267 a year.

Ask the insurer to compare the pools of money that would be available when you turn 85 under each policy. (The pool is the daily benefit amount times the benefit period.) With the Genworth policy, both policies start off with a pool of $164,250. In 30 years, the 85-year-old who bought the 5% policy would have a benefit pool of $676,075, compared with the $387,066 pool for the 3% policy. That means that the extra $27,690 in premiums that the policyholder paid for the 5% policy over 30 years leveraged $289,009 more in benefits than the 3% policy.

More insurers also are offering “future purchase options.” These policies charge a lower premium for a daily benefit but do not raise benefits automatically each year. Instead, you have the option to increase coverage every year or every few years by paying a higher premium, which would be based on your health when you bought the policy.

This option could be a good deal for buyers who can’t afford the bigger premiums for inflation protection early on—maybe you have several more years of mortgage payments. However, the premium increase will be based in part on your age when you add on the inflation protection—perhaps boosting your annual premium beyond what you would have paid if you locked in earlier.

You also could cut costs by cutting back on the benefit period. Most insurers eliminated lifetime benefits and hiked rates for a five- or six-year benefit period. But you can still cover most of the risk by buying a shorter benefit period. Northwestern Mutual’s Sperka says a three-year benefit period can cost about 30% less than a six-year period. Most long-term-care claims are for care that lasts fewer than three years.

Strategies to pay premiums. You can now pay premiums with tax-free rollovers from cash-value life insurance policies or deferred annuities. With life insurance, you can transfer dividends or part or all of the cash value. With a deferred annuity, you transfer cash that’s been built up, but the annuity can’t be in an IRA.

Another option: If you have a health savings account, you can use that money tax free for a portion of long-term-care premiums. The annual amount is based on your age ($1,400 from 50 to 60; $3,720 from 60 to 70; $4,660 if older than 70).

Most long-term-care insurers have raised rates at least once for current policyholders. Rate hikes announced by John Hancock and Genworth a few years ago are going into effect in some states (policyholders in most other states already pay the higher rates). New York Life recently announced that it will raise rates for some current policyholders for the first time in 25 years, with an average increase of 16% primarily for people with policies issued from 1997 to 2011.

You’re usually given several options if you can’t afford the new premiums. Ryan first recommends reducing your benefit period from ten years or lifetime down to five or seven years (or three years for men). His second choice is to lower the monthly benefit, and the third is to change the inflation adjustment from 5% down to 3% compounded.

Don’t drop the policy. You’ll lose the coverage you paid for, just as you’re getting closer to the age when you will need care. If you change your mind later, a new policy will cost a lot more than your current one, even if you’re still healthy.

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When to get it, how much you need and ways to cut the cost.

By Kimberly Lankford, Updated January 2015
Editor’s note: This article originally appeared in the November 2014 issue of Kiplinger’s Personal Finance.

Mackey McNeill, a CPA and personal financial specialist in Bellevue, Ky., talks with clients in their fifties and early sixties about protecting their retirement savings from potential long-term-care expenses—which currently average more than $85,000 a year for a private room in a nursing home. But when McNeill turned 58 and looked at long-term-care policies for herself and her husband, she balked at the premiums: more than $5,200 a year for two policies that would cover the average cost of care in her area. “I understand why clients resist it,” she says.
After she calculated how much extra money they’d need to save to cover the cost of care (and the risk to their portfolio if they didn’t) she decided to make the same compromise most of her clients do. “We’re buying policies that don’t cover everything but can cover about $4,000 a month,” she says. She gets a couples’ discount for buying with her husband. If the McNeills’ future care exceeds their coverage, they are confident they can make up the dif­ference with savings and retirement income.

Like McNeill, most financial advisers recommend buying long-term-care insurance in your fifties or early sixties. The younger you are when you buy a policy, the lower the annual premiums—but the longer you’ll have to pay those premiums. By the time you reach your mid sixties, however, you’re more likely to have a medical condition that makes you ineligible for a preferred-health discount or makes it tough to get coverage at all.

You’re also more likely to have the cash to pay premiums in your fifties or early sixties, especially if you’ve finished paying for college for the kids, or paid off the mortgage. And because you’re starting to form a better picture of your retirement budget, it’s a good time to factor the annual premiums into your long-term plan.

How much coverage to get

Start your calculations by looking at the cost of care in your area (see www.genworth.com/costofcare). Then figure out how much you could cover with your retirement income and savings. The calculation may be very different for single people than for married couples, who often need to plan on spending more than singles to cover long-term-care bills for one spouse plus living expenses for the spouse who remains at home, says Donna Skeels Cygan, a certified financial planner in Albuquerque.

After you know the cost of long-term care and how much you can afford on your own, consider buying enough long-term-care coverage to fill the gap. The average length of care is about three years, but you may want a longer benefit period if you have a history of Alzheimer’s in your family. (The pool of benefits is calculated by multiplying your daily benefit by the benefit period, but you may be able to stretch your payouts if you use less than the daily maximum benefit.)

Kathy Kingston, an auctioneer in Hampton, N.H., bought long-term-care insurance last year, when she turned 60. “I’m healthy and active and independent,” she says. “I’m interested in setting myself up to have care at home.” Kingston has a pension from her years working as a public employee in Alaska that could cover some, but not all, of the costs. She bought a Genworth policy that currently provides $380,000 worth of coverage. The policy has 5% compound inflation protection, which means the benefit will grow to $1.5 million by the time she’s 85. It also has a zero-day waiting period for home care.

A good strategy for couples is to buy a shared-benefit policy that provides a pool of benefits either spouse can use—for example, two three-year policies form a pool of six years (and some policies add another three years to the pool). “I prefer the shared policies because the chances of both spouses needing long-term care are slim, but you don’t know which one will need it,” says Cygan. “It gives you a huge amount of flexibility.”

Shared-benefit policies tend to cost 12% to 20% more than two separate policies, says Brian Gordon, a long-term-care insurance specialist in Riverwoods, Ill. For example, if a healthy 55-year-old couple were to buy two Genworth policies, each with a $150 daily benefit for three years and 3% compound inflation protection, they would pay $1,359 a year for each policy. If they added a shared-benefit rider—giving them a pool of six years to split as needed—the annual cost would increase to $1,660 each. And if they waited ten years to buy? A healthy 65-year-old couple would pay $2,143 each for the same policies, or $2,664 with the shared benefits.

Calibrating the cost

The longer the waiting period before benefits kick in, the lower your premiums. But initially you’ll need to pay the costs out of your own pocket.

Make sure you understand how the waiting period is calculated. Gordon recommends a calendar-day waiting period, in which the clock starts ticking as soon as you need help with two out of six activities of daily living (such as bathing) or you provide evidence of cognitive impairment. A days-of-service waiting period only counts the days you get care. If you have a calendar-day policy with a 90-day waiting period and you need care in your home just three days a week, the policy will pay out after three months. But the same waiting period with a days-of-service policy would mean waiting more than seven months before benefits kick in.

Because you may not need care until 20 or 30 years from now, inflation protection is essential. Nursing-home and assisted-living costs have increased by about 4% per year over the past five years, and home-care costs have risen by 1.3%, although that may rise faster as baby boomers compete for caregivers.

Older policies tended to boost benefits by 5% compounded each year, but low interest rates made it expensive for insurers to offer that coverage to new buyers. Now, 3% per year is most common, and some insurers even offer 2% or less per year. Claude Thau, a long-term-care specialist in Overland Park, Kan., usually recommends 3% compound inflation protection. “The carriers have rejiggered their pricing so that 3% looks especially good compared with 5%,” he says.

If spouses who are both age 55 each start with a $175,000 pool of benefits, they would pay about $5,850 per year (combined) for two policies with 5% inflation protection, but just $3,000 per year for policies with 3% inflation protection and $2,450 for policies with 2%, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance, a trade group.

Insurers have different sweet spots based on your age and health and their own claims experience. For example, Slome recently worked with a 65-year-old man and his 55-year-old wife, who received quotes for annual premiums from two insurers that were $1,200 apart.

Many long-term-care agents work primarily with Genworth, Mutual of Omaha, MassMutual, Transamerica and John Hancock (Northwestern Mutual and New York Life sell long-term-care insurance only through their own agents). Find a long-term-care specialist in your area at www.aaltci.org.

Read more at http://www.kiplinger.com/article/insurance/T036-C000-S002-how-to-buy-long-term-care-insurance.html#PKkRQyYkEg08iqu3.99

If you don’t have adult children, look to extended family, friends, neighbors or trusted advisers to make health-care and financial decisions in case you become incapacitated.

By Kathryn A. Walson, February 11, 2010
EDITOR’S NOTE: This article was originally published in the December 2009 issue of Kiplinger’s Retirement Report.

For individuals and couples with children, some decisions are relatively easy. If they become ill, they can probably turn to the kids for help. And their offspring are likely to be the beneficiaries of their estate. Such choices are less obvious for childless seniors.

William and Judy Scheeren, both 62, named each other as their agents to make health-care and financial decisions in case one becomes incapacitated. In the event one of them dies or they both need help, the Scheerens have asked their siblings to step in.

William appointed his 56-year-old brother, who lives within a mile of the couple’s home in Greensburg, Pa. Judy named her 56-year-old sister, who lives less than three hours away. “We trust them, and they can be on the scene quickly if something happens,” William says. The couple gave their siblings copies of their advance-care directives.
The Scheerens are lucky that their siblings live close by and are willing to take on the tasks. In choosing a health-care agent in particular, a childless person may need to consider a list of prospects — nieces, nephews, neighbors, friends and even clergy.

Make sure the person you’d like is willing to take on the health-care role, which could be time-consuming. Your choice should be “someone who’s good at acting in a crisis situation, someone who accepts the responsibility, someone you feel would honor your wishes,” says Leanna Hamill, an estate-planning lawyer in Hingham, Mass.

Howard Witsma, 76, who is single and lives in St. Louis, named his stepmother’s niece as his health-care agent. Her husband is the successor agent, in case something happens to her. When Witsma was in the hospital for six months, they visited him every weekend. “They take the best care of me,” he says.

If you plan to remain at home for the long term, try to cobble together a network of friends who can help you down the road. You can give the list to your health-care proxy. “Some people may have a longtime neighbor who’s willing to look out for them,” says Henry Barron, a social worker in Charleston, S.C.

You could make arrangements now with a geriatric-care manager who can work with your agent if you ever need such assistance. A manager would supervise your care, helping with Medicare paperwork, monitoring your prescriptions and hiring a home-health aide.

The agent with financial power of attorney should have financial savvy and be beyond reproach. He or she would manage your investments and pay your bills. If you’d like, you can name several informal advisers who can work with the single agent you select.

Choose a trusted financial adviser or accountant if you don’t have a friend or relative to take over this role. Or you can create a revocable trust and hire a corporate trustee at a bank or trust company.

You could direct the corporate trustee to handle your financial matters immediately, after you become incapacitated or after you die. Interview several trust companies. “You want to be comfortable with the organization,” says Kevin Bartlett, president of Fidelity Personal Trust Company. “Ask: How long have they been in the business? How many families do they work with? How many families does each trust officer handle?” The cost is usually 1% of assets per year.

Pat Iezzi, an estate-planning lawyer in Greensburg, Pa., says the corporate trustee should “agree with your way of investing.” If you’re a conservative investor, he says, don’t choose someone who wants to put most of your money in stocks. If you want oversight, you can name a friend or relative as a co-trustee.

Your financial and health-care agents must work well together. If they decide you should move into assisted living, says Sally Hurme, senior project manager for AARP, “the financial agent needs to determine how your care is paid for, and the health-care agent would work with doctors and determine the best facility.”

You should appoint back-up agents. “You always want an alternate in case the person you name gets sick or they don’t want to serve in that role anymore,” says William Andersen, a lawyer in Fort Lauderdale, Fla.

Without an adult child to coordinate activities, it could make sense to ask someone, such as your estate-planning lawyer, to oversee everything. You should give your lawyer the names of your agents, close friends and other contacts. You’ll also need to spell out in your trust how it will be determined that you can no longer handle your finances, perhaps letters from two physicians, with confirmation from a family member.
Drawing Up an Estate Plan
Creating an estate plan can be tricky. Spouses typically designate each other as IRA beneficiaries and as heirs of other assets. They should also name contingent beneficiaries, who will get the assets if the primary heir dies first.

For couples with children, the contingent beneficiaries for both spouses will likely be their kids. But what if a childless husband names his favorite nephew as a contingent heir, while the wife names a beloved niece? If the husband dies first, the wife will inherit everything, and when she dies, the niece will get it all.

If this couple wants their beneficiaries to line up, the two could spell out in both wills and on all designation forms that the nephew and niece will each get half or some other percentage. The Scheerens named each other as primary beneficiaries. When the second spouse dies, they’ve directed that their assets be divided equally among their five siblings.

A court will track down your relatives if you don’t name beneficiaries. Marilyn McWilliams, a lawyer with Moye White in Denver, says one of her clients, an unmarried man, wanted his favorite niece to inherit all his money. But he never drew up a will. When he died, a detective was hired to find his 17 nieces and nephews. “His favorite niece got one-seventeenth of his money instead of all of it,” she says.

Childless seniors are more likely than others to leave money to charity after they die. If much of your estate will go to charity, ask a tax or estate-planning lawyer to draw up an arrangement to carry out your wishes.

Witsma transferred his assets to a revocable trust. Upon his death, the trust will give certain percentages to his cousin and to two families he is close with. The balance will go to a charitable foundation, which will disburse money to 15 to 20 charities, including the St. Louis Symphony Orchestra. “I give a good deal of money to charities now, and I’d like to continue to support those organizations,” he says.

For more authoritative guidance on retirement investing, slashing taxes and getting the best health care, click here for a FREE sample issue of Kiplinger’s Retirement Report.

Read more at http://www.kiplinger.com/article/retirement/T021-C000-S001-planning-can-be-tricky-for-childless-seniors.html#hU6ARX4llGYaQfWs.99

Learn from the pop icon’s concise plans for handling his assets and caring for his family.

By Jane Bennett Clark, July 2009
For a man who lived so controversial a life, Michael Jackson did something surprisingly sensible before his death.

He set up a smart estate plan.

Jackson’s will provides for the care of his loved ones. A separate document gathers his assets — said to be over $500 million, exceeding his debt by about $200 million – into a trust, ensuring that his affairs stay (mostly) out of the courts and (ideally) out of the public eye.

Far from being wacko, the arrangements set the stage for an orderly disposition of his chaotic empire, says Todd Reinstein, an estate-planning lawyer in Los Angeles. And although challenges could roll in like the California surf, this plan is so well crafted that it just might hold up – unless another will emerges.

Here’s what you can learn about estate planning from the King of Pop.

Write a will.

A no-brainer? Actually, about two-thirds of Americans neglect to take on this basic estate-planning chore, allowing a judge to divvy up their assets by default according to state law. Had Jackson been similarly remiss, his property would have been split among his three children, as dictated by California law. Instead, he divided it the way he wanted to, reportedly leaving 40% of his estate to the kids, 40% to his mother, Katherine Jackson, and 20% to charity.

Jackson avoided potential misunderstandings by citing each of his children by name and by specifically excluding his former wife and mother of his two older children, Debbie Rowe, from any inheritance. That exclusion may not have been necessary, because the couple were no longer married, but it makes clear that Jackson purposely omitted her, rather than committing an oversight. Anna Nicole Smith, another celebrity with a tangled personal life, neglected to name her infant, Dannielynn, in her will, creating confusion as to her intent. Jackson made his choices clear.
Consider a living trust.

Along with a will, Jackson established a living trust, also called a revocable trust. This estate-planning tool lets you transfer all your property, including cars, bank accounts and real estate, into a separately owned entity—in Jackson’s case, the Michael Jackson Family Trust–while maintaining control as trustee. At your death, control transfers to your designated co-trustee or successor trustee. Most people, including Jackson, set up their will to “pour over” so that whatever property remains outside the trust at their death eventually is added to it.
The beauty of a living trust for some is that the assets it holds at the time of death avoid probate, a public process. “People who are not interested in having the media know how much they died with or to whom the money is going to be left always do a living trust to prevent media attention,” says Reinstein. Avoiding probate can also make sense for regular folks with significant assets or property in more than one state because it spares their heirs the aggravation of a prolonged legal process. “It saves a lot of money, time and hassle,” says David Shulman, an estate-planning attorney in Fort Lauderdale, Fla.

Name a guardian.

In writing his will, Jackson created a legal framework for naming a guardian for his children, all of whom are minors. Without that document, the state—not Jackson– would have made the choice about who would raise the kids. Jackson selected his mother as primary guardian and singer Diana Ross, his longtime friend and mentor, as backup. Although the court has to sign off on the selection, most judges abide by a parent’s wishes unless there is a compelling reason not to do so.

One big reason: The other biological parent demands custody. Unless he or she is deemed unfit or has given up parental rights, “the court is going to favor the surviving biological parent,” says Richard Barnes, an estate-planning attorney and author of Estate Planning for Blended Families (Nolo, $35). Rowe reportedly gave up her parental rights several years ago and later petitioned to have them reinstated, leaving the legal picture murky. She has yet to say whether she will seek custody. (The third child’s mother, a birth surrogate, has not come forward.)

As for Jackson’s choice of caregivers, he might have done better to pick someone younger than his 79-year-old mother, says Shulman. But, he adds, “with so much money involved, it’s not as if she will be driving the children to school and doing the actual work of raising them.” Most lawyers recommend that parents go with a trusted friend or relative who is reasonably close to their own age and circumstances. Jackson chose trust and continuity over relative youth.
Assemble a good team.

Known as an astute businessman, Jackson named a top-notch lawyer, John Branca, and a savvy business executive, John McClain, as co-executors of his will and co-trustees of the family trust (a third representative dropped out before Jackson died.). Despite a challenge by Katherine Jackson, Branca and McClain were awarded control of the estate by a California Superior Court judge until the next court hearing, in early August.

By relying on these and other experts, Jackson improved the odds that his wishes would play out, says Reinstein. “He had good legal advice. The estate plan was well drafted. He put two people in charge of the will and trust who he felt were sage, mature and had a great deal of expertise in how to handle what are probably considerable assets. He couldn’t have put his estate in a better position.”

Bottom line: “A good estate plan is very important,” says Reinstein. “I believe Michael Jackson has one in place.”

Read more at http://www.kiplinger.com/article/retirement/T021-C000-S001-4-estate-planning-lessons-from-michael-jackson.html#P5jf0ASR7WSCx0zB.99

This retirement-savings plan is a good option for businesses with fewer than 100 employees.

By Kimberly Lankford, September 26, 2014

I read your Retirement Plans for Self-Employed Workers column about SEPs and solo 401(k)s. Who should consider a SIMPLE, and what are the contribution limits?

A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) is a retirement-savings account for small businesses. It’s designed for companies with fewer than 100 employees. If you’re self-employed, an SEP or a solo 401(k) is generally your best option. But if you own a business with employees and want them to be able to contribute to their accounts, too, a SIMPLE can work well.

“I think the ideal group for a SIMPLE is a profitable start-up company with several employees,” says Scott Bishop, a CPA and certified financial planner with STA Wealth Management in Houston. Bishop says that a SIMPLE is easy to set up and requires little paperwork. The plans are administered by many brokerage firms and mutual fund companies.

Employees can contribute up to $12,000 pretax to a SIMPLE in 2014; those who are 50 and older can contribute an extra $2,500. Employers can either match the employees’ contributions (up to 3% of their compensation) or contribute up to 2% of compensation for all employees, whether or not they participate in the plan. (You can’t have a solo 401(k) if you have employees other than a spouse, and with an SEP, only the employer can make the contributions for employees.)
Employers who would like to set up a SIMPLE need to act quickly — you must establish the account by October 1. For more details, see the IRS’s SIMPLE IRA Plan FAQs and SIMPLE IRA Plans for Small Businesses, as well as the Department of Labor’s SIMPLE IRA Plans for Small Businesses. For information about all kinds of retirement plans for self-employed people and small businesses, see Do-It-Yourself Retirement Plans.

Read more at http://www.kiplinger.com/article/retirement/T047-C001-S003-retirement-plans-for-small-businesses.html#1xviKjqpT0ym47cd.99

Reclaim your desk! We tell you which files to trash and which to stash — and the best ways to turn the keepers into digital records.

By The Kiplinger Washington Editors, April 2012
Keep all of your old tax returns, and hang on to the supporting documents for three years after a return’s filing due date — six years if you have self-employment income (some states require records from earlier years in an audit). Hold year-end investment statements and records of stock and mutual fund purchases as long as you own them. (For more on tax-related recordkeeping, see IRS Publication 552, Recordkeeping for Individuals.)

Keep records related to your current home, including proof of the purchase price and receipts showing what you’ve spent on improvements. (You can toss those documents three years after you sell the house.) Also keep files with information on contributions and withdrawals from IRAs and 401(k) plans — especially documents regarding nondeductible contributions, such as copies of IRS Form 8606, to avoid paying too much tax on withdrawals.

Trash bank withdrawal and deposit slips, credit card receipts and ATM receipts once you’ve compared them with your monthly statement; paycheck stubs after you check them against your Form W-2; and monthly bills for utilities, cable and credit cards, unless you need them for tax purposes. Shred any documents that include your Social Security number, account numbers or other information you wouldn’t want in the hands of an identity thief.
Digitize your records to keep paper clutter to a minimum. Save PDFs or scanned images of files on your computer and back them up on a flash drive or external hard drive, or snap pictures of receipts with your smart phone — the Shoeboxed app (for iPhone and Android) will organize them as IRS-accepted images in a secure and searchable archive.

Access your files from any computer with free, secure online storage options, such as Manilla.com (which organizes your bills and saves unlimited documents in the site’s secure database as long as you have an active account) or Windows Live SkyDrive (with 25 gigabytes of free space). Other options include the Amazon Cloud Drive and Apple iCloud (each with 5GB of free storage) and Dropbox.com (2GB of free space). Extra storage is available on all three for a fee.

Read more at http://www.kiplinger.com/article/real-estate/T029-C000-S002-toss-paper-files-you-don-t-need.html#1hMWIwYtZ8kRpIWe.99

Find out which documents you should hang on to and for how long.

By Kimberly Lankford, March 26, 2012
I just filed my taxes for 2012 and am planning to clean out my old files. What records should I keep, and what can I safely toss?

It’s smart to keep your tax returns indefinitely. Old returns can provide important background information in a variety of situations — for example, if you’re applying for a mortgage, applying for disability insurance or trying to figure out the cost basis of investments. The pages from your return don’t take up much space, and the records are easy to digitize, so you don’t need to keep the paper versions of your old returns.

Also keep records of your home’s purchase price and major home improvements for three years after you sell the home. Most people no longer need to pay taxes on their profits on a home sale: Single filers can exclude $250,000 in profits from income, and married couples filing jointly can exclude $500,000, as long as they’ve lived in their home for at least two of the past five years. But if you live in the house for less than two of the five years leading up to the sale, your gains may be taxable. In that case, your home-improvement records can substantiate an increase in your tax basis and a lower gain (the cost of basic repairs doesn’t count). For more information, see IRS Publication 523 Selling Your Home.

It’s a good idea to keep records of stock and mutual fund purchases made in taxable accounts for as long as you hold those investments. The records will come in handy when you sell the shares and must report the purchase price, date of purchase and number of shares involved. Also keep records of any stock or mutual fund dividends you’ve reinvested so you can avoid paying taxes on them again when you withdraw the money.

And hang onto Form 8606, on which you reported any non-deductible IRA contributions, until you withdraw all the money from your IRA. The record will help you avoid being taxed on the money again when you take it out in retirement. See Deductible Versus Nondeductible IRA Contributions for more information.

As for what to weed out, the IRS generally has up to three years after the due date of your tax return to begin an audit, so you can toss most of your supporting tax documents — such as canceled checks and receipts – as soon as the three-year period has passed. See IRS Publication 552 Recordkeeping for Individuals for more information about tax records.

You can also toss monthly statements from your bank and brokerage firm after you receive your year-end statements; get rid of ATM receipts and bank-deposit slips as soon as you match them up with your monthly statement; and dump pay stubs after seeing that they accord with your W-2 for the year (but you’ll want to save your December pay stub if it shows charitable contributions made via payroll deduction). Dispose of paper copies of your credit card, utility, phone and cable bills as soon as the next month’s bill arrives unless you need them for tax purposes (say, if the expenses can be deducted as self-employed business expenses or if you’re claiming the home-office deduction). See Tax Tips for Freelancers and the Self-Employed for more information. (You may want to keep utility bills for a few years even if you don’t need them for taxes so you can show prospective buyers the average monthly cost of your utilities.) .

Shred these documents before tossing them so an ID thief doesn’t end up with a goldmine of information about your bank account, credit cards and other personal information. See Your ID-Theft Prevention Kit for more information.

Read more at http://www.kiplinger.com/article/taxes/T056-C001-S001-which-tax-records-to-keep-and-which-to-toss.html#EzPyrLUiwhC5jy7A.99

Digitize your files in these tech-savvy ways to save money at the tap of an app.

By Lisa Gerstner, August 2012

If you have a smart phone, scanner and computer, you have all the tools you need to banish paper clutter from your life. We’ve rounded up ways to digitize records and receipts, as well as cut back on paper bills and financial statements. The payoff: You can more easily organize your files, photos and miscellaneous pieces of paper, and you’ll be able to access them with the click of a mouse or tap of an app. Plus, you are likely to save money on paper and printer ink.

1. Scrap the small stuff

Get a handle on paper receipts with tools that save and categorize them. With the free Lemon app (available for Android phones, the iPhone and iPad, and Windows Phone), you just snap a photo of a receipt and add a label—for example, “Personal” or “Business.” Lemon arranges receipts based on your labels as well as the type of spending the receipt reflects (such as “Food and Dining”), and you can view a breakdown of the information on the app and at Lemon.com. If you don’t have a smart phone, you can e-mail receipts to your account or enter information from receipts manually.

Shoeboxed, which manages receipts as well as business cards, caters to small businesses but can be helpful for personal finances, too. The online tool has applications for Android devices and the iPhone and iPad (you can e-mail photos to Shoeboxed from any phone with a camera and e-mail capability). Plus, it integrates with several outside accounts, such as Evernote and Google, so that you can export data into them. Send five documents per month to Shoeboxed to have a human verify, at no charge, that the data pulled from the images of the documents is accurate (receipts submitted through the phone app go through verification). You can have more documents verified with paid plans that range from $10 to $50 per month or $99 to $499 a year. But you can always upload documents directly to Shoeboxed.com and skip data verification to keep using the tool free.

Just looking to clear your desk of business cards? Get the free CamCard Lite app. Take a photo of a card and the app stores an image of the card and transfers the information to an address book (you can manually edit the info if the reader translates it incorrectly). You can also export contact information to other accounts, such as Google and Facebook. After downloading the app, registered users may scan 50 cards, and then three cards per week after hitting 50. The paid version of the app, Camcard ($11.99 for Android; $6.99 for iPhone and iPad; $3.99 for Windows Phone), allows unlimited scanning.

2. Manage bills

Forgoing paper statements and receiving and paying bills online are essential steps to going paperless. Many big banks offer online bill-paying services to help you track statements and pay bills on time. You can typically set up automatic payments from your bank account for recurring bills, such as utilities and credit cards. But watch for fees. For instance, Wells Fargo offers free online bill paying for the first two months you’re enrolled. After that, you’ll pay a $3 monthly fee unless you have an eligible checking account or maintain a $5,000 balance among qualifying accounts. TD Bank and U.S. Bank offer totally free bill paying.

Manilla is an appealing alternative or supplement to bill paying through a bank. The free Web tool supports more than 1,300 service providers and merchants, and provides access to all of your connected accounts through Manilla.com. You can set up e-mail or text alerts for approaching due dates and use the free app (for Android, iPhone and iPad) to see your accounts. Manilla automatically stores statements and bills in its secure database—and there’s no storage limit. Keep tabs on daily-deal coupons, travel rewards points, and magazine and Netflix subscriptions, too.

3. Scan and save

Ditching paper documents and archiving records electronically may leave you feeling uneasy about the legal validity of your records. But for files that you may need for tax purposes, you can rest easy: Digital copies are acceptable to the IRS. Use a scanner to convert paper documents, such as letters from charities and mortgage records, to digital files. To reduce paper in general, scan any other files you’re comfortable keeping in digital form.

Creating PDFs of documents and Web pages allows you to store them on your computer and open them easily. You may be able to make PDFs using the “Print” menu as you work within a document or Web browser. Tools such as PrimoPDF (available for Windows) let you create PDFs from many applications.

Some smart-phone applications specialize in scanning and creating PDFs of documents that you photograph using the phone’s camera. For the best results, you’ll need good lighting and a steady hand. CamScanner, which has free versions available for Android devices and the iPhone and iPad, can send images straight to Box, Dropbox and other online storage services. (Limits apply to the number of images you can scan using the free app; the $4.99 version allows unlimited scanning.) For iPhone and iPad users, TurboScan ($1.99) and JotNot ($1.99 for the paid version) are popular options.

4. Make online to-do lists

Other tools can fine-tune certain aspects of putting your digital life in order. For example, instead of jotting to-do lists on scraps of paper, try TeuxDeux, which lets you create them online. The site’s format is simple and clean, organized by day. You can drag items from one list to another and cross them off as you complete them. Have an iPhone? The $2.99 TeuxDeux app makes viewing and editing lists easier than doing so through the mobile browser.

5. Read it later

Most Web browsers let you bookmark pages. But to access them from multiple devices, you’ll want to use a Web tool such as Instapaper. Like TeuxDeux, Instapaper has a no-fuss format. At Instapaper.com, copy and paste links to the pages you want to save into a queue. Crave more bells and whistles? Delicious lets you categorize groups of articles into “stacks” and share them with others. For those who want to hold on to Web pages for the long term, Pinboard fits the bill. Pinboard charges a one-time sign-up fee, recently $9.80, based on the total number of users. And for $25 yearly, Pinboard saves content from Web pages indefinitely in a searchable archive. Even if the content goes offline, you’ll have a copy of it.

6. Get organized

You can save, organize and search through your digital stuff with Evernote. At Evernote.com, download the free application, which is available for computers and several mobile devices (including Android and BlackBerry phones, Windows Phone, and the iPhone and iPad). You can import e-mails, photographs and PDFs into the app, “clip” Web pages—including embedded links—to save for later, and type out notes. Add “tags” to each item to categorize your files and make searching easy. For $5 per month or $45 per year, Evernote Premium provides additional features, including the ability to see previous versions of notes and let others edit notes.

7. Back up and store

Along with saving documents to your computer, it’s smart to back up files on an external hard drive or flash drive, as well as in secure online databases—that way, you can gain access to your files anywhere you have an Internet connection. Many sites limit the amount of storage you can use free, but you can spread your files among several programs or pay for additional space if you need it. For a guide to online storage options, see Join the Cloud on the Cheap.

Read more at http://www.kiplinger.com/article/spending/T057-C000-S002-7-steps-to-convert-paper-files-to-digital.html#Ue0xUOdMIcyQFVAg.99


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