Archive for the ‘Insurance’ Category
BusySoCalMom asked:
My child is listed as the sole beneficiary on a life insurance policy for their father. Is it possible that this could be contested by the mother of his other child? Would setting up a trust offer any protection against that?
King Polson
My child is listed as the sole beneficiary on a life insurance policy for their father. Is it possible that this could be contested by the mother of his other child? Would setting up a trust offer any protection against that?
King Polson
Cinnamon asked:
Are there any circumstances under which the trust that was set up for me can be broken by the lawyer administering it or by other family members without my consent? The family member who set it up is deceased and the executors are having some difficulties with the terms of the will. I think they want to get into the trusts to make more assets available for certain people because the assets that were designated for those people are not available elsewhere in the estate. My trust is the primary one they want to break, I suspect. I think it is the only one that could give them what they need. I am wondering if I have any right to keep them from breaking it. I am also afraid I would have to pay inheritance tax if they break my trust. One of the primary reasons the trust was set up [as I understand it] was to protect me from having to pay inheritance tax. I am sorry there is a problem with the will for anyone and wish for everyone to be treated fairly but I am very afraid that I will suffer significantly if my trust is broken. My trust was set up the way it is for specific reasons and I do not feel it should be violated. Am I apt to be allowed any voice in this?
Carl Jarva
Are there any circumstances under which the trust that was set up for me can be broken by the lawyer administering it or by other family members without my consent? The family member who set it up is deceased and the executors are having some difficulties with the terms of the will. I think they want to get into the trusts to make more assets available for certain people because the assets that were designated for those people are not available elsewhere in the estate. My trust is the primary one they want to break, I suspect. I think it is the only one that could give them what they need. I am wondering if I have any right to keep them from breaking it. I am also afraid I would have to pay inheritance tax if they break my trust. One of the primary reasons the trust was set up [as I understand it] was to protect me from having to pay inheritance tax. I am sorry there is a problem with the will for anyone and wish for everyone to be treated fairly but I am very afraid that I will suffer significantly if my trust is broken. My trust was set up the way it is for specific reasons and I do not feel it should be violated. Am I apt to be allowed any voice in this?
Carl Jarva
squeaker asked:
My husband and I have two adopted children ages 3 and 5. We have several life insurance policies for us but really have no one we trust to name as beneficiaries to make sure the children would receive their money. We are older and have no family or friends that we really trust with such a large sum of money. What can we do? In a trust, do you still name someone if your children are minors?
Pearlie Tinin
My husband and I have two adopted children ages 3 and 5. We have several life insurance policies for us but really have no one we trust to name as beneficiaries to make sure the children would receive their money. We are older and have no family or friends that we really trust with such a large sum of money. What can we do? In a trust, do you still name someone if your children are minors?
Pearlie Tinin
bamagrits84 asked:
I was wondering how one would go about having the benifits from a life insurance policy put into a trust fund for her children. Say I wanted to leave each of my children with $150K in a trust fund that niether could touch until they are 21. Can I do this and prevent the guardian of the children from touching the money until the children are the age I have specified?
I was wondering how one would go about having the benifits from a life insurance policy put into a trust fund for her children. Say I wanted to leave each of my children with $150K in a trust fund that niether could touch until they are 21. Can I do this and prevent the guardian of the children from touching the money until the children are the age I have specified?
Is this the best way to go about it or should I leave the money to a responsible member of my family and ask them to put it in a trust and ask that they money only be used for college expenses until the kids are 21?
Gearldine Beanblossom
lin asked:
Interested in creating a ‘family trust’ that can be used to benefit subsequent generations in a dynastic fashion
Kenny Rudoy
Interested in creating a ‘family trust’ that can be used to benefit subsequent generations in a dynastic fashion
Kenny Rudoy
Catherine Harvey asked:
Taking out a life insurance policy shows consideration and love to your nearest and dearest. It means you have the peace of mind that comes with knowing that, as much as possible, life for them will go on without added financial burden.
However, many people are making the mistake of not writing these life insurance policies in trust. This means that any life insurance payouts will be added to the inheritance of your family and could take them above the nil rate band for inheritance tax.
If a life insurance policy is written in trust this will enable the sum to be excluded from the overall estate of the policy holder, freeing it from inheritance tax liability. It also has the ability to speed up payouts, whether or not it would be liable for the extortionate tax.
Recent changes in the law mean that assets worth 300,000 pounds for individuals and 600,000 pounds for couples are the limit before any tax liabilities. Any assets over that amount would be subject to inheritance tax at a rate of 40%.
The latest figures to be released show that over the course of one year, 11,000 insurance policies worth a total of 597 pounds million were subject to inheritance tax. Had all these policies been written in trust, you can be quite sure that inheritance tax would not have been applicable on any of them.
Will reading and distribution of assets can be a notoriously lengthy procedure. This can be put a huge financial strain on the family. With life insurance policies that are written in trust would be paid out immediately, making things a whole lot easier.
Not putting life insurance policies in trust is costing customers millions of pounds every year in unnecessary inheritance tax. Apparently, only 10% of people write their life insurance in trust. Even if you already have a life insurance policy in place, it is possible to easily put it in trust.
Whether you purchase your life insurance over the net, over the phone or through a shop, they should all come with the chance of writing in trust. It seems odd that so few people take up this opportunity. Maybe it is a case of not getting the right advice?
Life insurance comparison websites abound but there is concern that they are not serving the customer well. It has been found that many people will take out the cheapest life insurance but this doesn’t necessarily mean that is the one that is most suitable to their circumstances.
The British Insurance Brokers Association have called for the Financial Services Authority to overhaul regulations regarding these insurance comparison sites. They believe that when people check out these sites, they barely take notice of the policy details, just the price. They even take this price comparison as ‘advice’. This is a good case of cheapest not always meaning best.
Whatever happened to people taking responsibility for themselves? Surely, if they take out a policy without concerning themselves with the details, they are throwing their money away. Many people take out a life insurance policy with their mortgage as is necessary but instead of shopping around will go with the mortgage providers own insurance simply because it is easier.
Take control, by all means shop around to get the best life insurance deal, but don’t take one purely on the cost of the policy because it may not help very much right at the time when it is most needed.
Lanette Joa
Taking out a life insurance policy shows consideration and love to your nearest and dearest. It means you have the peace of mind that comes with knowing that, as much as possible, life for them will go on without added financial burden.
However, many people are making the mistake of not writing these life insurance policies in trust. This means that any life insurance payouts will be added to the inheritance of your family and could take them above the nil rate band for inheritance tax.
If a life insurance policy is written in trust this will enable the sum to be excluded from the overall estate of the policy holder, freeing it from inheritance tax liability. It also has the ability to speed up payouts, whether or not it would be liable for the extortionate tax.
Recent changes in the law mean that assets worth 300,000 pounds for individuals and 600,000 pounds for couples are the limit before any tax liabilities. Any assets over that amount would be subject to inheritance tax at a rate of 40%.
The latest figures to be released show that over the course of one year, 11,000 insurance policies worth a total of 597 pounds million were subject to inheritance tax. Had all these policies been written in trust, you can be quite sure that inheritance tax would not have been applicable on any of them.
Will reading and distribution of assets can be a notoriously lengthy procedure. This can be put a huge financial strain on the family. With life insurance policies that are written in trust would be paid out immediately, making things a whole lot easier.
Not putting life insurance policies in trust is costing customers millions of pounds every year in unnecessary inheritance tax. Apparently, only 10% of people write their life insurance in trust. Even if you already have a life insurance policy in place, it is possible to easily put it in trust.
Whether you purchase your life insurance over the net, over the phone or through a shop, they should all come with the chance of writing in trust. It seems odd that so few people take up this opportunity. Maybe it is a case of not getting the right advice?
Life insurance comparison websites abound but there is concern that they are not serving the customer well. It has been found that many people will take out the cheapest life insurance but this doesn’t necessarily mean that is the one that is most suitable to their circumstances.
The British Insurance Brokers Association have called for the Financial Services Authority to overhaul regulations regarding these insurance comparison sites. They believe that when people check out these sites, they barely take notice of the policy details, just the price. They even take this price comparison as ‘advice’. This is a good case of cheapest not always meaning best.
Whatever happened to people taking responsibility for themselves? Surely, if they take out a policy without concerning themselves with the details, they are throwing their money away. Many people take out a life insurance policy with their mortgage as is necessary but instead of shopping around will go with the mortgage providers own insurance simply because it is easier.
Take control, by all means shop around to get the best life insurance deal, but don’t take one purely on the cost of the policy because it may not help very much right at the time when it is most needed.
Lanette Joa
lazyurl asked:
The Child Trust Fund (CTF) is a long-term savings and investment plan set up by the Government to encourage you to save for your children’s future. Applicable for all children born after 1 September 2002 and living in the UK, an initial £250 sum is paid out at birth (£500 if your household income is below £14,495)xfollowed by an additional £250 when your child turns seven. In addition to the money paid into this account by the Government, you, your family and friends can contribute up to £1,200 each year.
Your children’s voucher can be invested in one of three types of accounts: Cash, Stakeholder or Shares.
Cash Accounts operate much like savings accounts, with interest earned on the sum invested.
Stakeholder Accounts invest your children’s money in shares from a variety of companies, moving the money to lower risk investments or assets (lifestyling) when your child turns thirteen. The fees for these accounts are limited by the government to no more than 1.5% a year.
Shares Accounts operate similarly to the Stakeholder Accounts, but are not subject to the same government limitations on fee percentages.
So which type of account is best for you and how can you best compare Child Trust Funds?
The lower risk option is a cash account with the highest returns varying from 6-7%. Various websites compare the interest rates of numerous Cash Child Trust Fund accounts on the market and list which accounts offer introductory bonuses. Our table, which is very comprehensive, can be accessed at http://www.myeggnest.com/info/compare.aspx
Stakeholder and Shares Accounts potentially offer a much greater return in comparison to the cash accounts, but with a greater element of risk. To find an account which offers the best return on investment, MyEggNest.com compares the best performing Stakeholder Child Trust Fund accounts of the last two years and offers parent reviews of these products.
To compare Child Trust Funds, the return on investment from cash and shares differs widely. Compare £250 in the best cash savings account on offer (7.15% from Britannia Building Society) which will yield £287.03 over two years while the best performing stakeholder Child Trust Fund (Family Investment’s Ethical Account) will see this money grow to £377.70, a 25% higher return. If you invest the maximum annual allowance of £1,200 in this stakeholder account, your investment can be worth £1,812.96.
When you compare your children’s Child Trust Fund accounts, it is worth noting that funds which offer the greatest returns also offer the greatest risks. However, most experts will agree that over time shares will out perform cash savings.
“It is very important that parents and grandparents take a long-term view …. when you compare Child Trust Funds” says Tony Vine-Lott, director general of Tax Incentive Savings Association (TISA). Ben Yearsley of independent financial adviser (IFA) Hargreaves Lansdown. “I would back equities over cash. The markets go up and down and are volatile, but over such a time, it’s the best option.”
Which ever decisions you choose, you will still better off than the 25% of parents who choose not to do anything at all. Just remember to shop around and compare Child Trust Funds before you act, as it will be time well spent. Happy EggNesting!!!
Marvis Harmann
The Child Trust Fund (CTF) is a long-term savings and investment plan set up by the Government to encourage you to save for your children’s future. Applicable for all children born after 1 September 2002 and living in the UK, an initial £250 sum is paid out at birth (£500 if your household income is below £14,495)xfollowed by an additional £250 when your child turns seven. In addition to the money paid into this account by the Government, you, your family and friends can contribute up to £1,200 each year.
Your children’s voucher can be invested in one of three types of accounts: Cash, Stakeholder or Shares.
Cash Accounts operate much like savings accounts, with interest earned on the sum invested.
Stakeholder Accounts invest your children’s money in shares from a variety of companies, moving the money to lower risk investments or assets (lifestyling) when your child turns thirteen. The fees for these accounts are limited by the government to no more than 1.5% a year.
Shares Accounts operate similarly to the Stakeholder Accounts, but are not subject to the same government limitations on fee percentages.
So which type of account is best for you and how can you best compare Child Trust Funds?
The lower risk option is a cash account with the highest returns varying from 6-7%. Various websites compare the interest rates of numerous Cash Child Trust Fund accounts on the market and list which accounts offer introductory bonuses. Our table, which is very comprehensive, can be accessed at http://www.myeggnest.com/info/compare.aspx
Stakeholder and Shares Accounts potentially offer a much greater return in comparison to the cash accounts, but with a greater element of risk. To find an account which offers the best return on investment, MyEggNest.com compares the best performing Stakeholder Child Trust Fund accounts of the last two years and offers parent reviews of these products.
To compare Child Trust Funds, the return on investment from cash and shares differs widely. Compare £250 in the best cash savings account on offer (7.15% from Britannia Building Society) which will yield £287.03 over two years while the best performing stakeholder Child Trust Fund (Family Investment’s Ethical Account) will see this money grow to £377.70, a 25% higher return. If you invest the maximum annual allowance of £1,200 in this stakeholder account, your investment can be worth £1,812.96.
When you compare your children’s Child Trust Fund accounts, it is worth noting that funds which offer the greatest returns also offer the greatest risks. However, most experts will agree that over time shares will out perform cash savings.
“It is very important that parents and grandparents take a long-term view …. when you compare Child Trust Funds” says Tony Vine-Lott, director general of Tax Incentive Savings Association (TISA). Ben Yearsley of independent financial adviser (IFA) Hargreaves Lansdown. “I would back equities over cash. The markets go up and down and are volatile, but over such a time, it’s the best option.”
Which ever decisions you choose, you will still better off than the 25% of parents who choose not to do anything at all. Just remember to shop around and compare Child Trust Funds before you act, as it will be time well spent. Happy EggNesting!!!
Marvis Harmann
Robert D. Cavanaugh, CLU asked:
Irrevocable Life Insurance Trusts (ILITs) are planning tools used to keep life insurance proceeds outside of the taxable estate.
For example, if a married couple has an estate of 6 million, they can pass 4 million to the next generation with no tax if they set up the proper trust arrangement to take advantage of the maximum lifetime unified credits. That leaves 2 million still subject to tax under the current law.
The logical thing to do is to purchase a survivorship life insurance policy for the projected tax. However, a policy purchased in the manner most people are familiar with, the problem is not solved; it is compounded.
If the couple has any “incidences of ownership” in the policy, it will be included in the estate. The purchase of a one million dollar policy increases the estate to 7 million. Four million passes tax-free, but now the taxable estate is 3 million. This increases the tax by some $225,000.
Enter the Irrevocable Life Insurance Trust.
Attorneys draft Irrevocable Life Insurance Trusts. The trust will apply for its own Federal Tax ID number. The trust will then apply for the survivorship life insurance policy. It will be the applicant, owner and beneficiary of the policy. Typical wording is “The John and Mary Smith Irrevocable Life Insurance Trust dated April 5, 2007, JPMorgan Chase Bank, trustee.”
In this example, since neither John nor Mary has any “incidence of ownership” in the policy, it will not be part of their taxable estate.
The Owner and Beneficiary
As opposed to using an ILIT, I have worked with a few cases where the only child or children are the owner and beneficiary. This may work. However, each year the parents gift the money to pay the premium, there is no assurance that the money will be used to pay the premium. Furthermore, the children, as owners, have access to the cash values. An ILIT has much more assurance.
I have seen the trustee be a child, the couple’s attorney, accountant or a long-time family friend. All of these will work, but an un-biased third party, such as a bank, is much better. If an individual is the trustee, name a bank as the successor trustee. Banks don’t die.
The Crummey Letter
Typically, the life insurance premiums are paid by the parents in the form of annual gifts to the Irrevocable Life Insurance Trust. Currently (2007) a person can give up to $12,000 each year to as many people as they want without paying gift tax or having the amount subtracted from their lifetime exclusion. However, these gifts must be “present interest” gifts, which mean the recipient must have immediate rights to the gift.
Gifts to an ILIT, for paying premiums on a life insurance policy owned by the ILIT, are not “present interest” gifts. A “Crummey” letter qualifies the gift as a “present interest” gift. The letter is not crummy or poorly written; the letter takes its name from a court case initiated in 1968 by Clifford Crummey, who was trying to do this very same thing: make annual gifts present interest gifts. Ultimately, the outcome of the case required the use of a letter, now known as the “Crummey” letter.
A letter is sent every year to each of the beneficiaries of the ILIT. It simply states that a gift has been made to the ILIT and they can withdraw it if they want within a certain timeframe, usually 30 or 60 days. If they don’t exercise this right, the gift becomes a present interest gift.
Obviously, there is an “understanding” between the parents and children to ignore these letters, as it is a part of the overall estate plan. The annual gifts and the ensuing yearly Crummey letters do not have to go to children with a legal capacity, such as age 18. I have seen letters written to 4-month-old babies. In this case, even though the baby was not able to read the letter or understand the estate planning rationale behind it, it did not exercise its right to the gift. Phew, another legal bullet dodged.
As you can see, it is very important to arrange for the annual drafting of these Crummey letters. Some banks’ trust departments used to provide this service if they were the trustee of the trust. This was just a courtesy as they never would see or manage any of the life insurance proceeds.
The best bet is to have your attorney do the letters. I have one client whose law firm (under a written set of instructions) has the premium notice from the life insurance company sent to their firm, prepare and send the Crummey letters and then pay the premium. All the client has to do is open a letter each year from the law firm indicating a premium is due and send them a check. Other than that, they don’t have to lift a finger. A nice service.
If you have an estate that will be subject to estate taxes and your advisors suggest a life insurance policy to pay the tax at a discount, make sure you evaluate the use of an Irrevocable Life Insurance Trust.
Clement Depierre
Irrevocable Life Insurance Trusts (ILITs) are planning tools used to keep life insurance proceeds outside of the taxable estate.
For example, if a married couple has an estate of 6 million, they can pass 4 million to the next generation with no tax if they set up the proper trust arrangement to take advantage of the maximum lifetime unified credits. That leaves 2 million still subject to tax under the current law.
The logical thing to do is to purchase a survivorship life insurance policy for the projected tax. However, a policy purchased in the manner most people are familiar with, the problem is not solved; it is compounded.
If the couple has any “incidences of ownership” in the policy, it will be included in the estate. The purchase of a one million dollar policy increases the estate to 7 million. Four million passes tax-free, but now the taxable estate is 3 million. This increases the tax by some $225,000.
Enter the Irrevocable Life Insurance Trust.
Attorneys draft Irrevocable Life Insurance Trusts. The trust will apply for its own Federal Tax ID number. The trust will then apply for the survivorship life insurance policy. It will be the applicant, owner and beneficiary of the policy. Typical wording is “The John and Mary Smith Irrevocable Life Insurance Trust dated April 5, 2007, JPMorgan Chase Bank, trustee.”
In this example, since neither John nor Mary has any “incidence of ownership” in the policy, it will not be part of their taxable estate.
The Owner and Beneficiary
As opposed to using an ILIT, I have worked with a few cases where the only child or children are the owner and beneficiary. This may work. However, each year the parents gift the money to pay the premium, there is no assurance that the money will be used to pay the premium. Furthermore, the children, as owners, have access to the cash values. An ILIT has much more assurance.
I have seen the trustee be a child, the couple’s attorney, accountant or a long-time family friend. All of these will work, but an un-biased third party, such as a bank, is much better. If an individual is the trustee, name a bank as the successor trustee. Banks don’t die.
The Crummey Letter
Typically, the life insurance premiums are paid by the parents in the form of annual gifts to the Irrevocable Life Insurance Trust. Currently (2007) a person can give up to $12,000 each year to as many people as they want without paying gift tax or having the amount subtracted from their lifetime exclusion. However, these gifts must be “present interest” gifts, which mean the recipient must have immediate rights to the gift.
Gifts to an ILIT, for paying premiums on a life insurance policy owned by the ILIT, are not “present interest” gifts. A “Crummey” letter qualifies the gift as a “present interest” gift. The letter is not crummy or poorly written; the letter takes its name from a court case initiated in 1968 by Clifford Crummey, who was trying to do this very same thing: make annual gifts present interest gifts. Ultimately, the outcome of the case required the use of a letter, now known as the “Crummey” letter.
A letter is sent every year to each of the beneficiaries of the ILIT. It simply states that a gift has been made to the ILIT and they can withdraw it if they want within a certain timeframe, usually 30 or 60 days. If they don’t exercise this right, the gift becomes a present interest gift.
Obviously, there is an “understanding” between the parents and children to ignore these letters, as it is a part of the overall estate plan. The annual gifts and the ensuing yearly Crummey letters do not have to go to children with a legal capacity, such as age 18. I have seen letters written to 4-month-old babies. In this case, even though the baby was not able to read the letter or understand the estate planning rationale behind it, it did not exercise its right to the gift. Phew, another legal bullet dodged.
As you can see, it is very important to arrange for the annual drafting of these Crummey letters. Some banks’ trust departments used to provide this service if they were the trustee of the trust. This was just a courtesy as they never would see or manage any of the life insurance proceeds.
The best bet is to have your attorney do the letters. I have one client whose law firm (under a written set of instructions) has the premium notice from the life insurance company sent to their firm, prepare and send the Crummey letters and then pay the premium. All the client has to do is open a letter each year from the law firm indicating a premium is due and send them a check. Other than that, they don’t have to lift a finger. A nice service.
If you have an estate that will be subject to estate taxes and your advisors suggest a life insurance policy to pay the tax at a discount, make sure you evaluate the use of an Irrevocable Life Insurance Trust.
Clement Depierre
Joe B asked:
this be in the trust name and paid from it? also, can a trust be sued? say someone is on the farm and gets hurt, can they sue the trust? thanks
Joseph
this be in the trust name and paid from it? also, can a trust be sued? say someone is on the farm and gets hurt, can they sue the trust? thanks
Joseph