David M Jones :: Family Wealth Insurance Advisors

Each client and client situation is unique. But sometimes we are asked some questions that can be answered in a general way. We have assembled some of these questions here. Please feel free to ask us your personal questions too.

Q. I am 80 years old - is it too late to buy life insurance?

A. Not at all. In fact the average age of our clients is about 79. Over the past 10 years the fastest growing segment of life insurance purchasers has been seniors. And life insurance companies are making it even more attractive by offering much lower rates than they did a decade ago - as much as 50% lower in some cases.

Q. Now that the estate tax exemption is rising, do I still need my second-to-die life insurance?

A. Only a few of our clients have decided to drop or sell their second-to-die policies. Our counsel is that such insurance still typically provides a good return for the investment. Also, none of us knows what will happen to estate taxation in the future. Therefore, as a rule of thumb, we recommend that if you can afford it, you should keep it.

Q. How can I save money on my life insurance premiums?

A. There are several techniques that we are using. The most common is to fund the policy to a lower age (e.g. 95 instead of 100). Some carriers discount the cost by as much as 30% by simply keeping the policy until age 95 instead of 100. We can always readjust later in life.

Q. What is a Life Settlement?

A. Institutions such as banks and hedge funds have created a secondary market to buy existing life insurance policies from insured individuals over the age of 68. In all cases they pay the insured more than the cash value of the policy, but they become the owner and beneficiary. This is an excellent opportunity if you have an unwanted life insurance policy. The elimination of paying the policy premiums, and the cash-in-hand, can result in significant savings.

Q. How should I best avoid probate?

A. Probate is the court-supervised process of transferring property at death pursuant to the terms of a will. The living trust is currently the most popular vehicle used to avoid probate. However, many types of property routinely pass outside of the probate process, including life insurance or retirement plan proceeds that have a named beneficiary, and real estate and bank or brokerage accounts that are held in joint names with a right of survivorship.

Q. What is estate planning?

A. Effective estate planning will ensure that:

Your assets will be managed competently if you become disabled
Your estate will be distributed to your beneficiaries efficiently and economically
Transfer taxes and expenses will be reduced
Your asset values will be preserved
You will leverage lifetime gifts and make maximum use of your available tax exemptions

Q. What are the most common forms of a trust?

A. Charitable Trust: there are many different types of charitable trusts, which are established to benefit a particular charity or the public. Typically, they also lower or avoid Federal (and sometimes state) estate and gift taxes.

Private Foundation: a private foundation can be funded with appreciated assets, life insurance or cash. Donations to private foundations receive an income tax charitable deduction, within certain limitations. Most foundations are required to pay out a percentage of their income each year to selected charities, and last for several generations. Family members can become involved in the management of the foundation and the selection of charities.

Irrevocable Trust: typically used for life insurance, this is a trust that cannot be altered, changed, modified, or revoked after its creation. Once a grantor transfers property to an irrevocable trust, it is not taxed in his or her estate.

Revocable Living Trust: a revocable living trust is a vehicle that is very helpful in avoiding probate. During your lifetime, you can transfer ownership of your assets to the trust so that it is owned by the trust at the time of your death and, thus, not subject to probate.

Qualified Personal Residence Trust: this type of trust is designed to help you reduce or avoid gift or estate taxes on a personal residence or vacation home. You retain the right to live in the residence for a specific number of years. If you survive the trust term, the residence passes to your beneficiaries free of estate tax.

Q. If I move to another state is my Revocable Living Trust still valid?

A. Yes, a Revocable Living Trust is valid and recognized in all 50 states, regardless of the state in which it was created.