Life insurance — a useful tool for estate planning and management

An illiquid estate can be very difficult to administer. If the estate assets include real estate or a business to be sold,  there can be a need for substantial cash to maintain these pending sale. If the beneficiaries of the Estate are Class C (siblings) or Class D (all others), New Jersey Transfer Inheritance Tax will need to be paid. Many Wills direct that these taxes be paid from the estate itself, rather than paid by the beneficiary who receives the inheritance. The Executor may need to pay for the funeral bill.  401Ks or IRAs generally have designated beneficiaries, and therefore are not used to pay estate expenses. There may be  substantial debts to clear up as well, or unfiled income taxes. So there’s often a need for cash in the estate so that the Executor can reasonably take care of the Estate’s obligations.  Life insurance that is payable “to my Estate” can be used to create the liquidity that’s needed.

If the estate plan needs to balance the amounts being left to different people, and certain people are receiving, let’s say, the tax-deferred accounts, the beneficiary designations on the life insurance can take care of the others.

Perhaps there is a Trust within the Will to protect the inheritance for certain heirs, or a supplemental needs trust for a disabled heir, or an unfunded standby trust for another person’s benefit. Life insurance can be made payable  to the Trustee of the Trust, to ensure that there will be an inflow of dollars to fund the trust. This is a particularly useful technique when the Trust includes a house that the beneficiary will live in.

Life insurance is one of many tools in the toolbox for an effective estate plan. Call us for advice to design the plan that meets your needs ….. 732-382-6070


Using life insurance to fund a trust for your disabled family member

When you make an estate plan, you take into consideration the needs of all the family members who you want to give a benefit for. One child may have disabilities and may or may not presently require government benefits. You may think that you don’t have much assets to leave behind for their lifelong support. Are you worried that they will be able to work to a degree, but not be able to earn a good enough living, and won’t be able to live independently in the community?

Life insurance can really help in this situation. You might leave the tax-deferred accounts (IRAs) to the other kids and make your life insurance payable to a trust for the needier child. It’s worthwhile to sit down with a life insurance specialist to review your existing policies and discuss the possibility of exchanging older policies for better ones. This is sometimes referred to as “conversion.” For instance, you may have a term policy with a “conversion privilege.” If your policy has a sizeable built-up cash value, sometimes you can exchange one policy for another (a section 1035 exchange under the Internal Revenue Code) and use the cash to pay the premiums for a much larger policy. Often the cash that has built up is like a hidden asset — it’s there, but you don’t think about it the way you think of your other liquid assets.

Estate planning is the process of achieving peace of mind. Setting up a trust for the one who cannot manage on their own, rather than leaving them at the mercy of other family members or leaving them solely dependent on government programs, may be just what you need to feel good about your plan, and life insurance in some cases can be the right tool to use.

Call us for advice on estate planning, elder care planning and special needs trusts… 732-382-6070

Elder Care Planning: Building your Team

Tuesday evening I was privileged to participate in a lively panel at the JCC in Scotch Plains that was answering  questions on a wide range of elder care/ elder law issues. The panelists were terrific — Michele Morandi, D.O., geriatric physician based in Union and affiliated with Center for Hope Hospice ; Chris Kaiser, MSW, LCSW, Director of the Older Adult Services at Jewish Family Services ; Dale Ofei-Ayisi, MA, of the Rutgers U. COPSA dementia assessment program in Edison  and Donna Farrell of the Union County Division on Aging.

There were certain major themes that crossed the lines from medical to legal to social services: invest the time to plan ahead; failure to plan can cause great expense and trouble at a time of crisis; a thorough medical evaluation should be part of the dementia assessment process; the caring family members need to be practical and objective to help an aging person deal with their increasing limitations; there are many governmental services available but none that pay for 24/7 care in the home.

At the end of the program, I said that although issues are intertwined, an aging person needs a team for advice. The elder law attorney evaluates the Medicaid eligibility and designs an estate plan, creates the documents to implement a plan, and pursues any needed court proceedings. The accountant/CPA prepares the income taxes and evaluates & advise you on tax issues. The life insurance advisor gets you the insurance you may need to fund special needs trusts for disabled family members or to otherwise take care of those left behind. The reverse mortgage specialist gets you access to your home equity when the liquid assets are gone. The long term care insurance specialist helps you in that middle 40 – 70 age bracket so you have insurance to pay for home health care in the event of dementia or a catastrophe. The physician follows the patient over time and manages the health issues. The dementia assessment specialist can help you identify the nature of the dementia (diagnosis) so it can be understood and properly handled. The financial advisor guides your decisions about investments and use of specific assets. And the geriatric care manager (GCM) can assess the safety of your home and oversee/coordinate the delivery of care for you in your home. Then of course, you need close family or friends to be there for you as well, whether as your fiduciaries (power of attorney etc) or caregivers or companions.

There may even be a need for more help: a Medicare gap policy/ choice plan specialist; a medicare appeals specialist; an interior designer who is familiar with universal design to keep your house safe for you. The bottom line is, you need a team, and careful planning can prevent a crisis

Call for a consultation to start planning for your elder care legal needs: 732-382-6070