Most people know about life insurance. If you don’t, here’s a quick summary of what you need to know. Life insurance is a contract between you as the buyer of a policy and the insurance company where the insurance company will pay a sum of money to your beneficiary (the person you designate to receive the proceeds of your life insurance policy) when you die. The beneficiary can be your spouse, your children, or your business partner, or whomever you want to receive the money when you die.
If you are a young, married man or woman, you need enough life insurance to support your family in the event you die early. You would need enough money to pay for your children’s college tuition, for a retirement fund for your spouse, and for the normal expenses of living – mortgage, utilities, food, car, gas, etc. Typically, that amount can be $500,000 or even $1,000,000 (it’s not cheap living in New Jersey).
How does a life insurance trust enter into the picture? A life insurance trust provides a means of avoiding estate tax. Although you may be aware that the federal estate tax kicks in above estates of $3,500,000 (if you die in 2009), New Jersey has a state estate tax that starts with estates of more than $675,000. If you have some equity in your house, a retirement account, and a bank account, you might be over the $675,000 threshold. In that case, you would be a good candidate for some tax planning. Let’s say you bought a $500,000 life insurance policy and made your estate the beneficiary of your policy. Now, the $500,000 is considered part of your estate for estate tax purposes. If you own a house with $200,000 in equity, have $50,000 in your retirement account, and $10,000 in the bank and add in the proceeds of the life insurance policy of $500,000, you will die with an estate of $760,000. Your federal estate tax is $0 but your NJ estate tax is just under $21,000. Do you want to give away almost $21,000 to the state? If you die 5 years from now, it is more likely that your estate will be larger (hopefully you saved more money and the real estate market went back up a bit). Then you will owe more estate tax.
If you put the life insurance policy in a trust, and you don’t own it anymore, then your estate is worth only $260,000. Your federal estate tax is $0 and your NJ estate tax is $0. That’s why you might need a life insurance trust.
You should talk to an estate planning lawyer to learn about whether you owe any federal or New Jersey estate tax. Would you spend $3,000 to save $21,000?
Tuesday, October 20, 2009
Monday, October 5, 2009
Listen to Your Mama When She Tells You about Her Medications
Estate planning is about so much more than documents. It’s about making your family’s end of life issues less difficult for you and for them.
If you have elderly parents, chances are they are taking at least one daily medication. My father had perhaps a dozen medications. He had one of those weekly pill boxes for the morning and a separate one for the evening. Every Sunday, my sister or I would go over to his apartment and fill the pillboxes for the following week. We also had a box to store all the original pharmacy pill boxes with a sheet of paper listing each drug, how many times per day it was taken, and the dosage. We took that paper with us every time we went to a new doctor or to the hospital.
Do you know what medications each of your parents are on? Have they tried to tell you and you’ve told them that you don’t need to know yet? Do you know whether they are taking the medications that have been prescribed?
It’s very hard to switch from being your parents’ child to their caregiver. You feel like it’s not your place to tell your parents what they should be doing. Yet, you know that you would feel guilty if they had been trying to get you to help them and you couldn’t deal with the change in roles so you ignored their problems. If your parents are trying to tell you about their medications, where their wills are located, whether they want a “Do Not Resuscitate” order on their medical chart under certain circumstances, you must listen and keep that information written down for when it is needed. Doctors rely on their patients telling them what medications they are taking so they do not prescribe additional medications that duplicate what they are already taking or have bad consequences when they are taken with certain other medications. If your parents can’t tell their doctor every medication that every doctor has prescribed, then you must step in and make it your business to get the doctors that information. Or you can keep your head in the sand and wait for a crisis to happen to the ones you love.
If you have elderly parents, chances are they are taking at least one daily medication. My father had perhaps a dozen medications. He had one of those weekly pill boxes for the morning and a separate one for the evening. Every Sunday, my sister or I would go over to his apartment and fill the pillboxes for the following week. We also had a box to store all the original pharmacy pill boxes with a sheet of paper listing each drug, how many times per day it was taken, and the dosage. We took that paper with us every time we went to a new doctor or to the hospital.
Do you know what medications each of your parents are on? Have they tried to tell you and you’ve told them that you don’t need to know yet? Do you know whether they are taking the medications that have been prescribed?
It’s very hard to switch from being your parents’ child to their caregiver. You feel like it’s not your place to tell your parents what they should be doing. Yet, you know that you would feel guilty if they had been trying to get you to help them and you couldn’t deal with the change in roles so you ignored their problems. If your parents are trying to tell you about their medications, where their wills are located, whether they want a “Do Not Resuscitate” order on their medical chart under certain circumstances, you must listen and keep that information written down for when it is needed. Doctors rely on their patients telling them what medications they are taking so they do not prescribe additional medications that duplicate what they are already taking or have bad consequences when they are taken with certain other medications. If your parents can’t tell their doctor every medication that every doctor has prescribed, then you must step in and make it your business to get the doctors that information. Or you can keep your head in the sand and wait for a crisis to happen to the ones you love.
Subscribe to:
Posts (Atom)
