Estate Planning and Life Insurance

Finance Forward

Tips, Tricks, & Insider Peeks into the Finance Industry

Estate Planning and Life Insurance
by Ryan Burt, Senior Partner

Once again we roll the calendar over to a new year, and the normal clichés of early January arrive in the form of “New Year Resolutions”. But I argue that something as important as financial planning should not have a yearly timeline to complete. I have an uncle who always completes his taxes at the beginning of the year claiming he enjoys the peace of mind that comes with planning ahead. While increasing my time at the gym is a fine item to resolve at some point during this year, finding peace of mind right now is worth changing estate planning to an action item.

The very name “estate” usually congers up images of big mansions and healthy pocketbooks. While it’s true that wealthy individuals have an obvious need for estate planning in the form of the Federal Estate Tax, the rest of America does have an “estate” that requires planning.

The IRS defines a taxable estate as a networth of $2,000,000 and up, upon which they levy a 45% tax upon the death of both spouses. To avoid a heavy burden of liquidation for your heirs you can use life insurance as a cost effective solution, specifically in the form of a “Second to Die Universal Life” policy.

Universal Life (UL) insurance offers a multitude of options and flexibility as compared to the older “Whole Life” policies. Specific to estate taxes, a "Second to Die Term to 100” policy offers the most affordable means of coverage. Since the policy pays out upon the death of the second insured, the cost is less than a personal life insurance policy that only covers one life. “Term to 100” means this policy will not be used for investment potential, but is priced so that the cash value is just enough to sustain the policy. In other words, it’s a term policy that covers you for life.

Here’s a comparison* for a male age 42, non smoker with a Preferred health rating and a $1,500,000 Term to 100 policy:

Covering his life only: annual premium $9,765

Covering second to die: annual premium $5,264

But what if an individual has poor health and is uninsurable? A Second to Die policy can still be issued as long as the spouse is in good health. So you just have to ask yourself this question: Do you want to pay Uncle Sam, or do you want the insurance company to do that for you?

The rest of America also needs estate planning, specifically for funeral expenses, final debt, inheritance, and charitable gifts.

When someone in our family dies, remaining family will need to immediately cover their credit card debt and mortgage payments. Just the cost of the funeral can come as a shock to most people. According to the US Federal Trade Commision, “A typical funeral including a casket costs about $6000, although extras can add thousands. Many funerals run well over $10,000”. Factor in inflation and the average funeral could cost $15,000-$20,000 30 years from now.

In addition to covering our passing we may also wish to help grandchildren with student loans, or assist with the down payment on their first house. Maybe we have a special needs child that will require professional care (a second to die policy works great in this situation). Or maybe we wish to donate to our favorite charity and help pay for the statue they will display in our honor. You don’t have to be famous to have a statue, and you don’t have to be rich to afford life insurance.

Let’s look at some examples* showing annual and monthly payment options:

Male 42, Non-smoker Preferred, $50,000 UL:
Annual/monthly premium: $412.32 / $35.73.

Male 42, Non-smoker Preferred, $100,000 UL:
Annual/monthly premium: $652 / $56.50.

Male 62, Non-smoker Preferred, $100,000 UL:
Annual/monthly premium: $1,783/ $154.53.

If he lives to 75, he pays $23,179 in premiums for a guaranteed tax free payout of $100,000.

Male 75, Non-smoker Standard, $100,000 UL:
Annual/monthly premium: $4,801/ $416.

If he lives to 80, he pays $24,005 in premiums for a guaranteed tax free payout of $100,000.

This will achieve his goals, which are to help his wife, reduce his children’s debt, and help with his grandchildren’s tuition.

There is no better mechanism available for estate planning than a Universal Life Insurance policy. The holidays are over, a new year is upon us, and my uncle is getting ready to work on his taxes.

Peace of mind is worth pursuing right now!

* Rates are from different companies. Changing face amount, duration, and type of policy will change the carrier offering the lowest rate. We will always seek out the best policy for your needs.

MORTGAGES INSURANCE ANNUITIES

  7141 E. Quartz St.
  Mesa, AZ 85207
  (800)505-9412
  www.budgetlife.com

Finance Forward Tips, Tricks, & Insider Peeks into the Finance Industry
Estate Planning and Life Insurance by Ryan Burt, Senior Partner
Once again we roll the calendar over to a new year, and the normal clichés of early January arrive in the form of “New Year Resolutions”. But I argue that something as important as financial planning should not have a yearly timeline to complete. I have an uncle who always completes his taxes at the beginning of the year claiming he enjoys the peace of mind that comes with planning ahead. While increasing my time at the gym is a fine item to resolve at some point during this year, finding peace of mind right now is worth changing estate planning to an action item. The very name “estate” usually congers up images of big mansions and healthy pocketbooks. While it’s true that wealthy individuals have an obvious need for estate planning in the form of the Federal Estate Tax, the rest of America does have an “estate” that requires planning. The IRS defines a taxable estate as a networth of $2,000,000 and up, upon which they levy a 45% tax upon the death of both spouses. To avoid a heavy burden of liquidation for your heirs you can use life insurance as a cost effective solution, specifically in the form of a “Second to Die Universal Life” policy. Universal Life (UL) insurance offers a multitude of options and flexibility as compared to the older “Whole Life” policies. Specific to estate taxes, a "Second to Die Term to 100” policy offers the most affordable means of coverage. Since the policy pays out upon the death of the second insured, the cost is less than a personal life insurance policy that only covers one life. “Term to 100” means this policy will not be used for investment potential, but is priced so that the cash value is just enough to sustain the policy. In other words, it’s a term policy that covers you for life.	Here’s a comparison* for a male age 42, non smoker with a Preferred health rating and a $1,500,000 Term to 100 policy: Covering his life only: annual premium $9,765 Covering second to die: annual premium $5,264 But what if an individual has poor health and is uninsurable? A Second to Die policy can still be issued as long as the spouse is in good health. So you just have to ask yourself this question: Do you want to pay Uncle Sam, or do you want the insurance company to do that for you? The rest of America also needs estate planning, specifically for funeral expenses, final debt, inheritance, and charitable gifts. When someone in our family dies, remaining family will need to immediately cover their credit card debt and mortgage payments. Just the cost of the funeral can come as a shock to most people. According to the US Federal Trade Commision, “A typical funeral including a casket costs about $6000, although extras can add thousands. Many funerals run well over $10,000”. Factor in inflation and the average funeral could cost $15,000-$20,000 30 years from now. In addition to covering our passing we may also wish to help grandchildren with student loans, or assist with the down payment on their first house. Maybe we have a special needs child that will require professional care (a second to die policy works great in this situation). Or maybe we wish to donate to our favorite charity and help pay for the statue they will display in our honor. You don’t have to be famous to have a statue, and you don’t have to be rich to afford life insurance.	Let’s look at some examples* showing annual and monthly payment options: Male 42, Non-smoker Preferred, $50,000 UL: Annual/monthly premium: $412.32 / $35.73. Male 42, Non-smoker Preferred, $100,000 UL: Annual/monthly premium: $652 / $56.50. Male 62, Non-smoker Preferred, $100,000 UL: Annual/monthly premium: $1,783/ $154.53. If he lives to 75, he pays $23,179 in premiums for a guaranteed tax free payout of $100,000. Male 75, Non-smoker Standard, $100,000 UL: Annual/monthly premium: $4,801/ $416. If he lives to 80, he pays $24,005 in premiums for a guaranteed tax free payout of $100,000. This will achieve his goals, which are to help his wife, reduce his children’s debt, and help with his grandchildren’s tuition. There is no better mechanism available for estate planning than a Universal Life Insurance policy. The holidays are over, a new year is upon us, and my uncle is getting ready to work on his taxes. Peace of mind is worth pursuing right now! * Rates are from different companies. Changing face amount, duration, and type of policy will change the carrier offering the lowest rate. We will always seek out the best policy for your needs.


MORTGAGES INSURANCE ANNUITIES		7141 E. Quartz St. Mesa, AZ 85207 (800)505-9412 www.budgetlife.com