Andrew Ewalt's Law Blog

Insurance Checkup

Whether you are married or single, young or old, whether you rent your home or own it, an insurance checkup is an important part of your overall Life and Estate Planning success.

The most important assets are your family's well-being, your health and your ability to earn an income.  Life and disability insurance are critical to your success and need to be reviewed periodically to make certain you have the proper protection in place.

Here are some things to consider:

Insurance experts say the likelihood of becoming disabled, at least temporarily, is greater than the likelihood of death during your working years.  Disability insurance helps replace your income in the event you become disabled and cannot work.

Most people avoid thinking of their untimely death, however, life insurance protection is a must for protecting the financial needs of the family in the even of the death of a spouse or a parent.  Consider the need to pay the rent or mortgage, provide child care and fund child's education.

Be certain you are fully protected. Contact your insurance professional for your checkup.

Planning Considerations for Same Sex Couples and Civil Unions

For same-sex couples living in Connecticut, civil unions are now an exciting reality (Massachusetts, California and Vermont offer similar alternatives).  If you live in Connecticut (or one of the other 3 states) you and your partner now have new options, decisions and concerns that same-sex couples have never previously had. One of the many issues that should be considered is inheritance and death taxes.  Without a legal union, a couple will need to sign a number of agreements to create even a partial framework of protection in the event of death or incapacity, and certain tax benefits are forever denied same-sex couples, union or not.  With a civil union the surviving spouse generally inherits the estate based upon the terms of a written will or living trust and/or the terms found in the intestatacy statute (the statue which outlines how an estate should be distributed when a person dies without a will).  Other considerations are the implementation of living wills, health care directives and powers of attorney.  Spouses by civil union or marriage are not automatically granted the authority to act on each others behalf. Thus, it is very important to execute the appropriate documentation in order to avoid difficulty if a spouse becomes incapacitated  or is deemed incompetent to act for themselves.  Estate and gift taxes are another concern. Laws exempting married couples from inheritance taxes and gift taxes at the federal level do not yet apply to same-sex couples, because the federal government does not recognize same-sex unions even where state law approves.  However, Connecticut has its own death and gift tax which can affect same-sex couples who have civil unions in Connecticut.  It is very important when considering a civil union to think about  all of the legal pros and cons.  As with married couples once the decisions has been made to move forward with the civil union same-sex couples must protect themselves, their affairs and families by implementing the appropriate planning.

Saving The Family Home: Use A House Trust?

Many of my clients want to be certain that their homes go to their children when they die.  As many homes appreciate in value clients also worry about their children having to pay estate taxes on the increased value of the house.  One option of leaving the home to children  is to use a Qualified Personal Residence Trust also known as a QPRT.

Please consult your attorney before considering any estate planning option because there are many pros and cons to each option. Here are some pros and cons for QPRT's:

Pros:

1.  It removes any appreciated value of a house from a parent's estate which can help reduce estate tax liability.

2.  The parents can continue to live in the house during the term of the trust.

3.  Both residence and vacation homes can qualify.

4.  Often more than one home can be protected.

5.  When the trust term ends the children receive the home.

Cons:

1.  Capital gains tax can be a significant factor on the sale of the home because the cost basis of the house remains the same as it was for the parents.

2.  If the parents die before the trust terminates the home will not be devalued for estate tax purposes.  Thus it is very important the parents survive for the term of the trust.

3.  Children will become their parents landlord when the trust terminates.  As such children could evict their parents  or increase the rent to live in the home.

4.  These trusts are very complicated. In order to set one up you will need a lawyer.

 

Providing Control

Control is a necessary element in all of our lives.  We all want to maintain control over ourselves, finances and other important aspect of our lives. In fact most of us want control over every aspect of our personal situation.   

However, it has been my experience that many people do not consider what will happen to them if they lose or have to give up control due to illness, incapacity or incompetence, something likely to happen to 2/3 of us at some point in our lives. 

Taking control of the situation by planning for these eventualities through personalized estate planning documents like wills, trust, durable powers of attorney, living wills and health care directives places you back in the drivers seat if and when you begin to lose the ability to control your affairs. 

Planning gives you the opportunity to dictate the "who, what, when, where and how" of your life.  It gives you the power over your life and affairs even if you are no longer in "legal" control.  Thus you can be confident that even though you have given up some or even all control, your life and affairs will be maintained and managed according to  your wishes and not the whim of the state or courts.

Living Wills

So what is a living will exactly? It is a legal document that directs your physician to discontinue life-sustaining procedures (cardiopulmonary, artificial respiration and artificial hydration and/or nutrition) if you are in a terminal condition or a permanently unconscious state.

Living wills are very important b/c family members or loved ones are most often put in the position of having to decide whether to terminate or continue life support when there is no hope for recovery.  Having a living will means you have made the decision for them.

Unfortunately, in Connecticut our current living will statute more heavily favors providing liability protection to health care provider (doctors or hospitals) rather than protection to the patient right to refuse medical treatment.  Given the recent Terry Schiavo case it is time for our legislature to reconsider the statute in favor of stronger patient's rights. 

However, though not as strong as the law could be it is never the less the best way of conveying your wishes on this most personal choice.  It is always important to take control of your life and equally important to take control of your dying.  Having a written living will provides just that....control. 

Advantages of a Trust For Descendants

There are many advantages for leaving property in trust to descendants instead of leaving it to them outright. The degree to which each advantage is realized depends on the trust terms. Here are several advantages of using a trust.

1. A trust provides a mechanism for investment and management.

2. A trust prevents the beneficiary from squandering the property.

3.  A trust protects the property from claims of the beneficiary's creditors, including claims of a spouse upon divorce or the beneficiary's death.

4.  A trust enables the creator of the trust to control the ultimate disposition of the trust property instead of the beneficiary.

Planning For Your Heirs

Hey, I understand that estate planning is not the most exciting thing for most people to consider, but in the end it will save your loved ones a lot of headaches and money.  Here are some things to consider when planning for heirs.

1. How should each bequest be divided? Equally or unequally?
2. Are your heirs minors and if so at what age will each heir inherit?
3. How do you want to distribute indivisible property, such as a house or a family ring?
4. Will you disinherit any heirs?
5. What should you do if when spouses have children from other marriages?
6. Do you have an heir who is reckless and might spend their inheritance with abandon?
7. Do you have an heir with mentally or physically disabled?
8. Do you have a specific goal for your heir’s inheritance…like paying for college or a first home?
9. What will happen if your heirs die before you pass away?
10. Are there any special gifts (family heirloom or memento) that you would like to go to a specific individual or charity?

Life Insurance: Providing Certainty To An Uncertain Time

Once you have updated your will and executed a health-care power of attorney and durable power of attorney you must determine if you have enough life insurance.

One of the worst mistakes a person can make is underestimating the amount of money their families will need if the primary earner in the family should die unexpectedly.  The bottom line is not to skimp on life insurance, especially young families who may need the financial help for many years.

When considering insurance there are basically two types –Term and Permanent.

Term life insurance expires after a certain number of years, can be attractive because it is typically less expensive and when coverage is only needed for a predetermined period.  However, when the term expires, renewing may be very expensive. 

Permanent insurance can be more expensive but is often the better choice where there is a long-term need for coverage.  Typically, permanent life insurance builds up a cash value over time, which is different from term, which has no cash value.

It is very important to speak with a knowledgeable and qualified insurance professional who can provide you with an in-depth assessment of your financial needs and your long-term objectives regarding the need for life insurance. 

We would be happy to help you find an insurance professional.  Please contact our office for a great referral. 

Reasons To Have A Living Trust

Here are some reasons to have a Living Trust instead of a Will

§  A revocable living trust is private while probating a will is public.

§  Living trusts are easy to make and maintain

§  You can give what you own to whom you want and when you want   subsequent to your death through the use of a revocable living trust.

§  A revocable living trust can control, coordinate, and distribute all your property interests while you are alive as well as on your death.

§  By using a revocable living trust, you can arrange for your well-being under your terms as you advance in years, become ill, or become mentally incompetent.

§  The use of a revocable living trust assures that your plans and affairs will remain private, rather than being made public, on your death or incapacity.

§  It is not difficult for you to change or amend your revocable living trust at any time during your lifetime.

§  There are no adverse lifetime income tax consequences that result form the use of a revocable living trust.

§  Property that has been placed in a revocable living trust during your lifetime is not subject to and does not pass through the probate process on your death; it is probate free.

§  Opportunities of gift and estate tax planning available through will planning are equally available through the use of a revocable living trust.

§  Continuity of cash flow and investments in your portfolio can continue uninterrupted by your death.

§  Revocable living trusts are legal in every state.  Your trust can easily be moved with you as you cross state lines.

§  By using a revocable living trust, you can measure your post death trustees’ abilities to manage your assets while you are alive.

§  Revocable living trusts are more difficult to attack in court, and usually less successfully attacked, by disgruntled beneficiaries than are wills.

Cost of Life Insurance

According to the Insurance Information Institute, Individual Life insurance should cost less this year.  The reason is people are living longer, so mortality charges are lower, plus competition helps keep prices down.  Here are some tips for keep insurance on your life even lower:

1. Quit smoking.  Nonsmokers pay lower life insurance premiums.

2. Younger folks should consider term insurance (keep in mind this form of insurance has no "cash value" or savings aspect like with other permanent insurance)

3.  Overall health.  If you can get your insurance company to qualify you as a preferred risk (meaning your health is very good and you are at a low risk for dying), you can save up to 50 percent on premiums.

4.  Shopping low numbers on policies.  Consider what your goals for the insurance are.  If you are concerned about the final death benefit consider the Net Payment Cost Index and compare those prices between policies.  If you  expect to surrender the policy and hope to take its cash value consider the Surrender Cost Index and compare those prices between policies.