Women, Money and Power
Women, Money and Power. This is the title of an article recently published by Aimee Johnson, who is the women’s program manager for Allianz Life. According to Johnson, the women’s market is still viewed by some as a niche market, but she goes on to set the record straight.Nearly a third of women serve as the sole or main breadwinner of their household, according to a 2009 report on women in the labor force by the U.S. Bureau of Labor Statistics. A more recent study from Women and Company also notes that 66 percent of affluent women designate themselves as the chief financial officer (CFO) of their family. Women also control 60 percent of the wealth in the United States and are involved in 90 percent of the family’s financial decisions.
Simply put, the women’s market is significant. What is just as significant is that women are still not getting the attention they deserve from the financial services industry, so gentlemen, pay attention. The LIFE Foundation hopes to change this lack of attention.
The 2007 Allianz Women, Money and Power study indicated that only 29 percent of women are working with a financial professional. The study revealed that this was mainly because of a lack of comfort and confidence with financial planning, despite the fact that these same women are well educated, have successful careers and are managing their daily household finances.
So, she asks, where is the disconnect? (more…)
Estate Taxes Finalized? Not Really.
Congress finally settled the issue of estate taxes last month. Really? No, they only put on another temporary patch for the next two years.What does this mean for you? If your estate is valued at $10 million or less and you are married, you may be able to pass your entire estate to your heirs with no federal estate tax ($5 million exemption x 2). Anything above $10 million will be taxed at 35 percent. These numbers are for 2011 and 2012 only. After that, there is no certainty of what the tax rates will be because the current fix only lasts for two years.
Clients are still confused. How do they make long-term planning decisions when only short-term solutions are available? What if they own life insurance for estate-tax purposes but no longer feel it is needed with the $5 million exemption? What if the clients terminate the insurance now and find they need it again at a later date due to, once again, changing tax laws? (more…)
An “Almost” That Has a Silver Lining
Imagine paying absolutely no federal estate tax. It was “almost” a reality.I say almost because the estate tax was due to disappear in 2010, unless Congress took action, which it did (and still is). On Dec. 3, the House of Representatives passed H.R.4154, which would permanently freeze the estate-tax exemption at $3.5 million, and the estate-tax rate at 45%. The senate is poised to follow, but time is quickly running out.
But if you think about it, zero estate tax is certainly an unlikely tax policy in this budget-hungry environment, when the government is looking in every corner for ways to pay for programs. The good news is that all the estate-planning techniques that we, financial professionals, have been employing to care for families and business owners are still very much applicable today.
A cornerstone of that planning is life insurance. It’s not just a tool for you to provide basic financial security to your loved ones when you die. If you’re a high-net-worth individual, it can also help you protect the estate you have worked so hard to create. Life insurance, when payable at death, is income tax free, capital gains tax free, and estate tax free (when properly structured through third-party ownership or trusts). It’s the only asset class in our financial system that enjoys these tax privileges.
Life insurance is an excellent way to pass on money from your estate to your family and heirs in a tax-efficient manner. By setting up an irrevocable life insurance trust (ILIT) and paying your life insurance premiums from that, you transfer ownership of the life insurance to the trustee of the ILIT. And since you no longer own the policies, the proceeds can’t be taxed in your estate when you die. The ILIT will also be designated as the primary beneficiary of your life insurance policies. So after you die, the insurance proceeds will be deposited into the ILIT and held in trust for the benefit of your spouse during his or her lifetime, and then the balance will pass to your children or other beneficiaries. Aside from this, the ILIT can provide your family with a quick source of cash to pay your estate-tax bill while at the same time not increasing your overall estate-tax burden.
Life insurance is an excellent tool for paying estate taxes and other fees upon your death, which means your family doesn’t have to immediately tap into or sell other assets, like real estate, to take care of those obligations.
We all want to support our government by paying tax where tax is due, but we also want to ensure our children and their children and perhaps even their children’s children can benefit from our hard work. Life insurance was, is and will be a sound financial tool to do just that. This is why it’s so important to protect, promote and preserve the core tax treatment of life insurance products for the 75 million American families who rely on it every day.
Life Insurance: A Good Asset
The Atlanta Journal-Constitution published an article on September 20, 2009 by M. Bryan Freeman and Stephen B. Wilkins titled “Life insurance good asset for consumers.” The article pointed out that “Life insurance may not be thought of as an asset class because its buyers may not think of it as a flexible investment. That is, they expect to lapse it, take a minimal cash surrender value payout or, of course, pass away and leave the proceeds to their heirs.”
But it further points out that in today’s uncertain financial times, wealthy families are purchasing life insurance “to generate the maximum amount of death benefit with the most efficient premium stream.” They are not trying to grow cash value but enhance the overall return on the fixed income portfolio. This strategy is a buy-and-hold one with a long-term estate planning purpose.
Many people have experienced substantial drops in their investment portfolios and pension plans. Supplementing these programs with life insurance to replace the values lost over the past 20 months is a very cost-efficient way to replenish these portfolios which may otherwise never be rebuilt in the event of the death of the individual.
Contact your agent or locate one at LIFE’s Agent Locator to learn how inexpensive this asset replacement option may be for you.