Monday, October 21st, 2013 | | |
While you may think you’re doing the right thing if you name your special-needs child (or grandchild, sibling, etc.) as the beneficiary of your life insurance, you may be doing the wrong thing. Here’s why.
Under current federal law, an individual with more than $2,000 in assets is disqualified from most needs-based government benefits. State assistance programs may also be based on need. If your child were to receive an inheritance from you directly, including the proceeds of a life insurance policy, it’s highly probable that the inheritance would disqualify the child from receiving needed benefits. Do not leave assets to the child directly.
Instead, create a special-needs trust and leave assets to the trust. The special-needs trust will provide financial assets for a disabled child’s future care and well being, while maintaining the child’s eligibility for government benefits. The trust is managed by a trustee, who then can use trust assets on the child’s behalf.
In a properly structured special-needs trust, the trust holds the title to the property for the benefit of the disabled child or adult. The assets in the special-needs trust can then be used to provide for the needs of the disabled individual, as well as to supplement benefits received from government assistance programs. For example, trust assets can be used for:
- transportation, including purchase of a vehicle
- training, rehabilitation or education programs
- medical, dental and eyesight expenses
- insurance premiums
- companion/home health aide expenses
- items to enhance quality of life/self esteem
A special-needs trust can hold cash, as well as title to stocks, bonds, mutual funds, real estate and personal property. In addition, it can own and/or be the beneficiary of life insurance policies, one of the least expensive ways to fund a special-needs trust. Another use for special-needs trusts is to receive any proceeds from personal injury settlements without jeopardizing eligibility for government benefits.
In order to retain eligibility for government benefits, it’s important that well-intentioned family members, such as grandparents, understand that their will should bequeath assets to the special-needs trust, and not directly to the disabled individual.
Keep in mind that special-needs trust requirements are stringent, so it’s important that you work with qualified financial and legal experts when establishing a special-needs trust.
Monday, August 26th, 2013 | | |
Hard as it is to believe, there are only a few more months until the December holidays. And then we are back to January—and those pesky New Year’s resolutions. You know: lose weight, exercise more, get a handle on our finances.
And we mean to follow through. We really do. But something happens—or more precisely, life happens—and we just don’t have the time or energy or the incentive to do the things we said we wanted to do.
Remember the story of the ant and the grasshopper? The ant worked hard all summer, gathering wheat grains to store for winter. And the grasshopper? He just hopped around, enjoying the sunshine and laughing at that sweaty ant. Well, once winter hit, the grasshopper wasn’t laughing, but was cold and miserable and hungry. And the ant? He had plenty of food and could now toast his toes in front of his warm fire.
The point is, instead of waiting for January 1 to make your next set of New Year’s resolutions, start now working on those you made eight months ago, working on the principle that there is no time like the present. Here are four quick tasks to undertake—one for each week of this coming month—to get your financial life under control and heading in the right direction. (You’re on your own with the diet and exercising!)
1. Start saving now. Have a set amount of money deducted from your paycheck and sent directly to a “don’t touch no matter what” savings account. Self-employed? Do your own auto-deduction from your checking account. (Bonus tip: save your change and once a month, make a coin drop to your account. Or go even further: Don’t spend those one dollar bills but instead save them. When you get 10, deposit them. It’s amazing how quickly your savings balance will grow!)
2. Review your life, business, auto and home policies. Do you have enough coverage—and the right kind? Can you increase your deductibles to save a few dollars? Do you need to add any extra options, riders or increase existing coverage amounts? Schedule a session with your insurance agent for a complete evaluation of your existing policies. (Bonus tip: Not sure how much life insurance you need? Check out the LIFE’s Life Insurance Needs Calculator.)
3. Pull your credit score. Go to Annual Credit Report.com—one central site where you can request a free credit file disclosure (also called a credit report) once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. Look for any errors or unexpected information and then get it corrected—ASAP!
4. Create a workable financial plan. Do you know where your money goes each month? Take a look at your income and outgo. Are there expenses you can reduce or eliminate? If so, use the extra money to either pay down debt or save for a rainy day. Consider the “Latte Factor”: the concept that many small purchases can add up to a significant expenditure over time. For example, a $3 coffee five days a week is an expenditure of $780 a year. Settle for a regular cup of joe at half the price, save the rest and, at minimum without factoring in interest, you’ll have $390. Every little bit helps, whether it’s spending more or adding more to your monthly payments.
By the end of September, you’ll be in better shape financially, and feel more secure and less stressed about your overall financial plan.
Monday, August 12th, 2013 | | |
Marshal is sharing his story as part of LIFE’s sponsorship of the Debt Movement, whose goal is to help people pay down their debt. He’s LIFE’s $2,000 Debt Scholarship recipient. LIFE promotes people taking personal financial responsibility, and debt reduction is a large step toward that goal. —Editors
My debt journey is not a personal journey but a joint adventure with my beautiful wife, Sarah, and our three, also beautiful children Tatum, Caleb and Emma. I am 37 years old and have been married for 15 years. I have been in various levels of debt since I was 17. I brought that debt into our marriage and continued to compound the problem by accumulating additional debts. My debt problems became our debt problems, and we continued to live beyond our means.
This has been our story for the past 20 years. I have moved from my first debt, owing $3,000 on a 1987 Pontiac Firebird, to accumulating over $65,000 worth of debt in credit cards, car loans, student loans and family debts. In the past, we’ve made several efforts to get out of debt, but be we lacked focus and intensity. We also lacked discipline and never attempted to reconcile what we earned with what we spent. This comprised our day to week to month to year life. Each day a little worse than the previous.
There was no hope. I felt a tremendous responsibility for jeopardizing my family’s future and mortgaging away tomorrow for a taste of satisfaction today. I could never see a day in which we could retire, travel, pay cash for a vehicle, actually own our home or finance college. There was not a foreseeable day where we would experience financial freedom.
One of “Those” Days
I had a particularly memorable moment about 18 months ago. I remember having “one of those days” where things seemed to pile up against me. I sat down to collect my thoughts and figure out how we were going to get through another situation where the money stopped before the month ended. As I reflected, my internal dialogue said, “Hey Marshal! Look around! Right now, you make more money than you’ve ever made and you still have the same old problems you had when you were a broke college kid!” I remember feeling somewhat foolish as I thought more about the situation. I did not act on this right away and we continued to struggle along for about six weeks.
Shortly after that, I had a conversation with some friends. They were discussing something I had never considered. To put it simply, they did not borrow money. I did not believe this was possible. After all, we were never able to save money and I knew what our bills looked like. They suggested a book for me to read. As I read it, I was floored. I had no idea this lifestyle was possible. I tend to be a little skeptical, and I wanted to know more so I pursued more books, six in all. Some of the books were faith based and others were not, but they all told the same story. It was the same as my story and I was ready to be debt free.
Getting My Wife on Board
I might have been ready but Sarah was not as convinced. She was understandably nervous, after all debt was all we have ever known. It took a lot of discussion to decide that cutting up our credit cards was a good idea. We did cut them up and pledged that credit had no place in our future. This was a first for us, talking about our future in absolute terms. Suddenly our future was not a “someday” dream; it had a specific date. In two years, we would be able to do “this” and in five years we could save enough to do “that.” We started calculating when we would be debt free. It was so exhilarating and I remember crying with excitement.
We laid out our plan and we started. We saved $1,000 for emergencies. It took less than two weeks to set that money aside. This was the first time we ever had money designated for an emergency, and I suddenly understood why we did not need credit cards any more. It is amazing how such a small amount of money could have such a dramatic impact.
Working Our Plan
It took about two months to pay off the first credit card balance. It was such a liberating experience, and I immediately closed the account. We continued on this path, paying off our car, another credit card and a line of credit. The numbers almost didn’t add up. We were so focused and dedicating every extra penny to debt repayment. That is where we stand today.
Yesterday the final payment was made on our last credit card and that account is in the process of being closed. We still have about $25,000 in student loans and some smaller family debts to repay. We are laser focused on our plan and securely on a path to have those paid off in December 2013. We may miss that target, but it won’t be by much and 2014 will be our debt free year.
I really have not allowed myself to dream about our debt free day yet. I do know when we get there, I’m ready for that challenge. I cannot wait for the day we start saving for retirement, funding a multi-month emergency fund, saving for our kids’ college education, and starting to pay down our mortgage. I don’t know what happens beyond that but I’m excited to find out!
I would be remiss if I did not take time to mention some other points. First, the most important lesson I have learned in this journey is how to tell myself “no.” This has been a tremendously powerful tool in our debt battle and has spilled over into other parts of my life. I have lost over forty pounds by telling myself no.
It has taught me to have more patience with Sarah and our kids, which has strengthened our relationship. And it has allowed me to enjoy my job more than ever! It has allowed me to enjoy other people and generally have a brighter look at life. Our children have noticed the changes and it has positively impacted how they view finances. It is amazing how good decision-making is contagious! Finally, I wholly believe that God placed people and events into my life that influenced my decision and led me to this path. This short story does not cover all of the details of our experience but there are so many things that cannot be explained away as coincidence. I cannot tell this story without saying thank you to God.
I do imagine my story does not sound much different than the hundreds of other debt freedom stories. I’m okay with that. We have gained freedom beyond imagination and hope that our story can become a testimony for others to explore their own debt situation and experience the liberation of debt freedom.
Monday, July 29th, 2013 | | |
Do you have a living will? Fewer than one in three Americans have a living will detailing whether they want life-sustaining medical care if they are unable to communicate their medical treatment preferences, according to a new survey by FindLaw.com. This means you could potentially be leaving legal problems for your family if they are unable to communicate your health-care wishes.
A living will, also known as a health-care directive or directive to physicians, is a document in which you can indicate your instructions in advance as to what medical treatments you wish to receive in the event you are unable to communicate those wishes due to illness or the inability to communicate. Under certain conditions, it permits doctors to withhold or withdraw life support systems. In the absence of a living will, medical-care decisions are generally made by a spouse, guardian, health-care agent or majority of parents and children. But if family members disagree and doctors have difficulty deciding on appropriate medical care, the matter may need to be decided in court, and this could be a major legal, family and financial problem.
“Without a living will, there is no clear directive for families and medical professionals to follow in terms of what types of care should be administered or withheld in the event that you become incapacitated or unable to communicate your medical treatment preferences,” says Stephanie Rahlfs, an attorney and editor with FindLaw.com. “Living wills and health-care directives let you specify which treatments you want, and who will make decisions when you’re not able to. Otherwise, misunderstandings and disagreements among family and other care providers can result in delays in treatment or carrying out actions that are contrary to your wishes. Things need to be spelled out in advance through a living will.”
It’s important to make sure your living will conforms to your state of residency’s laws. This is especially important when you have homes in multiple states.
It is also extremely important for your health-care guardian (the person appointed in your health-care power of attorney) to have copies of all these documents. Keep the original in a place where family members can easily find it. Depending on your state, you may wish to sign several copies, have each witnessed and certified, and give an original to the appropriate people, such as family members and family physicians. However, if you change your mind and revoke or change your living will, make sure you destroy all originals and copies.
These are important decisions that need to be taken with careful deliberation and the advice of your attorney. If you don’t have a living will and a health-care power of attorney, please contact your advisor today. The cost of preparing these documents is nominal. The cost of not having these documents and needing them could be enormous.
Monday, July 8th, 2013 | | |
Very soon, your high school graduate will be heading off to college. And while you may have provided your son or daughter with the necessary dorm room equipment, last-minute cooking and laundry instructions and a generous supply of pantry items for meals-on-the-go, have you had that all-important talk with your child?
No, not that one—the one about money, finances and credit card usage. For many college-age students, the focus of the next four years will probably be more on school than on solvency. While they know that higher education comes at a price, they figure they’ll worry about those pesky student loans later, once they’re out of school and in the workforce.
But the reality can be far from rosy. According to an Associated Press story, more than half of bachelor’s degree-holders under the age of 25 were jobless or underemployed in 2011, the highest share in at least 11 years. When you consider that student loan payments will be coming due post-graduation—and 64% of Millennials financed their education to the tune of a student debt total that exceeded $1 trillion at the end of 2012, according to the Consumer Financial Protection Bureau—it is no surprise that the debt load carried by current GenY-ers is their biggest financial concern.
And along those same lines, a Wells Fargo survey showed that Millennials believe that financial literacy should be taught—either in high school or college or by parents. But even if you haven’t broached the subject yet, it’s not too late. LIFE has tools to help you help your child to become fiscally aware.
Start with the resources available through the Next Generation website. The site offers a range of free resources focusing on five key areas—risk, life insurance, health insurance, disability insurance and financial planning—and includes quizzes, family activities, glossaries with terms and phrases related to insurance and financial planning and a video library.
Then explore the materials on the LIFE site, such as the LIFE Lessons videos (such as those about Brittney LaCombe and Jermaine Suggs and realLIFEstories such as the one about Missy Junk personalize the role insurance plays in protecting a family’s future. In particular, the section for singles focuses on three key areas: controlling debt, saving money and protecting assets and income with insurance.
The LIFE calculators, such as the Life Insurance Needs Calculator, can provide you and your student with useful information about how to evaluate their need for coverage and the potential for risks, while this blog offers succinct articles about the role of financial planning and insurance.
Finally, involve your student in discussions about family budgets and finances, and make them part of your meetings with insurance professionals. They will learn how you make decisions regarding insurance coverage and investments, which will provide them with useful information when they need to make the same decisions and choices.
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