Life insurance serves a number of purposes in the estate planning realm, and it is most commonly utilized as a vehicle of income replacement.

Many younger adults fail to make preparations for the future because they feel as though this is something that only older people have to concern themselves with.  But in fact, the children of senior citizens are probably going to be self-supporting.  When you have dependent children estate planning is quite relevant, and making sure that you have adequate life insurance coverage is going to be part of the plan.

Most people are aware of the fact that life insurance often serves as a vehicle of income replacement, but it has other estate planning uses as well and one of them would be to balance inheritances.

Let’s say that you have a particular asset that comprise a significant percentage of the overall value of your estate, such as your house.  For the purposes of this example suppose you have two children to whom you would like to give equal inheritances.

The family home means a great deal to your daughter and you know that she would love to inherit the property.  Your son lives out-of-state and he already has his own dream home.  You could balance the inheritances by leaving the house to your daughter while making your son the beneficiary of an insurance policy that equals the value of the home.

Life insurance can be an important part of many estate plans. To gain a comprehensive understanding of its various uses, sit down and discuss the matter with a good Indianapolis estate planning lawyer.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

Estate planning attorneys will emphasize the importance of estate planning for people of all ages, even if you don’t have a lot of financial resources to pass on to your loved ones.  One of the primary reasons for this is because if you’re like most people, your family relies on your income to maintain their quality of life.

If you were to die suddenly in an accident or due to a catastrophic medical event, your family would be left in a very difficult situation financially as well as emotionally if you did not made preparations for such a contingency.

This is why life insurance is so highly recommended as a vehicle of income replacement.  You not only have to take the first step in obtaining coverage, but you are also going to want to update your coverage as your family grows and your financial responsibilities increase.

Life insurance is used in the field of estate planning for other purposes as well.  One of these would be in small business succession planning.  Partners in small businesses often execute buy-sell agreements such as the cross purchase plan.  Each partner takes out a life insurance policy on every other, and when one of them dies the combined proceeds are used to purchase the deceased partner’s share in the business from his or her heirs.

Another way that life insurance is utilized in estate planning is to balance inheritances.  Suppose you own a business and it is your most valuable asset.  You have a son or daughter, and you would like to bequeath them equal sums, but you want to give the business to your daughter.  You could take out a life insurance policy on yourself that is worth the same amount as your business and make your son the beneficiary to balance the inheritances.

To learn more about life insurance and estate planning, take a moment to get in touch with an experienced estate planning attorney to arrange for a consultation.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

If you’re like a lot of people your first exposure to life insurance takes place when you are offered it on the job as one of your benefits.  If you are young and single at that time you may feel like it is nice to be able to leave your loved ones enough to handle your final expenses, but beyond that it may not seem especially important.  However, as you enter different stages of your life and people come to rely on your income, life insurance takes on added significance.

Clearly, when you get married you and your spouse will be pooling your respective incomes in an effort to maintain a particular lifestyle.  Should one of these paychecks suddenly vanish the standard of living of the surviving spouse could be jeopardized, and this is the last thing that you need when you’re faced with such a devastating emotional turn of events.  Along the same lines, when you have children your coverage must be revisited with their long-term well-being in mind.

In addition to serving as an ideal income replacement vehicle, life insurance is used in estate planning in other ways.  One of these would be to balance inheritances.  To provide a simple example, suppose your largest financial asset was a business that you owned, and you had two children.  For the purposes of this example let’s say that one of the two children worked in the business and understood it thoroughly and the other had embarked on a different career path. To be fair to both of your children you may leave the business to the child who works there and take out a life insurance policy of similar value to the business and make your other child the beneficiary.

Life insurance is a key element in many estate plans, and if you would like to learn more about how to use it to optimal effect, simply arrange for a consultation with an experienced estate planning attorney.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

When you are planning your estate after having worked for a company all of your life, you have particular challenges. However, small business owners who are involved in partnerships have many of the same circumstances to address and then some. When you are working for someone else or retired, your assets are your own to situate as you see fit. But when you are the co-owner of a business, your share may represent a large portion of your overall net worth.

So when you are planning your estate you have to find a way to extract that share for the benefit of your family without doing any damage to the business and the partners that you will be leaving behind. And, of course, you would like your partners to protect you in the same manner as they plan their estates.

This is often done through the execution of buy sell agreements. There are two commonly used approaches to this succession strategy and they both involve the purchase of life insurance. The first one we would like to highlight is the cross-purchase plan.

The way it works is that each of the partners takes out a life insurance policy on every other partner. The total value of the policies held by the surviving partners is calculated to equal a partner’s share in the business. When one of the co-owners passes away, the proceeds from the insurance policies are used to buy the deceased partner’s share in the business from his or her heirs.

The other type of buy sell agreement that is often used is called the entity purchase plan. With this method the total value of each partner’s share is valuated by mutual agreement. Then the business entity itself purchases a life insurance policy on each of the co-owners. When one of them dies, the business uses the insurance benefit payment to buy the share owned by the deceased from his or her estate.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

One of the top stories in the elder law community of late has been the rising cost of long term care. This is a very complex matter because the playing field is changing as the costs are rising, and there are no easy answers. Let’s start by recapping the costs associated with long term care, which we have touched on previously in this space.

According to a MetLife market survey, in 2010 the national average charge for a day in a private room in a nursing home was $229; this factors out to over $83,500 per year, which represents a 4.8% increase over 2009 numbers. In the state of New Jersey the average is into the six figures.

The cost of a year in an assisted living facility rose by even more. In 2009 the charge for a year’s stay in an assisted living facility averaged $37,572 in the United States. In 2010 it was $39,516, and that is a 5.2% increase. Once again, these numbers are larger in the Garden State, where a year in an assisted living facility would set you back over $54,000 on average.

These costs are attention-getting at present, but if they continue to rise at about five percent every year for the next five, ten, or twenty years they may be truly suffocating by the time you need long term care. This is a challenge that can be addressed by the purchase of long term care insurance.

Long term care insurance is expensive in its own right, but you can get locked in at a lower rate if you obtain the coverage when you are in your forties or fifties. A person who is fifty-years-old may pay about $150 a month for coverage, while a sixty-year-old may be looking at a $250 monthly payment (these are broad estimates).

The suggestion here is to do some research on the matter and compare some quotes if you find that long term care insurance sounds like a viable solution given the specifics of your financial situation. The longer you wait before purchasing the coverage the more expensive it will be, and coverage is not going to be offered at all once you reach an advanced age.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

Everyone knows the value of life insurance and what can happen if you don’t have it. A spouse dies, leaving the other spouse with little or no income and no resources. Dreams of staying in your home or sending the kids to college may go by the wayside. Everything caves in on itself.

So you need it, but committing to buying it is something else. First off, life insurance is an important part of your financial plan. If you are married or have kids, buying life insurance is a no brainer. There are no excuses not to have it. If you are single, you might want to rethink buying it, or just have a minimum amount for your burial expenses. But you can also buy a policy to leave money to your favorite charity or niece or nephew, or to cover your bills if necessary.

You may have a policy through work, but is it enough? Some workplace policies are just enough to pay funeral expenses, but will not provide a comfortable life for the surviving spouse or send the kids to college.

You can buy a policy to supplement your workplace policy. So do you go for term or whole life insurance?

Term insurance is usually cheaper, but also only pays the face amount of the policy to the insured’s beneficiary. Whole life, or permanent insurance on the other hand, is a forced savings situation—you pay a premium and part of it is invested and grows for you over the years. An argument against whole life is that you can pay for term insurance and invest the balance yourself and come out ahead. But if you keep a whole life policy for at least 20 years, it can make sense for you. You can also borrow against a whole life policy.

Much of the decision is going to depend on how disciplined you are as a saver or investor. If you are a dedicated investor, you might want to go the term insurance route. If you want a policy to grow automatically, you might choose whole life. Ask your financial planner what type of policy would work best for you.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

One of people’s greatest fears is that they will get sick or injured, can’t work for a long time, get in debt, and then lose their savings and their house, basically losing their independence and dignity. Sounds grim, and it is.

If you have enough money in savings or investments that you could weather up to five years of unemployment, stop reading here. For the rest of you, disability insurance might be the answer.

But do you need short-term disability or long-term disability, or both? Again, that probably depends on your own financial situation.

If you can go without a paycheck for up to six months, then you probably don’t need short-term disability. But few of us have built up that much of an emergency fund. Short-term disability pays approximately 40 to 65 percent of your salary if you get sick or injured, excluding injuries on the job,which are covered by worker’s compensation. Most people receive short-term benefits for three to six months, with most policies capping benefits at two years. The downside is that it is hard to get an individual short-term disability; the best bet is to try to get one through a work group policy.

Long-term disability insurance picks up where short-term disability ends. Long-term disability usually pays 50 to 60 percent of your salary, and can last from two to five year, or until retirement. These policies are often offered through the workplace, or you can buy an individual policy. With LTD policies, you can choose the waiting period for benefits to start. The longer the waiting period, the smaller the premium. Make sure you know what you are signing up for: Some policies allow benefits when you are unable to perform your normal occupation, while others only payout if you cannot perform any job at all. Some policies require that you be totally disabled, while others pay benefits if you are partially disabled.

Your financial planner can help you decide what kind of disability insurance you need.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

A well known financial personality often talks about long term care insurance on his radio program. When people call in and ask when should they start buying LTC insurance, he says at about age 60.

That may make perfect sense, because at age 60, you might be pretty healthy and can still qualify for long term care insurance, and your annual premium (for now at least) would be fairly affordable.

But there are 1 in 2 odds that someday you will need long term care insurance, and you are not guaranteed that this will happen after the age of 60. Young people come down with serious illnesses and have tragic accidents too and need long term care.

There is also no denying that the older you become, the higher your annual premiums. If you buy LTC at a young age, you can lock in the premiums at a cheaper rate. You have the option to buy inflation protection throughout the years, but even with that, it will still be cheaper than waiting until your senior years to buy a policy.

Waiting even five years to buy a policy can cost you thousands of dollars. For example, buying a policy at age 60, with an annual premium of $4,000, and making payments until you are 80 years old, may cost you $30,000 more than if you bought it just five years earlier.

Single people particularly might want to buy LTC, since they do not have a spouse who can care for them.

The bottom line is that no matter how high your premiums, long term care insurance is still a bargain compared to paying $60,000 to $108,000 out of pocket a year for care. Without insurance, you can go through your life savings quickly and possibly lose everything. Ask your estate planning attorney for suggestions on long term care insurance or other instruments to protect you in these circumstances.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

When a loved one passes away, we’re often left with the task of sorting through mail and files to locate the important papers. But what happens if you can’t find everything you’re looking for?

If you suspect that your loved one had a life insurance policy or an annuity but can’t find the documentation, you may have a difficult task ahead of you. Finding an outstanding life insurance policy isn’t simple because unlike a pension, there is no place where these policies are registered so that they can be found.

There are however, some steps you can take to increase your chances of finding information about a life insurance policy that you suspect exists.

• The first thing you’ll want to do is go through all of the paperwork of the deceased. When doing this you might actually find the policy, and if not there could be some type of correspondence concerning the policy.

• Look through the checkbook or bank account of the deceased to see if you can identify any payments that have been made to an insurance company.

• Contact the employer of the deceased to inquire about any life insurance policies they may have. A number of larger companies do provide paid life insurance for their employees.

• If the deceased belonged to any organization, you could inquire with them. An example would be AARP, the Eagles, etc. Often these organizations provide special pricing and programs for their members that include discounted life insurance.

• Contact the deceased’s insurance agency. Most people prefer to have all their policies in one place, so it’s quite possible that the agency who writes their homeowner coverage is the same agency that carries their life insurance.

• If you do have an idea of which insurance company the deceased was going through, you can write the company with as much information as possible and ask about any policies the person might have had with them.

• In case you simply cannot find any information and you still believe that the deceased had an insurance policy, you can always write some of the top insurance companies and ask them about a policy.

The most important thing to remember is that there’s generally no time limit to file your claim and until you do file, the interest continues to grow. This assumes of course, that the policy doesn’t lapse in the interim for non-payment of premium but if there’s a premium due, you should see a bill turn up sooner than later.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.