I Just Got a Rate Increase on my Long Term Care Insurance Policy
It’s a call we are getting with increasing frequency. Jim just received a letter from his long term care insurance company that they are increasing his premium by a whopping 60%. If that’s not bad enough, the letter warns that he should expect further increases in future years. Jim is 71 years old and healthy. While he doesn’t have a crystal ball to look into the future, he is currently healthy and has no idea if or when he’ll need long term care. How many rate increases could he face - and will he be able to afford them – before he ever starts to receive benefits under the policy? The letter Jim received gives him options. One of course is to pay the 60% rate increase and keep his benefits the way they are. A second option is to reduce his daily benefit – the amount paid per day for care – or to reduce or eliminate the inflation protection that raises the daily benefit each year to keep pace with the rising cost of care. A third option is to keep a more limited benefit for long term care. In that case Jim does not have to
Estate Planning – Changing as We Age (Part 4)
Last week I was telling you why the New Jersey probate process can be easy but the tax waiver system designed to protect the State’s ability to collect estate and inheritance tax can tie up your money for years. That’s because the law requires financial institutions to freeze ½ of your account until the tax is paid – or your estate satisfies the State of New Jersey that it owes no estate or inheritance taxes. In many cases, an estate and/or inheritance tax return must be filed even though no taxes are due, simply because the State wants to determine for itself that there are not taxes owing before it will allow the funds to be “unfrozen”. The tax waiver is proof that New Jersey has given it’s “OK”. The problem is that the State doesn’t work quickly so assets can be frozen for a period of years. So, how can you avoid this? The tax waiver system applies to any accounts that were in the decedent’s (the person who has died) name. That includes probate assets and non-probate assets. An account which is payable on death to another is a non-probate asset. Its distribution is not governed by what
Estate Planning – Changing as We Age (Part 3)
Last week I was talking about what we call senior estate planning and something called a tax waiver. New Jersey probate – the process of administering an estate after someone dies – is easy in some respects but not so easy in others. Let’s go back to Jack and Diane. Upon Jack or Diane’s death, their will must be presented to the surrogate, that elected official charged with overseeing the probate process administratively. Unless there is a dispute over the will’s validity, there is no need to appear before a judge. The will is accepted and the executor named in it is appointed as the official representative of the estate, charged with gathering the assets together, paying the debts and taxes if any and distributing the assets according to the instructions in the will. It’s a very easy process. However, the estates of New Jersey residents are potentially faced with 2 types of taxes after death – New Jersey inheritance tax and estate tax. To insure that the tax is paid, the State has put in place something called a tax waiver system. Here’s how it works. By law, New Jersey requires financial institutions to freeze ½ of the
Estate Planning – Changing as We Age (Part 2)
Last week we were talking about how estate planning and what’s in your legal documents need to change as you age. Our hypothetical couple, Jack and Diane, have reached their 60’s. The focus of their plan needs to shift to what we call senior estate planning. One of the big issues that Jack and Diane must face is the specter of long term care. How do they pay for it without running out of money or seriously depleting their savings? Much of this blog is devoted to that topic. But what about more traditional estate planning – answering the questions, “what happens if I die?”. “How do I pass my assets on to my loved ones while paying as little as possible in estate taxes?” Many people mistakenly believe they don’t need to worry about estate taxes because a few years ago Congress raised the federal exemption – that amount of money that can be passed free of estate taxes – to $5,000,000 (now $5,430,000 when indexed for inflation). What they don’t realize is that New Jersey’s estate tax kicks in on estates greater than $675,000. New Jersey also has an inheritance tax on amounts passed to heirs who
Estate Planning – Changing as We Age
When I ask someone if they’ve got an estate plan in place – the basics being a will, power of attorney and health care directive, often the response is “yes, we took care of that a number of years ago”. But, what many people don’t realize is that the plan you may have put in place 5 or 10 or 20 years ago most likely won’t meet your needs now. Why? Because as time, passes many changes occur. We change, our families change, our needs change. Nothing stays static. Especially in today’s fast paced technologically dominated world. Let’s take a look at a young couple in their 20’s and 30’s, we’ll call them Jack and Diane, In those early years, the estate planning focus is on support for the surviving spouse and young children, typically with a heavy reliance on life insurance. In the event both Jack and Diane die, who will be guardians of their young children and who will manage the money left for their benefit? This is typically done thru the use of minor trusts. In the early stages of growing their assets, there is less of a focus on estate taxes. As Jack and Diane
A Special Needs Plan Gone Wrong (Part 2)
Last week I was telling you about Bob’s call. Dad’s will left everything to Bob and his brother Sam. According to Bob, they had conversations with his dad about setting up a special needs trust for their disabled sister, Sally and transferring her 1/3 share to that trust. When Sam reneged on that agreement Bob didn’t really have a good option. Going to court to try to enforce a verbal agreement is costly and not likely to get the result he wants. Since Dad isn’t alive to support Bob, it is Bob’s word against Sam’s. So, where did they go wrong? What his dad should have done is make his wishes clear in writing by way of his will. It would seem obvious, but to be clear, no one can know for sure what your wishes are after you die unless you put them in writing. As we can see with Bob and Sam, wishes stated verbally can’t be proven later on if there is a dispute. Court intervention is costly, time consuming and likely to get an unsatisfactory outcome. That’s why the law has established a process to carry out those wishes. It’s called a Last Will and