When people think about estate planning, they tend to start thinking about Attorneys and Trusts. Although trusts can be a very important part of an estate plan, they may not always be necessary. This will depend on how complex your situation is and what specific requests you may have for when you are gone.
Every year from January through April, there is a big crunch to get our tax returns done and submitted. We all know when the deadline is and what is expected of us to have them completed on time. The hard part of estate planning is that we don’t know when we are going to die so we must put plans in place many years, if not decades, prior to the actual day the plan fully comes into play.
It can be a concern for some if they have accrued a large amount of pre-tax dollars that may pass to their beneficiaries. When the SECURE Act was passed in December of 2019 it changed the non-spouse beneficiary rule, now requiring non-spouse beneficiaries to have all the Traditional IRA and 401k funds withdrawn within 10 years following the death of the account holder. This can put a large tax burden on your beneficiaries.
A life insurance policy can give your beneficiaries a tax-free lump sum of money to help pay the taxes on inherited IRA dollars or estate taxes. If you have a universal life policy that was issued in the 80’s or 90’s, there is a good chance that the policy will not last as long as initially intended. When they were sold, the illustrations were run with a higher interest rate based on the rates at that time, and expectations going forward. Unfortunately, the interest rates have been quite low for most of the 2000’s and are having a direct impact on the longevity of those policies. Many of the newer policies resolve this problem with a no-lapse provision that keeps the policy in place as long as premiums are paid.
Many are finding that to keep older policies in-force for their entire life, they may need to significantly increase their premiums now. Things may have changed over the years, since the policy was put into place, and it is beneficial to do a Policy Audit on a regular basis. The audit will include a complete review of the policy’s cost, performance, sustainability, and the proper coverage as estate values grow.
If you have old policies that have not been reviewed in a long time, or if you have concerns about proper coverage, contact our team at 920-236-6587 to get your personalized Policy Audit completed.