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Can I Benefit from a Reverse Mortgage?

Can I Benefit from a Reverse Mortgage?

It seems that we can’t turn on the television or radio without hearing an ad for a “reverse mortgage.” So what is a reverse mortgage exactly, and who can benefit from using one?

A reverse mortgage is a type of loan taken out against your home. With a reverse mortgage (as with a traditional mortgage) you are borrowing against your home equity which is the difference between your home’s market value and the amount you owe on your mortgage. The difference in a reverse mortgage is that you do not have to pay it back while you are alive. Instead, the loan is paid off after you pass away.

What Are Some of the Benefits of a Reverse Mortgage?

Reverse mortgages can be a fantastic tool, depending on your goals. They can provide additional income and improve your cash flow, particularly if you have already paid off your home. Here are some reasons to consider a reverse mortgage:

  • They can help you maintain your financial independence by providing additional income;
  • They can allow you to stay in your home until you die;
  • For most people, the risk of default is low; and
  • They are not taxed.

One of the best things about a reverse mortgage is that the amount paid back will not exceed your home’s value.

What Are Some of the Disadvantages of a Reverse Mortgage?

As with any financial tool, reverse mortgages are not for everyone or every situation. Before you decide to take out a reverse mortgage on your home, you should consider the following potential disadvantages:

  • Interest costs are higher because you are making no payments;
  • The amount paid back after your death will cut into the estate left for your family or heirs; and
  • Because they are based on a formula, the amount you can borrow is lower than with traditional home equity loans.

Reverse mortgages can also be complicated and rather difficult to understand.

The bottom line is this: A reverse mortgage is one financial tool you can use to achieve your goals. However, before you commit to a large loan, you should make sure you understand all aspects of the loan. If you are not sure whether or not a reverse mortgage is right for you, talk with a trusted financial adviser or attorney.

This article is a service of Tara Cheever, Personal Family Lawyer.® I believe in developing trusting relationships with families for life. That’s why I offer a Family Wealth Planning Session,™ where I can explain financial management techniques and help identify the best strategies for you and your family. Normally, a Family Wealth Planning Session™ is $750, but when you mention this article and are one of the first three families to book an appointment this month, I’ll waive that fee. Call now to get started!

 

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Do You Have a Business Succession Plan In Place?

Do You Have a Business Succession Plan In Place?

As a business owner, you’ve taken on a big responsibility to your family, your clients/customers, your team and your partners. Most businesses are not sufficiently liquid to keep the company going and the owner’s family thriving, in the event of death. But with the right plan in place, you can ensure the people you care most about are well provided for if anything happens to you.

While facing death is not the most pleasant prospect, doing so can actually make your life and business a whole lot better. A life and death plan – also called a succession plan – for your business will ensure you have:

  • Enough insurance (and the right kind of insurance) to provide cash to keep your business going in the event of your death;
  • A written plan to designate who will run your business (or prepare it for sale), when you are no longer able to do so;
  • Documented access to your digital business assets so your business can continue to serve customers, collect payments and pay expenses;
  • A plan to keep your business (and your family) out of probate court, which is totally unnecessary and avoidable;
  • An updated inventory of your business and personal assets so nothing you own is lost to the State Department of Unclaimed Property and so your intellectual property is well-protected and capitalized upon;
  • The story of your business, written, video or audio recorded, so you can leave a documented legacy of the lessons and experienced you learned along the way.

With a succession plan in place for your business, you can rest easy knowing that if anything happens to you, the people you care about most — your family, clients and customers, your team and partners — will be well cared for, in just the way you want. The peace of mind which comes with that knowledge frees you up to focus on creating more income and a bigger impact now.

Creating and documenting a business succession plan is truly a win-win-win situation. If you are ready to set up yourself, and your business, and the most important people in your life to win, no matter what, we can help you accomplish just that. I’ll ensure you get from where you are now – no matter what stage your planning is in currently – to exactly where you want to be. That’s my commitment to you.

This article is a service of Tara Cheever, Family Business Lawyer®. I offer a complete spectrum of legal services for businesses and can help you structure your operations for success. One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate. This session is normally $5,000, but if you are one of the first three people to schedule, I’ll take you through the entire LIFT Start-Up™ process for half that investment. Call me today to schedule a time to have a conversation!

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How Does My Annuity Fit Into My Estate Plan?

How Does My Annuity Fit Into My Estate Plan?

Selecting the right type of annuity for yourself is no small feat. Of course, you’ve put in the research and planned with your financial advisors. But, you might still be wondering what happens to those annuity payments upon your death.

In addition to their benefits as a financial tool for your goals, annuities can have a positive impact on your beneficiaries after you’re gone — but only if you take smart estate planning steps to make sure your wealth ends up in the right hands.

Types of annuities

Your annuity type affects how things pan out after your death. In some cases, annuities end with the death of the annuitant. In other cases, the annuity payments continue to be distributed to a named beneficiary. If you haven’t already named your beneficiaries, it’s crucial that you don’t wait any longer. Make sure to work with me when naming your beneficiaries because you’ll want them to be coordinated with your will or trust.

  • Immediate vs deferred: You may have chosen an immediate annuity, which begins paying out as soon as your initial investment is made. This is a common choice for those nearing retirement or those looking to secure long-term income after a windfall like an inheritance or the sale of a business. However, many people opt for a deferred annuity and don’t begin receiving payments for some time. Deferred simply means that it begins paying out at some point after the initial investment.
  • Fixed-period or lifetime: A fixed-period annuity only lasts for a predetermined amount of time (such as 20 years). A lifetime annuity pays out during the annuitant’s life, and these are commonly purchased for the lives of both spouses.
  • Fixed-sum or variable: Within both immediate and deferred annuities, you’ve likely selected either a fixed-sum payment schedule or fluctuating payments depending on the performance of your investments in the market.

Why you need to name your beneficiaries explicitly

It’s easy to think that including your loved ones in your will or trust is enough to cover your annuities as well. But if you want your children, spouse, or other individuals to receive your annuities when you’re gone, you need to fill out paperwork from your financial advisor that names those people as beneficiaries. Otherwise, your annuity sums could end up going to people you don’t want to leave your legacy to.

Annuity death benefits

There are a few different ways you can build death benefits into your annuity plan so that your wealth is passed on to your beneficiaries once you’re gone.

  • Standard death benefit: The value of the annuity at the time of your death is passed to your beneficiary.
  • Return of premium death benefit: Either the current value or the amount of the initial premium (whichever is greater) is distributed to your beneficiary.
  • Stepped-up death benefit: The highest anniversary value is distributed to your beneficiary.

In each of these cases, your beneficiary can decide if they’d like to receive this payment as a lump sum or over a period of time. With so many options, it’s a good idea to discuss an annuity with me, an estate planning attorney, before you sign up for one. Your financial advisor works with you to make sure the annuity fits your financial goals and I can work with you to make sure it works with your estate planning goals. If you already have an annuity, it’s important to make sure it’s taken into account with the rest of your estate plan.

Annuity taxation

It’s rarely uplifting to consider how much of your annuity value will be lost to taxation before being handed over to your beneficiary, but taxes are a fact of life (and estate planning). Your annuity will either be taxed as part of your estate (as an estate tax if you have a large enough estate) or as a disbursement to your beneficiary upon your death (as an income tax). However, in most cases, your spouse can continue to receive annuity benefits or inherit your annuity with little to no tax burdens.

How your estate planning attorney can help

As with many estate planning and financial issues, choices you make about your annuity can make a big difference for your loved ones. You want to make sure you’re setting your beneficiaries up with the right kind of death benefits with as little loss to taxation as possible. Give me a call today so we can review your current annuities and explore ways to get more out of them for you and your family in the long run.

This article is a service of Tara Cheever, Family Business Lawyer®. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why I offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling my office today to schedule a Family Wealth Planning Session™ and mention this article to find out how to get this $750 session at no charge.

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Planning for the Future (Without a Crystal Ball)

Planning for the Future (Without a Crystal Ball)

Creating a will, trust, or any type of estate plan has always involved dealing with an uncertain future. Consider that just 20 years ago in 1997, the estate tax had an astonishing 55% rate with only a $600,000 exemption. Back then, tax-driven estate planning was a mathematical necessity for a large segment of the population.

Fast forward to 2017. Not only do we now have a generous $5.49 million exemption and a lower 40% rate, we also have renewed emphasis and action from the President and Congress on repealing the estate tax, as evidenced by the September 27, 2017 Unified Framework for Fixing Our Broken Tax Code. So what does this mean for you, as you’re planning for the future?

Estate Tax Repeal Means No Need to Plan…Right?

Nothing could be further from the truth! Although there was a lot of tax-driven planning in the past, in recent years estate planning has largely focused on preserving family unity, protecting assets, ensuring privacy, and effectively passing along financial and emotional legacies.

And, for those with high net worth, it’s also worth mentioning that estate tax repeal isn’t a foregone conclusion at this point either. The Unified Framework still must be crafted into legislation that must pass both houses of Congress and then be signed by the President. Given the political division the country faces (and the likely stiff opposition to the President’s tax proposal from Congressional Democrats), this will be no small feat.

While we wait for Congress to act on the Unified Framework, it’s also worth noting that the estate tax was already effectively repealed for more than 99% of American estates when the exemption was raised to $5 million (and indexed for inflation) in 2010. The vast majority of estates fall below this threshold and need no special planning to avoid the estate tax. But don’t think you’re out of the woods because you have less than $5 million.

Today, the focus of estate planning has shifted away from death taxes to other concerns that affect most families. Estate planners, like me, can now work with you to protect you and your family against costly, public probate, guardianship, or conservatorship court proceedings and also further your legacy goals.

You might be worried about some of these things happening to your family:

  • A financially irresponsible child or grandchild wasting their inheritance simply because they lack the financial maturity to handle wealth.
  • A divorcing spouse of one of your heirs taking advantage of family wealth.
  • Family discord lurking under the surface that tears your family apart, especially after the death of the patriarch or matriarch.
  • A lawsuit, judgment, or bankruptcy that causes your family to lose their inheritance.
  • Alzheimer’s or another cognitive impairment affecting you or someone else in your family.

Luckily, I have well-developed, flexible legal strategies (such as lifetime trusts, standby special needs trusts, and robust incapacity planning, to name a few) for overcoming these issues. Although estate planning can’t necessarily repair a damaged family relationship, proper planning can help make sure it does not get any worse. But these strategies only work when we have a chance to work with you to implement or refresh your will, trust, and estate plan.

So, there’s no crystal ball. Where should I go from here?

According to WealthCounsel’s 2016 Estate Planning Literacy Survey, about 74% of Americans find estate planning to be a confusing topic. So, you’re not alone if you’re unsure about your next steps. I’m here to help.

If you don’t yet have a will or trust, now is the time to explore getting one. If you have an “old” will or trust, now is the time to talk with me about whether you need an update. Modern families need modern estate planning solutions, and I am ready to help you create a flexible estate plan that works now, and will work in the future, even if the current tax laws change (even though no one has the proverbial crystal ball).

This blog is a service of Tara Cheever, Personal Family Lawyer®. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why I offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling my office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

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