RetirementHomes.com - insurance

Don't be surprised by unexpected funeral costs

aadmin — Fri, 13 Dec 2013 11:41:36 +0000

In 2011, an estimated 5.0 million Canadians were 65 years of age or older, a number that is expected to double in the next 25 years to reach 10.4 million seniors by 2036. By 2051, about one in four Canadians is expected to be 65 or over.

The story is the same in the U.S. The elderly, who comprised only 1 in every 25 Americans (3.1 million) in 1900, made up 1 in 8 (33.2 million) in 1994. The elderly populations will more than double between now and the year 2050, to 80 million. By that year, as many as 1 in 5 Americans could be elderly. Most of this growth should occur between 2010 and 2030, when the "baby boom" generation enters their elderly years.

Over the last several decades there has been a huge increase in the number of people who are prepaying their funerals. Seniors in ever increasing numbers are making the decision to ensure that even if they outlive their assets, the burden of paying for their funeral will not fall on their families.
Not all methods of prepaying a funeral are created equally; there are several ways to prepay your funeral.

At one time, the only way to prepay a funeral was to go into a funeral home and make a lump sum payment. The funeral home would deposit the money in a bank account, held in trust, the interest earned on that money would pay for future increases in the cost of the funeral. So in essence, the cost of the funeral is guaranteed.

There are costs, however which are not guaranteed, which are known in the funeral industry as disbursements, such as newspaper notices, flowers, luncheons, opening and closings on burial lots, etc. As a result, the complete cost of the funeral is not covered, and those costs not guaranteed will likely continue to rise over the years.

The low interest rate environment we have been living with for several years has turned this method of prepaying a funeral on its head. Funeral homes are finding that their costs are rising faster than the return that the invested funds are yielding. The Final Needs Planning Program has the perfect solution to this problem. Our insurance-based funeral prepayment plan is designed to grow with interest, which helps absorb increasing funeral costs.

All seniors and soon-to-be-seniors are concerned about preserving their capital, so the Final Needs Planning Program allows for monthly payments to be made. The plan is insured immediately in most cases, which means if death occurs before all the payments are made, the funeral costs are still looked after. The plan allows families to take out extra coverage to ensure that their loved ones are not burdened by unforeseen bills.

The Final Needs Planning Program can be used anywhere in the world, and is ideal for people who are planning to move upon retirement and do not want to be tied down to a specific funeral home. The Final Needs Planning Program also provides coverage, in the event a death occurs while outside the country.

All arrangements are taken care of, including paying all the bills to repatriate the remains. This, plus a service which takes care of all of the paperwork including cancelling credit cards, licenses etc., is the reason that the Final Needs Planning Program is considered to be the premier funeral prepayment plan in Canada.

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Insurance

Giving the charitable gift of a lifetime

aadmin — Wed, 25 Sep 2013 07:50:11 +0000

Often when you hear a person asked what they want to do are asked about what they would do with lottery winnings, he or she mentions giving to a charity, school or hospital that is important to them.

When asked about retirement and estate planning, however, the same person may be reluctant to commit to a sizeable donation while balancing a retirement budget and an estate plan that leaves something for their families.

Donating a life insurance policy as a charitable gift can ensure you leave a legacy to a cause important to you, without detracting from what you leave for your loved ones.
And you can feel good about both the donation and the tax benefits it provides.

How it works

You can gift a whole life or permanent insurance policy, either by making the charity the owner and beneficiary of the policy or gifting the death benefit through your will. Each strategy has its own benefits and tax advantages provided the donation is made to a registered charity. In both circumstances, you are the insured person under the policy, you pay the insurance premiums and the death benefit goes to charity.

Gifting the policy

Either a new policy with you as the insured or an older policy already in force can be assigned to the charity of your choice. By assigning the policy to the charity, the charity becomes both the owner and beneficiary of the policy.

You continue to pay the policy premiums and those premiums are considered to be a donation, giving you an annual tax deduction.

Gifting the death benefit

When you remain the owner of the life insurance there is more flexibility in how you donate the proceeds of the policy. You can either name the charity the beneficiary, or name your estate the beneficiary and leave instructions in your will for donating the death benefit . Maintaining ownership allows you to change where the death benefit will go in the future if necessary or split it between two charities.

With this arrangement you do not benefit from tax deductions while paying the premiums. Instead, when the death benefit is donated your estate receives the deductions to offset any final estate taxes owed.

It is common for institutions and charitable organizations alike to have legacy programs in place for assisting potential donors. Work with your advisor or accountant to determine what strategy best suits your needs and goals.

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How to choose an executor of your estate

aadmin — Tue, 25 Jun 2013 13:30:22 +0000

When drafting your will, who the executor of your estate will be is as big a decision as who your beneficiaries will be. The role of the executor is to look after all aspects of your estate and may be involved in everything from organizing a funeral to informing beneficiaries, protecting the estate’s assets and distributing them to fulfill your tax obligations and carry out the provisions of your will.

Be clear in your will

The executor’s role is to follow your wishes and instructions laid out in your will, so be clear. The less there is open to interpretation, the less possibility there is of delays or confusion. It is also helpful to keep a list of where all of your bank accounts, insurance policies, mortgage or title documents and safety deposit boxes are. Less guess work means a faster and easier resolution. “It is difficult to stray from the terms of the will,” explains Toronto Lawyer Nigel Watson.

You don’t need to choose a professional

Watson says people mistakenly think they need to hire a professional to be their executor. Your executor will be working closely with a lawyer who will be knowledgeable in the area, so for the majority of estates it is not necessary to pay the high fees associated with going through a trust company or other financial institution. He explains that executors are entitled to charge a fee, generally about 5%, however many family members acting as executors do not. There are also many banks that offer free downloadable kits to help executors get organized, making the process easier to manage for an executor with no legal background.

You do need to choose a contingent executor

It is always a good idea to choose a contingent executor when drawing up your will. If something happens to your executor while are able to change your will, you will have more time to appoint a new executor. As well, if something happens to your executor while your estate is being dealt with, there will be a smooth transition.

Ask your executor first

Although many people consider being named an executor an honour, others shy away from the role. Your choice for executor has the right to refuse or renounce the responsibility. You can ensure the job is easier, and your wishes are acted upon, by putting together a list where all of your bank accounts, insurance policies and safety deposit boxes can be found. Having that information with your will can make the process smoother.

You can choose more than one executor

While you can joint executors, it is not always wise to do so. Watson points out that all of the decisions will have to be approved by both executors, so it is important to choose people who are willing to work together. Be wary of choosing more than two executors, as sometimes parents of three or more children are tempted to do to avoid hurt feelings. It can be difficult for everyone to come to a consensus, especially during an emotional time.

Stay Current

When updating your will, don’t forget to look at your choices for executor and contingent executor. Just as your situation changes over time, the situation of your executor may have changed as well.

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What comes to mind when you think of life insurance?

aadmin — Wed, 29 May 2013 14:11:44 +0000

What comes to mind when you think of life insurance? You are likely thinking of paying final expenses and funeral costs and not what you can do with your insurance policy while you are living. A whole life insurance policy, either a universal life or participating policy, can also benefit you and your family while you are alive.

Many permanent life insurance policies have a cash value that can grow tax deferred over time, taxed only when withdrawn from the policy. Here are three things you can do with a whole life insurance policy, whether you are looking to access the values of a policy you already have or want to make a new policy part of your retirement or estate planning.

1. Supplement your retirement income

You can combine planning for your retirement income and your insurance needs with a whole life policy. In retirement you can assign the policy to a lending institution as collateral on a line of credit and withdraw values from the policy as needed. The death benefit still remains in place and upon the death of the insured any outstanding balance and interest is paid to the lender and the remaining goes to the beneficiaries.

2. Take out a loan

Access the cash values through a policy loan. Interest is then charged on the loan within the policy, but the policy cash values (and death benefit for applicable policies) continue to grow as if no money was withdrawn. The loan can be repaid at any time without penalty. If the insured dies while a policy loan is outstanding the loan and interest outstanding are taken from the death benefit and the rest is paid to the beneficiaries.

3. Help fund a child’s or grandchild’s education

If you have saving for college or university for a child or grandchild in mind, there is an opportunity for several years of tax advantaged growth in the cash value of a policy, by owning a policy where a child is the life insured. When it is time to pay for post-secondary education, ownership of the policy can be transferred to the insured and, similar to a Canadian RESP, taxes are paid at the student’s tax rate when money is withdrawn.

If the child does not want to use the money for school it can instead go to a down payment on a home, the purchase of a car, the start of a business or continue to grow untouched in the policy. Funding a policy in this way can be a tax advantaged strategy for wealth transfer whether or not there is a specific savings goal in mind, while insuring the child for the future at comparatively low premiums.

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Guaranteed income products are not a guaranteed fit

aadmin — Fri, 10 May 2013 16:01:49 +0000

We’ve all seen the commercials – happy and fit retirees living lives free of financial concern because they solved their retirement income problems. These products, often referred to as guaranteed minimum withdrawal benefit (GMWB) products, combine the guarantees of an annuity with insurance benefits and the potential to realize benefits from being invested in the market.

The basics:

You make an initial investment in segregated funds and a percentage of those funds, usually around five percent, are guaranteed to be paid out annually for life.

As the money is invested in segregated funds in the market, there is the potential for that initial investment to increase in value.

For investors approaching retirement that saw what the market turbulence of 2008/2009 did to the retirement plans of people they know, these plans can deliver peace of mind.

You know exactly how much money you will be guaranteed and can manage the rest of your finances accordingly.

Insurance Perks

If you are able to leave your investment for some time, without withdrawing income, you are eligible for bonuses that increase the percentage of income you are entitled to withdraw in the future. The earlier you can put money in and leave it untouched, the higher level of income you will be entitled to receive when the time comes. These bonuses stretch your potential income regardless of market performance and make these products ideal for boomers who are still a few years off from retirement and can leave the money in place without it affecting their current lifestyle.

Over time, if your investment has gone up in value, there are reset opportunities to increase the amount which is used to calculate your income entitlement, giving you more income. If the investment goes down, however, your annual guaranteed payments do not change.
As they are insurance products, you can name beneficiaries who are guaranteed to receive a death benefit of at least the starting investment minus any withdrawals, regardless of the market performance.

To consider:

These products are meant for the long term retirement income, so look at all aspects of your potential retirement savings and assets before investing. Each company has their own stipulations on unscheduled withdrawals and penalties. As well, once you begin taking the income, you cannot stop taking the income to accumulate further bonuses.

As well the built in insurance features to these products come with higher fees when compared to other investments, and your segregated fund investment options are limited.

When contemplating a GMWB, make sure the guarantees and features of these products work with or enhance your personal situation. Everyone wants a secure retirement, just like in the commercials, but GMWBs may not be the way for everyone to have one.

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Will myths keep your last wishes from coming true

aadmin — Wed, 17 Apr 2013 12:08:51 +0000

Whether you think your will is out-of-date or up-to-date, if any of the statements below sound like things that you have been saying to yourself, it is time to take another look at your will.

“I am married. Everything is going to my spouse anyway, I don’t need a will.”

Nigel Watson, a Toronto lawyer who has specialized in real estate, wills and estate law for over 40 years, says that a common misconception is that married couples with joint property believe that only one of them needs a will.

According to Watson, the biggest potential problem with that is the couple “overlooks the possibility of them dying together.” For a couple’s joint property and each individual’s assets, having a will means there is a plan in place no matter who dies first.

“I named an executor. That should be fine. ”

Make sure that when you name an executor for your will, you also name an alternate executor.

Over time, things can change and you may not be able to react right away if something happens to someone named in your will, so make sure when naming beneficiaries you also name alternate back-up beneficiaries. As well, if your children are under the age of 16 make sure to include guardians and alternate guardians as well.

“I can write this new will by hand and you can witness it for me.”

Watson explains a handwritten will, known as a holographic will, is only legal if it is not signed by any witnesses. As for a typed will, it requires the signatures of two witnesses, neither of whom can be named beneficiaries in the will.

“I don’t need to redo my whole will. I’ll just change that part and initial it.”

Changing a beneficiary by a line through a name or writing in a different dollar value, is not a change that will legally hold. According to Watson, altering a section of your will, without it being done properly and officially, will render the whole section invalid, and neither your original nor your updated instructions will be followed.

“My funeral plans are in my will, so all of my wishes will be followed.”

Watson says he has seen people want to include very elaborate funeral plans in their wills, but even the simplest of wishes may not be followed if they are only written in your will. It is likely your executor will not see your will until after your funeral. Make sure your executor or family knows about any requests beforehand. Similarly, if you have made any prepaid arrangements, be sure someone knows about them and where you store your documents.

“My do-it-yourself will has everything a lawyer’s will does.”

Watson warns that many will kits that are readily available online and in stores are missing an important element, clauses that give the power to named individuals to sell your property after your death, including real estate and stocks and bonds.

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A short look at long-term care insurance

aadmin — Wed, 03 Apr 2013 12:01:11 +0000

As we so often hear, people are living longer and longer lives, and able to survive illnesses that would have been fatal not long ago. However, living longer than expected, even while remaining healthy, can be a strain on retirement savings, and an illness or chronic condition that requires extended care will quickly deplete those savings.

If you are willing to put some current savings dollars toward insurance premiums, long-term care insurance can make your retirement more secure, no matter what health challenges you may face.

What is it?

Long term care insurance pays a benefit towards the costs of home care or facility care when you need it. Once the qualifying conditions are met, the long term care benefit is paid out over time, up to the policy limits, daily, weekly or monthly. Every carrier’s policies are slightly different, so look for one that best suit your needs and budget.

Home and facility care can stand alone or can be combined. A plan with both home and facility coverage can take you through different stages as your care needs may change over time. You can choose the length of the benefit period, either to be paid for a certain number of years, your lifetime, or in some cases up to a maximum benefit dollar amount.

Premiums can be paid for the length of the policy until a claim is made, or for a set number of years so that the policy can be completely paid up long before you need the care. Premiums can be kept lower by opting for longer waiting periods or choosing a shorter a benefit period. And as with all insurance, the younger and healthier you are when you apply, the lower your premiums will be.

No one can know exactly the amount of care they may need, or for how long, and claims may be decades away. To offset some potential “what ifs….” additional policy riders are available. Riders can be added to ensure the benefits rise with inflation or to return eligible premiums if you die before making a claim. Some insurance carriers provide shared coverage, where there is a maximum benefit available to a couple, so a greater portion of the benefit can go to one person if he or she needs it.

Who is it for?

The short answer is everyone. Long term care insurance may be particularly helpful for individuals who have little or no pension or guaranteed income in place for their retirement years. It can provide stability to offset retirement savings and may enable you to preserve your savings or keep assets including your home.

If you know that you will be faced with providing care for parents, grandparents or another family member in the future, a long term care policy is a step to secure their future care without jeopardizing your future finances. Paying, or sharing in the payment of a policy with siblings or the insured makes paying for care a small predictable expense now compared to a larger, more difficult expense later.

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Having "the talk" with your parents: A How-To Guide

aadmin — Mon, 18 Mar 2013 14:38:41 +0000

Thought the days of uncomfortable conversations with your parents ended in high school? Think again. Although it may seem difficult to bring up subjects of money, retirement, sickness or death with your parents, it is the time to discuss the facts of life with them again -- the financial and practical facts of what they have planned for their future, as well as what they want and expect.

While you may think, “I don’t need to do this now; my parents are healthy and active,” it is far easier to talk about finances, health issues and final arrangements now than to deal with a crisis unprepared.

Not sure where to begin? Here are some conversation starters:

Wills – Is there a will? If there is, when was the last time it was updated? Who is the executor? Divorces, deaths, and grandchildren are all changes that when not up to date in a will can cause issues from hurt feelings to legal difficulties.

Life insurance – Do they have life insurance policies? How much are the policies for? What company are the policies from? Life insurance is meant to make the difficult time following a death easier; however, misplaced policies or outdated beneficiaries can lead to delays and disputes.

Final arrangements - While you do not need to choose who will be saying the eulogy yet, find out if any final arrangements are made. Have any services been prepaid? Is there a cemetery plot? Would they prefer cremation?

Health and Lifestyle - Even healthy seniors may be looking to change their lifestyles by downsizing or moving to an apartment, condominium or seniors’ community. If one parent or both parents become ill, would they ideally stay in their home or look to assisted living elsewhere? Who has power of attorney if it becomes necessary? Is there a living will in place to help guide loved ones in making difficult decisions?

Are there enough retirement savings, pension benefits in place to take care of costs, or do they plan to sell assets such as their home? Is there any long-term care insurance in place?

While talking may bring up as many questions as answers, one day your kids may be sitting you down for the talk, so stay open and honest and try not to roll your eyes as much as you did in high school.

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