Tag Archives: legal

My Monkey Mind-Irrevocable Life Insurance Trusts (ILIT)

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My monkey mind postings relate to Buddha’s description of the human mind as being filled with drunken monkeys, jumping around, screeching, chattering, and carrying on endlessly. These postings come from my monkey mind.

Something which happened about 10 years ago has been in my monkey mind.  I guess listening to my friends talk about elderly parents must have triggered it.  So here goes….

As part of my financial services business I had a listing in the Yellow Pages under resources for women.  It was the best I could do since there wasn’t a separate listing for women and finances.  The result was unexpected.  I received random calls from women in difficult life situations ranging from physical abuse, unwanted divorce, requests for money to start  businesses, and sometimes just a reality check on some financial decisions a spouse or significant other had made without checking with the woman.  After these calls continued , I became a connection between these women I never met to non-profits, social services providers, free legal advice, and government agencies who could help.  I learned a bunch of things which reached beyond financial advising.

One day I received one of those calls from an elderly woman who asked me what the difference was between term insurance (no cash value) and universal life insurance (which has a cash value).  The real reason for the call had to do with the fact that her late husband had established an Irrevocable Life Insurance Trust (ILIT) with a cash value policy and she thought he had made a bad decision.  I was curious to hear all the details so I went to visit with her.

In my Financial Freedom Party for Women®, A Little Book about Money for Women, Workbook Edition, I cover the differences between term and cash value policies.  To put it in a couple of sentences, term insurance is a very cost-effective way of getting life insurance and is appropriate for most people.  The premium goes towards the insurance cost and the policy runs for a certain period of time, such as 10, 15, or 20 years.  A policy with a cash value, such as universal life or variable universal life is more complicated and more expensive.  Some of the premium goes to the cost of insurance and some goes into investments offered through the insurance product.  The policy is considered to be “permanent” life since it is not restricted to a certain length of time.  My experience is that these policies (UL and VUL) are often considered upon guidance from an estate planning attorney when creating ways to provide for beneficiaries and reduce estate taxes.  This is a very generalized overview and to learn more please ask your insurance agent or do your own research on-line.

The control of the ILIT rests with a trustee, not the beneficiary (in this case the lady who called me).  This is done because of the estate tax benefits.  You can learn more by clicking here.  As with most people, she did not like knowing she had “all this money”, yet couldn’t access it when she wished.  I came to learn that was part of the plan.

I shared this insight with the lady. Apparently I was the first person she met who sat down and explained to her how this ILIT all worked. I was also the only woman advisor/insurance agent she had ever met.  She found me through my Yellow Page listing.

I learned that she was unhappy because the ILIT controlled her spending.  She had to ask a young man( who was the trustee) for any money which was needed  in addition to the monthly payment which had been established.  The goal of the plan was to keep her from running out of money.   I learned that her ILIT  did contain a universal life policy, the trust was created by an attorney with involvement by the now-deceased husband, and seemed to be in good order and in her best interest.  The things the trustee had told her were true, if she did not control her spending, she ran the risk of outliving her money.  In this situation, the planning was really in her best interest and when we finished our discussion, she, for the first time, realized it.  We talked about other ways for her to finance the expenses she wanted to incur including having a roommate in her spacious home, moving to a smaller one, or cutting expenses elsewhere.

I never heard from her again, but I learned a lot.  I saw how the appropriate cash value life insurance policy can be an integral and useful part of estate planning and a way to take care of beneficiaries upon the death of the insured.  My passion for working with women to understand their finances was re-kindled.  I knew that if someone had taken time to speak to this lady in language she could understand, her life would have been much better.  Sometimes financial professionals forget that it is not all about the numbers,  it is about how the numbers improve the lives of clients and getting the  clients to understand that.  It also reinforced my belief that the best time to learn about finances is not when your spouse or family member has died and not there to explain things.  Learning the fundamentals as a young person will make things a lot easier throughout her or his lifetime.

This event has stayed with me.  My insurance career involved term life insurance and that worked well for my family and clients. The ILIT was a good example how a cash value policy can be beneficial in estate planning and for beneficiaries who may need some additional structure and measured control over assets.  Each situation is different and this posting is not intended to provide you with personal advice on your estate planning, financial planning, or insurance needs.

Until next time.

Debra Hadsall

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www.financialfreedomparty.com

www.ffptalk.com

Begin with the End in Mind-Rhonda’s Rules

Some of my postings under Begin with the End in Mind have been about life insurance and end of life documents. The focus has been on organizing  personal affairs to make it easier for those you leave behind.

I never thought that I would hear about the importance of these things while watching  Wendy Williams interview a guest on her show.  Wendy is a fun, engaging and intelligent talk show host, but the subject matter is not normally about finances and personal legal matters.  I listened intently as she interviewed  Star Jones about a movement  Star has started called Rhonda’s Rules, A Women’s Guide to Getting Her Affairs in Order.

I hope you will  click here and learn more about Rhonda and the important information we all need to consider to help those we leave behind. It is a compelling story and the information Star shares is really important.  Star tells us that only 40% of women in this country have wills.  Are you in this 40%?

Be confident and proactive, even if it is a little work to create and maintain your own personal “Affairs in Order” notebook.  Call your best friend, ask if she has her personal affairs in order.  Team up and hold each other accountable.  When you finish give yourselves a reward by going to the movies or lunch or  heading to your favorite spot for a glass.  It is work, but so worth it and so worth celebrating the feeling that you have done all you can.

Until next time.

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Debra Hadsall

www.financialfreedomparty.com

blog at www.ffptalk.com

Wills and End of Life Documents

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When I used to meet with financial services clients and potential clients, the first thing I would ask is “Do you have a will or wills?”  Many couples assume they will have a joint will.  Not true, a will reflects the wishes of an individual.  Sometimes the answer was “yes”.  More often the answer was “no”.  Those saying “no” would add something like:

  • It is too expensive.
  • We have a software application for wills, just need to get find time to learn the system and get it done.
  • It’s on the list of things to do but first I need to get through Christmas, graduation, school, or wait until I have a vacation, or……
  • We can’t agree on who should be responsible for our children if we both are deceased and we don’t want to upset family members with our choice.
  • I don’t believe in wills.  No need for one, everything will work out.
  • I know I need one but I think if I get one then somehow it means I will die earlier.
  • Death is just too emotional to think about and preparing a will  just makes me nervous.
  • I think I need a trust and that costs a lot so I will wait until I save up some money and then get the trust, will and all the other documents at the same time

Clearly expense is the most often mentioned reason for the lack of a will.  However, there are now very affordable and reliable methods of having a professionally prepared will created and finalized.  With a little research you can learn more.

I have no brilliant  and happy way of encouraging people to get wills.  As I said in earlier posts, wills and life insurance (if needed) are two things we do for those we leave behind.  So rather than thinking about how having your will and other end of life documents prepared and executed impact you, think about the other folks in your life.  How will your actions reflect on you after you are gone?

In my book, Financial Freedom Party for Women, A Little Book about Money for Women, I state that it is estimated that 55% of the people in the U.S. do not have wills.  Or, on a positive note, 45% do have them.  In which category do you find yourself?

I found this article from Huffington Post to be a great example of how things can go a little crazy if the proper documents aren’t in place when a family member dies.  Please take the time to read it.

I hope you will share this posting with those in your life.  Some people appear to be very literate about personal financial management, are highly successful professionally, or seem to have it all together.  That doesn’t mean they have all their legal documents in place.  You could end up sorting out things you thought would be in order.  Happens a lot and it is not a good big surprise. So be brave and check in with those around you and see if they are a 55% or 45% person.

Soon we will be moving beyond end of life documents such as wills, and on to more exciting topics like finance (aka investing).

Until next time.

Debra Hadsall

logownedy (2)

www.financialfreedomparty.com