If you're worth more than a one million dollars in assets, it's time to talk to a lawyer to set up a trust that will own your insurance to avoid paying too much in estate (death) taxes.
I'm of course not giving specific legal or tax advice, you need to consult in person about specifics. I'm just pointing out a potential need many think they don't need to address. The tax laws will change again in 2013.
When you read the article, replace "farm" with the name of your business, and "farmer" with "business owner".
Read below:
Top Estate Planning Mistakes Farmers Make - Part 2
(www.AgWeb.com) - Mar 09, 2012
Continuing our post from yesterday:
- "I am worth less than $5 million, so who cares?" Well, for one thing, your spouse might care. We have a new estate planning opportunity called portability which allows the unused estate exemption to be transferred to the surviving spouse. Let's assume you passed away in 2011 worth $3 million. If you did not file a return, the extra $2 million is permanently lost. So if your spouse dies in 2012 suddenly worth $7 million (especially if you left her everything in a "I love you" will), she would owe $700,000 of estate tax that she did not need to pay. Many farmers forget to include life insurance that they own in their calculations. They might have an estate of $4 million, but $2 million of life insurance. They think they are worth only $4 million, when they are really worth $6 million.
- Lack of Liquidity -- Farmers are great at creating nonliquid net worth (farmland, equipment, etc.), but not as good at creating liquid assets to pay estate taxes. Do you know how much your estate is going to cost your heirs and where the money is coming from? Will it negatively impact the farm operation?
- Proper Ownership of Life Insurance -- If you own or control the insurance, it is included in your estate. Have you considered setting up an irrevocable trust to own the insurance? This gets the proceeds out of your estate and provides liquidity for the estate or income to your spouse for his or her lifetime.
end of blog
Click here to read original blog.
Consult with a Farmers Insurance agent such as myself to make sure your life insurance and income protection needs are met, and that you minimize taxes at the same time.
Other life Insurance themed blogs:
Charitable Giving with Life Insurance.
Life Insurance is Income Protection.
Remembering your Church with Estate Planning.
The greatest need: Single Parents.
Families with Special Needs Children.
British Royal Marine spends a message with his life insurance.
Advanced LUTCF Training for Platinum Elite Team Members.
Life Insurance Awareness Month & Lamar Odom.
The Romance-O-Meter: Insure Your Love.
Taking care of your children...and furry dependents.
* The content of this blog is for informative purposes only. It does not reflect official standing of any agent, agency, or company mentioned on the blog. Nor is this blog necessarilly an endorsement. Please consult with your insurance, tax, or legal specialist before making any decisions. This blog is purely meant to spark the thought process.
