The preservation of a financial legacy in a efficient manner has always had its level of complexity due to the uncertainty of future transfer-tax laws which may tempt many people to put their wealth-transfer planning on hold. This can end up being costly to many families that our the fear of the uncertainty wait and decide for no action. However, strategies to pass wealth to future generations and to fund your desired missions can be put in place at little or no tax cost to the grantor.
The tax theme for 2012 is filled with uncertainty. There are concerns about whether the Bush-era tax cuts will expire at the end of this year. One of the main areas of discussion for this year are the estate tax, the
lifetime gift tax and the generation-skipping tax. Currently they are set at $5 million. However, unless there is a change to the law before the end of the year they will be reduced to $1 million. There are also concerns about increases in taxes on capital
gains and dividends.
This year will be critical in the implementation of wealth transfer strategies while the current law is still in effect. When the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
was signed into law, it reunified the gift and estate tax exclusions, enabling
individuals to transfer up to $5 million tax-free, which can be applied
either to lifetime gifts or to amounts passing at death through an
estate. The Act went even further by allowing for
“portability” between spouses, so any unused exclusion amount may be
transferred to a surviving spouse. Also, the Act increased the Generation Skipping Transfer (GST)
tax exemption to $5 million. Finally, any transfers above the $5 million has a top tax rate of 35%, instead of the previous top rate of 55%. As you can see, this year offers a opportunity to transfer more wealth tax-free and pay a substantially lower rate for transfers above the transfer limits.
Keeping a current wealth management plan is critical to protecting
wealth through changing tax environments. The following solutions offer
particular advantages under the current law for individuals who are
looking to tax-effectively transfer their wealth. Here are some tips for your consideration in 2012:
1. Make Lifetime Gifts - With the current higher transfer threshold available, more assets can be transferred tax-free. By transferring those assets now, any future appreciation of those assets will be removed from the estate as well. Here are a couple of ways to accomplish this:
* Utilize the annual gift tax exclusion - This is a simple way to transfer $13,000 to as many recipients ($26,000 for married couples) without reducing your $5 million threshold.
* Pay for others' medical and educational expenses - as long as the payments are made directly to the providers, this transfer of wealth does not count towards the $13,000 annual gift tax exclusion nor the $5 million lifetime transfer exclusion.
Note: Please remember that gifts are irrevocable. Gift decisions must be done after careful analysis and consideration: Are the beneficiaries ready to manage the gifted assets responsibly?
Will there be other beneficiaries to consider in the future? Are the
grantors comfortable living with their remaining assets?
Because future
tax law changes are always unpredictable, making gifting decisions
solely for tax reasons without considering family issues can result in
an undesired outcome, especially if future tax law is more favorable
than expected.
2. Use a GRAT - A
Grantor Retained Annuity Trust (GRAT) is an irrevocable trust that can
allow individuals to transfer the appreciation of assets to heirs free
of gift tax. GRATs are particularly attractive for individuals who have
assets they believe will significantly appreciate and who would like to
remove this appreciation from their estate.
The grantor transfers assets to the GRAT and, in turn, receives an
annuity paid from the trust over a specified term. Generally GRATs are
set up so that the annuity payments to the donor equal the amount of
assets originally transferred into the GRAT, plus an assumed rate of
return that is established by the IRS, known as the “hurdle rate” (this
technique is called “zeroing out”). At the end of the GRAT’s term, any
appreciation of trust assets that exceeds the IRS hurdle rate passes
free of gift tax to the beneficiaries.
Note: The environment for GRATs is especially advantageous because the IRS hurdle rate is just 1.4% (IRC 7520 rate as of February 2012). Since any appreciation above the hurdle rate amount transfers tax-free
to beneficiaries, the lower the hurdle rate, the higher the potential
amount transferred to beneficiaries.
3. Get to know more about Charitable Lead Annuity Trust (CLAT) - CLATs can be used to leverage your charitable contributions to shift wealth to family members in a tax-efficient manner. A CLAT can be funded either during the your life or upon death as a testamentary transfer. As a split-interest trust, a CLAT names two beneficiaries. The charitable lead beneficiary, receives a fixed annual annuity payment throughout the term of the trust. At the end of the trust term, the assets remaining in the CLAT are then distributed to one or more noncharitable remainder beneficiaries―typically the grantor’s children or family members.
Note: CLATs generally are more efficient as long-term vehicles; they tend to work far better in low-interest-rate environments, and should be well diversified.
When considering a CLAT three fundamental questions should be addressed; What is the optimal trust term? ; How should the assets be allocated?; Are they advantageous only in low-interest-rate environments?
4. Consider a Dynasty Trust - Some states will allow you to establish a trust that exist in perpetuity,
called Dynasty Trusts. The main attraction of these trusts is that assets placed in the Dynasty Trusts pass from one
generation to the next free of estate tax. Also, if individuals elect to apply their gift and generation-skipping transfer (GST) tax exclusion,
they will not be subject to gift tax when funding the Dynasty Trust.
The GST tax is a federal tax that was
designed by Congress in 1986, to prevent people from being able to avoid
paying estate taxes. Generally, as property is passed down from
generation to generation, an estate tax is imposed on the value of the
transfer. For many years, people were able to get around paying this
estate tax by instead of transferring their property to the next
generation, usually their children—they would “skip” this generation—and
pass it to the following generation, usually their grandchildren.
As part of the Obama
administrations Tax-Relief, Unemployment Insurance Reauthorization, and
Job Creation Act of 2010, the GST tax was taken away completely.
However, in 2011, the GST tax returned at 35% to the Bush tax-cut
levels; the GST exemption is inflation-indexed for 2012. However, as
scheduled, the GST tax will rise again to pre-2001 levels in 2013: A 55%
tax for any part of a transfer made that is valued at over $1,000,000.
Note: A Dynasty
Trust is most effective if grantors have not already depleted their GST
tax exemption. By allocating the GST exemption to the trust, the grantor
can avoid the imposition of significant GST taxes on distributions to
beneficiaries. Also, individuals who
made gifts directly to grandchildren in 2010 to take advantage of the 0%
GST tax rate must opt out of the automatic allocation of the GST tax
exemption on their gift tax return.
Like with all tax planning strategies, consult with your tax advisor about how to utilize the available vehicles to most efficiently transfer wealth to your desired destinations. With
current tax laws set to expire on December 31, 2012, now is a good time
to review your estate plan.
February 4, 2012
January 18, 2012
What are you busy about?
"It is not enough to ask why you are so busy. The question is, what are you so busy about?" - Henry David Thoreau
Most people will share with you with pride and puffing up their chest about how busy they are. As if being busy is something to be proud of and the goal. Being busy and being productive are two totally different things. Being busy without a clear vision will lead to wasted of time. Unfortunately that is a plague that has infected most people in the United States. Most executives will have 53 items in their to-do list taking space on a piece of paper as to satisfy their ego that they are doing something or as a way to prove their co-works "I am busier than you". Tasks in your to do list that don’t add value to your life or work are going to lead to frustration and wasted time. Are those tasks that are keeping you busy providing you a deeper sense of fulfillment and are they aligned with your values? Do they provide you joy and peace of mind?
Today is a good day to take a moment and reflect on the tasks you are performing and in the midst of your busyness ask yourself "what are you busy about?". Is there a better way, more efficient and less stressful way to accomplish my daily tasks? Being busy is ok when you are focused, grounded and calm.
Here are five tips:
1. Define your core values
2. Avoid Over-Committing
3. Learn to Say NO
4. Outsource, Delegate and Automate
5. Take a "Mini-Vacation" from the busyness and noise
Martin Luther King said that he'd never have accomplished what he did if he didn't spend three hours a day in prayer. How much time are you taking for prayer and meditation? Take a moment today and reflect on what is truly important for you. Take a moment and prepare a plan on how to accomplish the goals that will provide you and your loved ones joy, fulfillment and peace of mind.
January 16, 2012
Understanding Mental Health
Mental health is as important as physical health. Still, millions of Americans suffer with various types of mental illness and mental health problems, such as social anxiety, obsessive compulsive disorder, addiction to drugs and alcohol, and personality disorders. Mental illness and psychological disorders have good treatment options with medications, psychotherapy, or other treatments.
Mental health concerns everyone. It affects our ability to cope with and manage change, life events and transitions such as bereavement or retirement. All human beings have mental health needs, no matter what the state of their psyche. This book is written specifically for those who want to have an introduction to mental health, mental illness and mental health problems. It is written in simple language from a person that is curious about the subject and wants to share with you his research.
My curiosity about what makes certain people successful, drove me into the road of mental health. I am not an expert in the subject of mental illness ad treatments, thus before any actions to self-treat or self-diagnose your mental health status you should consult with a qualified physician who can properly diagnose and treat any potential mental illnesses. What became clear to me is that there is more to good health than just a physically healthy body: a healthy person should also have a healthy mind. A person with a healthy mind should be able to think clearly, should be able to solve the various problems faced in life, should enjoy good relations with friends, colleagues at work and family, and should feel spiritually at ease and bring happiness to others in the community.
Why should you be concerned about mental illness?
As mentioned earlier, our mental health affect how we perceive many aspects of our lives. It is an integral part of our whole health. There are many reasons why you need to be concerned about
mental illnesses.:
• Because they affect us all. It is estimated that one in five of all adults will experience a mental health problem in their lifetime.
• Because they are a major public health burden. Studies from nearly every corner of the world show that as much as 40% of all adults attending general health care services are suffering from some kind of mental illness.
• Because they are very disabling. Even though the popular belief is that mental illnesses are less serious than physical illness, they do in fact produce severe disability. They can also cause death, as a result of suicide and accidents.
The World Health Report from the World Health Organization in 2001 found that four out of the ten most disabling conditions in the world were mental illnesses. Depression was the most disabling disorder, ahead of anemia, malaria and all other health problems.
• Because mental health services are very inadequate. Specialists spend most of their time caring for people who suffer from “severe mental disorders” (‘psychoses’). These are quite rare, but are also the very diseases that the community associates with mental illness. Most people with the much commoner types of mental health problems, such as depression or alcohol problems, would not consult a mental health specialist.
• Because mental illness leads to stigma. Most people with a mental health problem would never admit to it. Those with a mental illness are often discriminated against by the community and even their own family.
• Because mental illness can be treated with simple, relatively inexpensive methods. This is the good news! It is true that many mental illnesses cannot be ‘cured’. However, many physical illnesses, such as cancers, diabetes, high blood pressure and rheumatoid arthritis, are also not curable. Yet, much can be done to improve the quality of life of those who suffer these conditions and the same applies to mental illness.
It is important to understand mental health so we can help ourselves and our loved ones. The stigma often associated with the many forms of mental illnesses is very real. For example, many people with bipolar disorder or other mental illnesses are afraid to share their condition with other people for fear of ridicule or judgment. The stigma is so real in fact many will avoid telling friends or family of their mental condition. Many people with bipolar disorder face stigma and discomfort from well-meaning friends and family members that don't really understand bipolar disorder. It is common for patients with bipolar disorder to feel misunderstood. Unfortunately even many health care providers carry with them a biased attitude toward bipolar patients. Many have a difficult time focusing on the real reason a person is in their office. Instead they focus on the mental health issue.
Here are some small steps patients and family members can take to help overcome the stigma associated with mental illness:
* Always accept your condition for what it is.
* Never attempt to hide your condition for fear that others will be un-accepting or misunderstand you.
* Educate friends and family. Direct them to a number of sites that help explain bipolar disorder and other mental illnesses. Great reference sites include the National Alliance on Mental Illness.
* Confidently explain that one if five people suffers from some form of mental illness or another.
* Remember that you are more an insider than you realize.
* One out of every five of your friends, acquaintances or associates likely suffers from some form of mental illness. -Use support groups to help bolster your self-confidence and promote your inner peace and well-being.
If you are interested in learning more about mental health, I have compiled an easy to read and understand e-book "Understanding Mental Health" were I cover types, causes, and treatments available.
===> Understanding Mental Health http://ow.ly/8tErj
Mental health concerns everyone. It affects our ability to cope with and manage change, life events and transitions such as bereavement or retirement. All human beings have mental health needs, no matter what the state of their psyche. This book is written specifically for those who want to have an introduction to mental health, mental illness and mental health problems. It is written in simple language from a person that is curious about the subject and wants to share with you his research.
My curiosity about what makes certain people successful, drove me into the road of mental health. I am not an expert in the subject of mental illness ad treatments, thus before any actions to self-treat or self-diagnose your mental health status you should consult with a qualified physician who can properly diagnose and treat any potential mental illnesses. What became clear to me is that there is more to good health than just a physically healthy body: a healthy person should also have a healthy mind. A person with a healthy mind should be able to think clearly, should be able to solve the various problems faced in life, should enjoy good relations with friends, colleagues at work and family, and should feel spiritually at ease and bring happiness to others in the community.
Why should you be concerned about mental illness?
As mentioned earlier, our mental health affect how we perceive many aspects of our lives. It is an integral part of our whole health. There are many reasons why you need to be concerned about
mental illnesses.:
• Because they affect us all. It is estimated that one in five of all adults will experience a mental health problem in their lifetime.
• Because they are a major public health burden. Studies from nearly every corner of the world show that as much as 40% of all adults attending general health care services are suffering from some kind of mental illness.
• Because they are very disabling. Even though the popular belief is that mental illnesses are less serious than physical illness, they do in fact produce severe disability. They can also cause death, as a result of suicide and accidents.
The World Health Report from the World Health Organization in 2001 found that four out of the ten most disabling conditions in the world were mental illnesses. Depression was the most disabling disorder, ahead of anemia, malaria and all other health problems.
• Because mental health services are very inadequate. Specialists spend most of their time caring for people who suffer from “severe mental disorders” (‘psychoses’). These are quite rare, but are also the very diseases that the community associates with mental illness. Most people with the much commoner types of mental health problems, such as depression or alcohol problems, would not consult a mental health specialist.
• Because mental illness leads to stigma. Most people with a mental health problem would never admit to it. Those with a mental illness are often discriminated against by the community and even their own family.
• Because mental illness can be treated with simple, relatively inexpensive methods. This is the good news! It is true that many mental illnesses cannot be ‘cured’. However, many physical illnesses, such as cancers, diabetes, high blood pressure and rheumatoid arthritis, are also not curable. Yet, much can be done to improve the quality of life of those who suffer these conditions and the same applies to mental illness.
It is important to understand mental health so we can help ourselves and our loved ones. The stigma often associated with the many forms of mental illnesses is very real. For example, many people with bipolar disorder or other mental illnesses are afraid to share their condition with other people for fear of ridicule or judgment. The stigma is so real in fact many will avoid telling friends or family of their mental condition. Many people with bipolar disorder face stigma and discomfort from well-meaning friends and family members that don't really understand bipolar disorder. It is common for patients with bipolar disorder to feel misunderstood. Unfortunately even many health care providers carry with them a biased attitude toward bipolar patients. Many have a difficult time focusing on the real reason a person is in their office. Instead they focus on the mental health issue.
Here are some small steps patients and family members can take to help overcome the stigma associated with mental illness:
* Always accept your condition for what it is.
* Never attempt to hide your condition for fear that others will be un-accepting or misunderstand you.
* Educate friends and family. Direct them to a number of sites that help explain bipolar disorder and other mental illnesses. Great reference sites include the National Alliance on Mental Illness.
* Confidently explain that one if five people suffers from some form of mental illness or another.
* Remember that you are more an insider than you realize.
* One out of every five of your friends, acquaintances or associates likely suffers from some form of mental illness. -Use support groups to help bolster your self-confidence and promote your inner peace and well-being.
If you are interested in learning more about mental health, I have compiled an easy to read and understand e-book "Understanding Mental Health" were I cover types, causes, and treatments available.
===> Understanding Mental Health http://ow.ly/8tErj
January 15, 2012
Life Insurance is NOT an Investment
Life insurance is not an investment, the purpose of life insurance is to protect your loved ones in
case of your premature death. The reason I am writing this short blog today is due the constant question which one is better Whole Life or Term Life? The best answer I can give is it depends. I do I have a problem with "gurus" who give their "infallible truth" about term insurance being the only way to buy insurance.
I understand that whole life is not the best option for everybody but neither is term life insurance. For example, if you purchased a ten year term, ten years ago and develop some medical condition and can no longer afford insurance then you wont be able to get a new policy. However, if you have a whole life policy then it doesn't matter as long as you continue paying your premiums. Life insurance is NOT a one size fits all solution. Ask any over 60 year old right now how the "Buy Term and Invest the Rest" strategy worked for them around 2008. Most of them right now sit with no insurance, since most of them are now uninsurable, and their investment portfolio are valued at a fraction of what it once was. In addition, they are not able to sell their home to cover the devaluation of their investment portfolio since the real estate market is still so low in the United States.
Both types of policies have advantages and disadvantages. There are never any absolutes in life and that is why it is important to discuss your specific situation with your personal financial services professional, who can in turn help you find the right product for your situation.
The problem is that most people listened and are easily impressed by “experts.” We drool for the "As seen in Oprah" type of "experts". Unfortunately in today's society we consider someone who who utters quick and "authoritative-sounding" responses to our questions as an expert. Most people consider a "know-it-all" as an expert. However, people forget that it is all marketing. It is about selling and it works. That is why we are willing to pay hundreds even thousands of dollars to attend the seminars organized by these "gurus". The question we all must be asking is, Is the "expert" giving advice that helps his listeners or advice that sells? If the "expert" gives advice that does not sell, no one listens.
We must come to a different understanding of what defines an expert. Many times the best expert is the one that is willing to say "I don't know". However, I don’t see too many of that type around nowadays.
I understand that whole life is not the best option for everybody but neither is term life insurance. For example, if you purchased a ten year term, ten years ago and develop some medical condition and can no longer afford insurance then you wont be able to get a new policy. However, if you have a whole life policy then it doesn't matter as long as you continue paying your premiums. Life insurance is NOT a one size fits all solution. Ask any over 60 year old right now how the "Buy Term and Invest the Rest" strategy worked for them around 2008. Most of them right now sit with no insurance, since most of them are now uninsurable, and their investment portfolio are valued at a fraction of what it once was. In addition, they are not able to sell their home to cover the devaluation of their investment portfolio since the real estate market is still so low in the United States.
Both types of policies have advantages and disadvantages. There are never any absolutes in life and that is why it is important to discuss your specific situation with your personal financial services professional, who can in turn help you find the right product for your situation.
The problem is that most people listened and are easily impressed by “experts.” We drool for the "As seen in Oprah" type of "experts". Unfortunately in today's society we consider someone who who utters quick and "authoritative-sounding" responses to our questions as an expert. Most people consider a "know-it-all" as an expert. However, people forget that it is all marketing. It is about selling and it works. That is why we are willing to pay hundreds even thousands of dollars to attend the seminars organized by these "gurus". The question we all must be asking is, Is the "expert" giving advice that helps his listeners or advice that sells? If the "expert" gives advice that does not sell, no one listens.
We must come to a different understanding of what defines an expert. Many times the best expert is the one that is willing to say "I don't know". However, I don’t see too many of that type around nowadays.
January 11, 2012
Baby Boomers Taking A New Look At Retirement
A recent AllState-National poll found that Baby Boomers are pushing back their initial retirement plans from an average of 60 years to 66 years. In addition, the results of the poll showed that 68% of the Baby Boomers expect to work in some form after retirement. The concept of retirement age is no longer what used to be 10 years ago. According to a survey conducted by Wells Fargo & Co in August 2011, 76% of the middle class Americans surveyed considered that “it is more important to have a specific amount saved before retirement, regardless of age, while only 20% say it is more important to retire at a specific age, regardless of savings.”
Other results of the Wells Fargo survey:
- 25% of middle class Americans say they will “need to work
until at least age 80” to live comfortably in retirement.
- 74% of middle class Americans expect to work in their
retirement years, including 39% of all respondents who will need
to work to make ends meet or maintain their lifestyles, while
35% say they will work because they want to, rather than out of
financial need.
- Among middle class Americans age 40 to 59, 54% say they will
“need to work,” compared to 34% of those age 25 to 39.
Accordingly, only 25% of those between the ages of 40 and 59 say
they will work in retirement because they “want to,” versus 45%
of Americans between the ages of 25 and 39.
- Of the Americans who will work in retirement, 47% say they
will do “similar work” to their pre-retired years, while 42% say
they will work in a position that requires “less responsibility.”
This recession has taken a heavier toll on the middle class than past recessions. However, the “sandwiched generation” (those near-retiree sandwiched between the already retired and the young generation) will feel a heavier burden since their retirement savings and real estate values have both declined substantially in the last 7 years. This has caught many near-retirees by surprise and now will force them to stay in the work force longer than they anticipated.
There is still time to make corrections in your retirement plans if you are in that “sandwiched” situation. It will take immediate action and potentially making some strong and sacrificial changes over the next 5 to 7 years to make sure that you can enjoy a comfortable retirement.
January 7, 2012
Tips on Buying Insurance
Before you talk to an insurance agent it behooves you to do a little research about the insurance buying process. The purchase of insurance should be taken seriously and you should never rush in the decision process. Regardless of the insurance you are purchasing, whether it’s life or car insurance, it’s a huge decision that demands a little research and your undivided attention. Also, if you spent some time upfront and determine what you need or want, locating the insurance policy that best fits your needs will not be the unpleasant task that many people think it is.
That is why it is important that you meet with your insurance advisor to assist you in locating the best insurance policy for your needs. It is critical that the insurance you purchase meets YOUR needs and not the needs/wants of the insurance agent. You don’t want to make any hasty decisions, an incorrect could mean thousands of dollars wasted over the long term.
Insurance is important in the building and protection of your assets. Therefore, in the same way we spend time in developing an investment portfolio or business planning, we ought to dedicate time to determine our insurance needs. As we get older, our needs change and so our insurance needs. Furthermore, not all insurance companies are built equal.
I’ve compiled a list of six tips to take into consideration when purchasing a new insurance policy. Hopefully these tips will help you make a wise decision and save yourself countless headaches:
1. Determine your needs. This should be your first step in the purchase of insurance. Why are you buying insurance? What are you protecting? Determine how much it would cost to replace something that is valuable to you — your life, if you are disable and unable to work for three to six months, your home, your business equipment with which you generate revenues or anything else you determine is important. Compare the cost and inconvenience of replacing the asset you want to protect and you will find out that many times that insurance (when properly purchased) is comparatively inexpensive.
2. Research the company’s ratings. Many times overlooked. The best example was our recent recession. Many banks and insurance companies failed. Poor management decisions can lead an insurance company to lack the proper funding when the time comes to pay claims. Insurance companies are no different that other businesses. You need an insurance company that will be around when you need their service. Therefore, do your due diligence; you might even be surprised at the companies that don’t fare too well.
3. Check your insurance agent credentials. The presentation and sale of insurance products are regulated by your state. Insurance agents must be properly licensed and trained for the products they are presenting to you. As mentioned above, you need to have an insurance agent that is qualified to help you in the decision process and not just trying to sell you a product that they have no idea if it truly fits your needs but they know that they are making a huge commission on it. There are many insurance sales people, some are out there just for the commission they can make on the sale. However, there are a lot of great insurance professionals well trained and prepared to assist you in making the right decision.
4. Check your local BBB. Research consumer complaints filed against the insurance company under consideration. Knowing what the complaints are against a company will tell you how solid of an insurance company they are. Do not overreact on complaints filed, find out what type of complaints where filed and how the company handled them. Once again, insurance companies are no different than other businesses, they make mistakes too. Also, look at the frequency of complaints filed, are the same complaints being filed? Repetitive complaints could be a sign of weak internal controls.
5. Get the right coverage for YOU. Remember that the insurance must meet YOUR needs. Therefore, you should buy the right type of insurance and the right amount of coverage. Never let an agent tell you how much insurance or coverage you need. As a financial advisor, I could make a recommendation and it is my responsibility to justify my calculations based on the facts I have about my clients. However, it is YOUR responsibility to figure out how much insurance you want. Letting an insurance company blindly tell you what you need is like asking a casino how much you should gamble. Whether you need an umbrella policy or extended coverage, this is for you to decide, not an agent.
6. Ask some tough questions. Insurance is a significant financial decision. Take the time to really ask the tough and important questions. Also, remember that the investment in insurance coverage can have long-term implications. If your insurance agent seems uncomfortable, unable or unwilling to answer your questions, unprepared or unable to explain to you the insurance product that he/she is presenting to you, you are better off going to another insurance professional.
I hope these tips will be of help to you in the your decision making. As you may have noticed, I did not mentioned price on my tips. Even though, price is important, insurance is more than just price. Many times you will hear of horror stories of people that thought they had insurance or certain coverage and they find out the hard way and when it is too late. The cheapest insurance is not always the best option. Take these principles and print them out, keep them nearby when you are meeting or talking to your insurance agent. Remember, it is your money and it is your decision, if you ever feel that your agent is not listening to you or does not address your needs, that is a sign that it may be time to end the conversation and consider a different company. Take your time and make a decision you and your wallet can be proud of. Never buy insurance under pressure.
That is why it is important that you meet with your insurance advisor to assist you in locating the best insurance policy for your needs. It is critical that the insurance you purchase meets YOUR needs and not the needs/wants of the insurance agent. You don’t want to make any hasty decisions, an incorrect could mean thousands of dollars wasted over the long term.
Insurance is important in the building and protection of your assets. Therefore, in the same way we spend time in developing an investment portfolio or business planning, we ought to dedicate time to determine our insurance needs. As we get older, our needs change and so our insurance needs. Furthermore, not all insurance companies are built equal.
I’ve compiled a list of six tips to take into consideration when purchasing a new insurance policy. Hopefully these tips will help you make a wise decision and save yourself countless headaches:
1. Determine your needs. This should be your first step in the purchase of insurance. Why are you buying insurance? What are you protecting? Determine how much it would cost to replace something that is valuable to you — your life, if you are disable and unable to work for three to six months, your home, your business equipment with which you generate revenues or anything else you determine is important. Compare the cost and inconvenience of replacing the asset you want to protect and you will find out that many times that insurance (when properly purchased) is comparatively inexpensive.
2. Research the company’s ratings. Many times overlooked. The best example was our recent recession. Many banks and insurance companies failed. Poor management decisions can lead an insurance company to lack the proper funding when the time comes to pay claims. Insurance companies are no different that other businesses. You need an insurance company that will be around when you need their service. Therefore, do your due diligence; you might even be surprised at the companies that don’t fare too well.
3. Check your insurance agent credentials. The presentation and sale of insurance products are regulated by your state. Insurance agents must be properly licensed and trained for the products they are presenting to you. As mentioned above, you need to have an insurance agent that is qualified to help you in the decision process and not just trying to sell you a product that they have no idea if it truly fits your needs but they know that they are making a huge commission on it. There are many insurance sales people, some are out there just for the commission they can make on the sale. However, there are a lot of great insurance professionals well trained and prepared to assist you in making the right decision.
4. Check your local BBB. Research consumer complaints filed against the insurance company under consideration. Knowing what the complaints are against a company will tell you how solid of an insurance company they are. Do not overreact on complaints filed, find out what type of complaints where filed and how the company handled them. Once again, insurance companies are no different than other businesses, they make mistakes too. Also, look at the frequency of complaints filed, are the same complaints being filed? Repetitive complaints could be a sign of weak internal controls.
5. Get the right coverage for YOU. Remember that the insurance must meet YOUR needs. Therefore, you should buy the right type of insurance and the right amount of coverage. Never let an agent tell you how much insurance or coverage you need. As a financial advisor, I could make a recommendation and it is my responsibility to justify my calculations based on the facts I have about my clients. However, it is YOUR responsibility to figure out how much insurance you want. Letting an insurance company blindly tell you what you need is like asking a casino how much you should gamble. Whether you need an umbrella policy or extended coverage, this is for you to decide, not an agent.
6. Ask some tough questions. Insurance is a significant financial decision. Take the time to really ask the tough and important questions. Also, remember that the investment in insurance coverage can have long-term implications. If your insurance agent seems uncomfortable, unable or unwilling to answer your questions, unprepared or unable to explain to you the insurance product that he/she is presenting to you, you are better off going to another insurance professional.
I hope these tips will be of help to you in the your decision making. As you may have noticed, I did not mentioned price on my tips. Even though, price is important, insurance is more than just price. Many times you will hear of horror stories of people that thought they had insurance or certain coverage and they find out the hard way and when it is too late. The cheapest insurance is not always the best option. Take these principles and print them out, keep them nearby when you are meeting or talking to your insurance agent. Remember, it is your money and it is your decision, if you ever feel that your agent is not listening to you or does not address your needs, that is a sign that it may be time to end the conversation and consider a different company. Take your time and make a decision you and your wallet can be proud of. Never buy insurance under pressure.
January 1, 2012
Texas Elder Investment Fraud Scams
Seniors many times live
solitary and isolated lives, which makes them ripe targets for scammers and fraudsters
to gain their confidence by becoming their new constant "friend" which can
lead to any combination financial abuse. As our baby boomers in our families are reaching the age of retirement, they will be become the focus of attack of these opportunistic fraudsters. The common thread in all Ponzi schemes is greed, they offer "results to good to be true" and greed blinds people.
We must be active participants in our family members financial decisions. If you are not personally qualified to do the job, then hire a trusted financial advisor. There are many good financial professionals in your area, attorneys, CPAs, CFPs that could help you and your elders in your family analyze the "wonderful offers" being made to your family members.
Today I will share a sad story that was released in the month of December where an Amarillo-based property management and insurance company selling securities has swindled $6.7 million from about 100 investors, most of them elderly.
Click Here To Learn More
We must be active participants in our family members financial decisions. If you are not personally qualified to do the job, then hire a trusted financial advisor. There are many good financial professionals in your area, attorneys, CPAs, CFPs that could help you and your elders in your family analyze the "wonderful offers" being made to your family members.
Today I will share a sad story that was released in the month of December where an Amarillo-based property management and insurance company selling securities has swindled $6.7 million from about 100 investors, most of them elderly.
Click Here To Learn More
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