Archive for February, 2011
Life Insurance To Fund A Trust
Using life insurance to fund a trust
Life insurance can be one of the best ways to fund a special needs trust. Types of life insurance for special needs child are term life to whole life or survivorship life. The type of life insurance that is chosen is dependent on the needs and objectives.
Term Life Insurance: A set number of years are provided coverage, from one to thirty years. This is the most affordable life insurance policy, but a policyholder can outlive the policy term and leave the trust without the needed proceeds. A convertible term insurance is better when buying for a special needs trust. This holds the option of converting the term policy into whole life policy at some point of time.
Permanent Life Insurance: This provides insurance coverage for whole lifetime. Lifetime coverage is beneficial in the sense that the policy death benefit can fund the special trust. These insurance policies provide a death benefit and an investment feature called cash value.
Survivorship Life Insurance: Otherwise known as second-to die insurance, this life insurance insures the life of two people and provides benefit after the death of the second insured person. In this type of life insurance, premiums are relatively lower and funds are available after the second person dies.
How funds from a special needs trust are used
The U.S. Department of Health and Human Services authorizes the trustee to use funds from a special needs trust to supplement government assistance, including disbursement of funds for the following expenditures:
- Rehabilitation
- Training programs
- Computer equipment
- Transportation, including a vehicle purchase
- Trips and vacations
- Companion services and home health aides
- Supplemental medical or dental care
Using life insurance to fund special needs trust is beneficial because benefits are paid out outside of probate court and without income tax deductions.
Government benefits for a special needs child are awarded based on the family income, but once the child turns 18 the benefits are awarded based on the child’s assets. Academy of Special Needs Planners advises parents to create a trust before children reach age 18. Setting up a trust now protects the child in the event of unexpected death.
Life Insurance For Special Needs Child
The role of life insurance in planning for special needs child
Besides coming to terms with the reality of a special needs child, the parents need to face a few truths with grit teeth. The task of providing for special needs children after their demise lies upon the parents. There are state and federal government programs for medical care and income, but parents or other loved ones may bequeath small amounts to special needs children.
To safeguard against high costs of maintenance of special needs child, the answer lies in setting up a special needs trust which provides a financial safety net for children when parents are gone.
A special needs trust is a planning tool where proceeds from a life insurance and other assets are put together for the benefit of a special needs child. This is done without jeopardizing government benefits .A special needs trust is not an available asset to the beneficiary and does not qualify as income under rules for SSI and Medicaid. The assets are managed by a trustee, including allocation of investments and disbursement of funds.
The special needs trusts are further sub divided into three main types:
1. First-party trust: A first-party trust holds assets, such as an inheritance, for the beneficiary with special needs. This trust allows the special needs beneficiary to continue to receive SSI benefits. However upon the special needs individual passing away, assets remaining in the trust are used to repay the government for the medical care costs.
2. Third-party trust: Parents or other family members who want to help the special needs individual can fund this trust. All kinds of assets stocks or homes and their use to supplement government benefits can be used. Rather than reimbursing the government for medical care cost, in the event of special needs beneficiary passing away, the remaining proceeds of this can be passed on to other family members or a charity.
3. Pooled trust: A pooled trust contains assets for many beneficiaries with special needs rather than one. This trust is established by a charity and the assets are invested, while separate accounts for each beneficiary are maintained. In the event of a beneficiary passing away, a portion of that person’s trust goes to the nonprofit organization that manages the trust and the remainder is used for reimbursing the government for medical care.
Auto Insurance: What To Know
It is imperative to know the essential contents of an auto insurance policy, so that you get the best auto insurance in your budget.
There are no typical covers that apply to everyone and in every state, but certain covers must be in your policy irrespective of the state.
What tops all auto insurance is coverage for bodily injury and personal property liability. It is mandatory by law that everyone behind the wheel insures against injuries to individuals and damage tom property that you may cause.
The legal minimum in almost all states is made available by insurance companies. This may be different, but is a must have coverage in all states. Everybody is third party road user and your means to be able to pay for damages is none of their concern.
In auto insurance, personal injury cover must be taken. In the event of an accident, you and your passengers’ medical bills and salary loss (if any) are covered.
Collision and comprehensive insurance are next on the list. Collision insurance covers damage or total loss of car in a crash. Comprehensive auto insurance covers all kinds of damages to your car like theft, fire, vandalism riots, etc. Both of these are made available in a package, and these maybe purchase independently as well.
Auto insurance also provides uninsured motor coverage. This is cover against losses caused by motorists who don’t have auto insurance or if it is not sufficient to meet your claims.hit and run accidents are covered under this type of auto insurance.
Alternatives To Indemnity And Managed Care Health Insurance Plans.
When choosing a health insurance, most people have found themselves staring at the dual horns of indemnity health insurance or a managed care health insurance plan. While one offers relatively high cost range of choices and high security in an accident or a serious illness, the latter focuses at limited choice and relatively low cost.
The latest addition for the individual in health care insurance is Preferred Provider Organization (PPO) plan. This is a variation in the original managed health care model provided by a Health Maintenance Organization (HMO).Essentially, a health insurance PPO HMO plan marks an HMO which forms a network of health care providers and at a low cost provides policyholders with treatment within the network. If treatment is sought outside the network, the policy holder would have to bear the brunt of the payment. The latest developments in this are that the rules for policy holders who want to seek treatment outside the network have been relaxed.
Often enough an HMO would assign a policy holder to a primary care physician and in order to see a specialist, they need to go through a referral by him. The policy holder has no say in which specialist they are referred to.The improvement that a PPO HMO plan now offers is that no physician is assigned and naturally no referral is required. The policy holder may seek an experts’ opinion who is not a member of the network.
The cost implications are linked to this option, and plan holders will have to shell out that extra for treatment outside the network. Thus, PPO health insurance offers greater flexibility though at higher costs. The plan holder is free to choose.
This latest in health insurance sector has made indemnity health insurance a fast disappearing speck on the horizon. It is said that the number of people in PPOs is more than double that in HMOs.
Insurance Umbrella
Liability insurance is what people discover they don’t have enough of. Most people discover too late that they are grossly underinsured for injury lawsuits.
The most common liability limits on auto and home policies are usually $100,000 per person or $300,000 per accident. That’s not much not enough to pay for medical expenses of the person you severely injure, plus a possible lifetime of lost wages and compensation for suffering.
In the event that you don’t have enough protection, buying a second layer of liability coverage is a good idea. This is known as a personal umbrella policy. It helps defend you and helps in paying legal judgments against you when a covered lawsuit exceeds your primary liability insurance limits.
An umbrella policy is quite inexpensive – usually about $150 to $200 per year for $1 million of coverage. Buying an umbrella policy is definitely the best value in insurance. Some of the broadest coverage in the insurance business are offered at incredibly low prices. Buying an umbrella policy is all about the basic principles in insurance buying:
A)not risking more than you can afford to lose and
b) Not risking a lot for a little.
The affordability of umbrella policy comes easy. It just takes a bit of shifting; like from less important coverage to umbrella. For example, you can save some by raising the deductible on your car insurance and homeowner’s insurance by $500. Use the savings to pay for an umbrella policy.
Most people consider buying a personal umbrella policy to cover any gaps not included in their insurance policy. There are three common mistakes that people make when buying these policies.
COMMON MISTAKES IN BUYING AN UMBRELLA POLICY
Automatic choice of the company that has provided home and auto coverage is a first error among people. Looking around may get you a better deal.
Agents among themselves fail to communicate with each other, and this may pose difficulties. This mistake is in purchasing the umbrella policy from a different agent than the one who insures the car and home. This can lead to gaps in primary coverage, which completely negates the purpose of an umbrella policy.
The third mistake people make is choosing a policy that is at a lower price, without investigating the coverage. Some policies have gaps in coverage and it is important that you understand what your chosen coverage offers.
The solution to avoiding these mistakes is given below. Start building your insurance program, with an umbrella policy first. Further, ensure that you use the same agent for your primary insurance as for umbrella coverage. Carefully investigate coverage before price; paying a lower price may not benefit you at all.
By being aware of these common mistakes, you will be able to make a more educated decision when purchasing an umbrella policy.
