Plan Now for your Children's College Education

An advisor for college whose role is to help parents and grandparents to save money for your youngsters’ education should focus on at least two areas: 529 plans and life insurance.

529 plans were conceived as an opportunity for parents and grandparents to save money for their children or grandchildren’s college education. 

They were created by Congress in 1996 to be offered by each state.

The number 529 reflects the section of the IRS code. It offers a chance for these funds to be put into investment vehicles (including stocks and bonds) in which the returns on the investment can be realized free of federal income taxes. If allowed by your state, your investments may be deductible from your state income taxes.

529 Plans
In that 529 plans are an investment decision, the return on your investment is subjected to the vagaries  of  the stock market cycles. In recent years returns on many of these investments have been non-existent or negative. Such a situation can easily jeopardize your youngster’s college education.

While 529 plans remain a viable option for concerned family members, what’s often not taken into consideration is what if the parent or grandparent meets an untimely death. At that point the contribution comes to an abrupt halt although the costs of a college education continue to rise faster than the rate of inflation. 

If a 529 plan is chosen, then a life insurance plan covering the contributor to the 529 plan is essential. Either a whole life plan or a universal life insurance plan would be appropriate. A term life plan should not be chosen. It offers no cash build up and it’s just limited to a specific number of years.

Whole Life and Universal Life Insurance Plans
Both a whole life plan and a universal life plan offer a tax-free build-up and will not count against the assets evaluated in determining the student’s college financing package. An equally important feature and perhaps the most important, is the death benefit. If the contributor dies prematurely, then their effort to provide for the youngster’s college education would be self-completing.

If you as a parent want to build up a college education fund for your children and have a hundred dollars to invest monthly, it would make sense to invest $25 a month in your 529 Plan and $75 per month your whole life insurance plan. The choice is yours. The return on your $25 per month is totally uncertain, that includes both you principal and your interest. 

All whole life plans which I am familiar with offers you both a guaranteed return and a non-guaranteed return plus the death benefit which would go to your child in the event of an untimely death. 

Keep in mind that the 529 plan has no death benefit, and is therefore, not self-completing.

Are you concerned about college educational planning for your child or grandchild? Leave your questions below.

6 Crucial Estate Planning Tips

Estate planning isn't just for the wealthy. It is to make sure your family is taken care of if something happens to you.

The basic pieces of estate planning are a Will, a Living Will or Durable Power of Attorney, a Revocable Trust, Life insurance, and 
Long Term Care.

1. The Will

The most important part of your estate plan is your will. It names your heirs -- the people you want to receive your money and possessions after you die. If you have children or dependents, a Will also names the person you want to take care of them.

In most states, you need a lawyer to create a will, but it needn't be very expensive. If you die without a will, the state will decide who will get your assets, your money and who will take care of your children.

2. The Living Will or Durable Power of Attorney

A Living Will or Durable Power of Attorney (POA) says what types of medical treatment you want (or don't want) if you get sick and cannot talk to the doctor. This document also states that you give someone permission to make decisions about your money and property if you are not able to make them yourself.

3. Health Care Directive

This document is also frequently referred to as a Living Will. With this document, you name a person who will make decisions about your health care if you are personally unable to make those decisions. Be sure your doctor has a copy of your health care directive.

Although you may have both documents, keep in mind that they may conflict since the Health Care Directive allows another to make decisions while the Living Will already states what is to be done. Absent statutory or document direction, healthcare providers may experience a conflict as to what to do.

4. The Revocable Trust

In incorporating a Revocable Trust into your estate plan, don't forget to update all the account titling into the name of the trust. Not changing titles creates problems.

Moreover, never name a financial institution as successor executive/trustee after surviving spouse or instead of a surviving spouse.  In some cases, this is to the detriment of the spouse and other beneficiaries because large institutions usually follow their fiduciary responsibilities with a less personable approach that another trustee could provide.

Finally, just having a will just about guarantees probate which can cost approximately 3% of your estate. A properly drafted and funded trust-based plan (seriously consider a land trust if your state laws allow for it) can avoid probate and protect your beneficiaries from predators and creditors. It can also incorporate sophisticated tax planning so that you can avoid or reduce estate tax liability.

5. Life Insurance

Do not name minor children outright as primary or contingent beneficiaries of life insurance or retirement plans. When children are named as primary or contingent beneficiaries a court must appoint a guardian who then must be bonded and file a laborious annual accounting with the local court.

Also, with regards to beneficiaries, it is important to remember to change the beneficiary in the event of a divorce or death. And never name a special needs child or a grandchild directly as beneficiary. Instead, use a trust for the benefit of the child. If you list a child as a direct beneficiary, you affect the child's eligibility for Social Security disability benefits.

6. Long-term Care Insurance (LTCi)

Long-term care can be a wise investment. If you become unable to perform routine daily functions such as dressing yourself then long-term care will pay the expense for someone to help you whether in your home or elsewhere. LTCi will also protect your assets, so that you have something left in your Will to direct to your heirs.

Now its your turn. How much importance do you put on estate planning. Do you think that any one of these steps are more important than another?

Leave your comments below. 

7 Key Health Insurance Terms You Always Need to Know

Forget Obamacare. It is falling apart fast and in the process of being replaced by Congress and the President. 

Affordable health insurance is coming soon and knowing the meaning of key health insurance terms is essential whether you are comparing policies, or need to know what to ask an agent.

Below is a list of key health insurance terms to help you understand more about what your health insurance plan has to offer.

1. Deductible
The deductible refers to the amount of money that you need to pay before any benefits from the health insurance policy is paid. This is usually a yearly amount. Consequently, when the policy starts again, usually after a year, the deductible would be in effect again. Some services, like doctor visits, may be available without first meeting the deductible. Usually there are separate individual deductible amounts and total family deductible amounts.

2. Co-insurance
This is usually a percentage amount that is  your responsibility to pay. A common co-insurance split is 80/20. This means that the insurance company will pay 80% of the procedure and you are required to pay the other 20%.

3. Co-payments
Co-payment is a fixed amount that you are required to pay at the time of service. It is usually required for basic doctor visits and when buying prescription medications.

4. Out-of-Pocket
This is the cost you would pay out of your own pocket which can refer to how much the co-payment, coinsurance, or deductible is. Also, when the term annual out-of-pocket maximum is used, it is referring to how much the insured would have to pay of their pocket, excluding premiums, for the whole year.

5. Lifetime Maximum
This is the most amount of money the health insurance policy will pay for your entire life. Pay attention to individual lifetime maximums and family lifetime maximums as they can be different.

6. Exclusions
The exclusions are the procedures that the insurance policy will not cover. 

7. Pre-existing Conditions

This is something you had before obtaining the health insurance policy. Some plans will cover pre-existing conditions while others may completely exclude them. Then again, some health insurance plans will cover pre-existing conditions after a certain time period.

Any comments or questions? Leave them below.