Official Blogger Blog

Estate Planning & Life Insurance

2023-07-19T16:33:26Z

Why and How in simple terms

Lets talk abt the financial responsibilities every family has to take care of !! The key items being estate planning and having a basic life insurance

Estate Planning for High-Net-Worth Individuals

2023-05-04T03:23:57Z

In addition to anyone, more specically for high Net Worth Individuals ...

Depending on the value of one’s estate upon death, the estate may be subject to both Federal and State estate taxes. Life insurance can be an ideal source of liquidity for the estate to cover these taxes. However, to satisfy this objective the affluent individual is typically not the owner of a life insurance policy insuring their own life. This would result in the death benefit being part of the estate for estate tax purposes thereby increasing the overall estate tax liability
There are numerous life insurance ownership strategies that avoid this outcome. One of the most commonly used strategies involves the affluent individual establishing an irrevocable life insurance trust (“ILIT”) to be the owner and beneficiary of the policy. Upon the insured’s death, the life insurance death benefit paid to the ILIT may be used to provide the estate with liquidity through the trustee either 1) lending money to the insured’s estate; or 2) purchasing assets from the insured’s estate. With proper drafting and execution, such transactions between the ILIT and the insured’s estate should not cause the death benefit to be added to the insured’s estate for the purposes of calculating the estate tax
Of Significance
The 2017 Tax Cuts and Jobs Act doubled the gift and estate tax exemption amount starting in 2018, which has been adjusted for inflation in the subsequent years. This higher exemption amount is set to sunset on December 31, 2025. On January 1, 2026, the exemption amount will revert to the pre-2018 amount of $5 million base per person ($10 million base for married filing jointly), as adjusted for inflation.

Special Need Trust

2022-06-02T19:09:34Z

If you have a child with a disability, providing for them into the future will likely stand among your top priorities. However, if you also wish to apply for Medicaid to cover your own long-term care expenses, first consider establishing a special needs trust (SNT) for your child. This will allow you to transfer assets to support them while remaining eligible for Medicaid yourself.

The rules for participating in Medicaid, a federally funded program managed by the individual states, are stringent and complex. Applicants must demonstrate that their income and assets are below the limits set by their state before Medicaid will fund their long-term care. Anyone with more than $2,000 (in most states) in “countable assets” (generally, anything beyond their home, one automobile, and personal belongings) will not qualify. At the same time, applicants can’t just give their money away and expect immediate support from the program.

Congress does not want people to move into a nursing home on Monday, give all their money to their beneficiaries on Tuesday, and be eligible for Medicaid on Wednesday. To avoid this situation, any Medicaid applicant who has transferred their assets recently — in most states, “recently” means the past 60 months — will be ineligible for funding for a certain period of time. The duration of these penalty periods is determined by dividing the amount transferred by what Medicaid determines to be the average private-pay cost of a nursing home in that state.

Special Needs Trusts to the Rescue

The good news: Certain asset transfers are exempt from such penalties. Even after entering a nursing home, Medicaid applicants may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

their spouse
a trust for the sole benefit of a child (of any age) who is blind or permanently disabled as defined by the IRS
a trust for the sole benefit of anyone under age 65 who is permanently disabled

In other words, there is a way to set money aside for someone with permanent disabilities and still qualify for Medicaid for your own long-term care. This is possible through an SNT, which is specifically geared to support the beneficiary with disabilities, under the management of a trustee, throughout their lifetime. (In this case, the SNT would be a “ third-party SNT ” because the funds come from someone other than the person with disabilities.)

An SNT also can ensure that the individual with disabilities continues to receive any public benefits already available to them through government programs such as Medicaid and Supplemental Security Income (SSI). That is, if you were to transfer your assets directly to the person with disabilities and their resulting “countable assets” then exceeded a program’s threshold (which is $2,000 for SSI), you may inadvertently have made them ineligible for those government programs.

As parent of special needs children, and with our team at BlueGenie Solutions we stand ready to help you navigate this journey! Reach me @ 210-264-7715 for any questions

Should I do Will or Trust ?

2021-12-25T17:16:31Z

Will takes effect at death, goes through probate court, Assets become public

Trust will take effect while you're alive, skips probate court for assets held in Trust, Assets stays private.

Ready to create your estate planning docs ? Reach me @ 210-264-7715

Steps to do Backdoor Roth IRA

2021-12-14T03:59:59Z

1) Checking Qualification criteria - Verify if your single or combined limits allow you to directly fund your Roth IRA. The limits may change every year --> https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2024

2) Decide which broker you want to open the account in - If you already have a brokerage account, its quicker as you wont have to give all details. Login to them and open both a Traditional IRA and Roth IRA Accounts with the same broker. If you want to register new, use the link below to start a brokerage account

https://bit.ly/startwithschwab
https://bit.ly/startwithIB

Steps to Execute a Backdoor Roth IRA With a 401(k):

Contribute to a Traditional IRA :
- Make a non-deductible contribution (up to $7,000 for 2025, $7,500 if age 50+).
Convert the Contribution to a Roth IRA :
- Quickly convert the contribution to a Roth IRA to avoid any significant gains, which would be taxed.
Monitor Tax Forms :
- Complete IRS Form 8606 to report the non-deductible contribution and Roth conversion properly.

Note :
- If you already have a traditional account there are some additional steps and checks to go through
- Backdoor Roth has to be done before end of year

Reach me @ 210-264-7715 if you have any specific questions

Rule of 72

2021-02-11T16:56:03Z

A simple yet very powerful formula to calculate how compounding works. When you divide 72 by the interest rate, you can find out when your money will double. Example: If your money is growing in a savings account at 1% interest rate, 72/1 = 72 => It takes 72 years for your $1 to become $2.

Power of Compounding

2017-02-10T11:11:31Z

1 Cents or 1M in 30 days

What would you prefer to take ? A Million $ 30 days from now or 1 cents that double every day for 30 Days ?