There are many kinds of life insurance that can be used in an estate plan. One type, survivorship life insurance, covers two people on a single policy. Another name for survivorship life insurance is second-to-die joint life insurance. It pays out a death benefit once both policyholders have died. This article will examine the benefits of this type of policy and how survivorship life insurance works.

What triggers the payout?

• This policy pays out only after both people have passed away.

Do you have to be a married couple to purchase survivorship life insurance?

• No, although married couples are often the ones who do purchase this type of coverage, the joint policyholders are not required to be married.

 What are some of the situations where survivorship life insurance is typically used? 

• High net worth household – after the second spouse dies, the benefit from this policy can be used to pay estate taxes so that the heirs do not have to worry about selling assets to pay the estate taxes.

• Business succession – this policy can be used to transfer business ownership if both partners die.

• Special needs child – This policy can be used to fund a trust to provide care for a special needs child.

• Leaving a legacy –  The death benefit from the policy can help any beneficiary you select, which can include a charity.
  

 Is survivorship life insurance different from joint life insurance? 

• First to die vs. second to die – Joint life insurance can refer two any policy that covers two people under one policy. There are two types of joint insurance, first to die and second to die (survivorship life insurance). So, survivorship life insurance is really a subset under the general umbrella of joint life where the trigger is the second death.

• Different goals – The main goal of the first-to-die joint life insurance policy is to cover the surviving spouse to provide that person with enough funds to replace the lost income from the spouse that passed away. The second-to-die policy has a goal to provide heirs or a charity with the benefit rather than the spouse.

CONSULT THE LAW OFFICE OF DAVID KNECHT

There are many estate planning tools to choose from, so it is vital to create a customized plan that is right for your goals, assets and loved ones. If you want to get started on an estate plan, contact the Law Office of David Knecht. Call us at 707-451-4502. We have extensive experience in estate planning.

When you pass your loved ones can face many expenses, which may include funeral expenses, debts that may reduce the assets for your heirs and final taxes, which can include back taxes and taxes for the year in which you die. Life insurance can help your loved ones cover these expenses, which can be very advantageous if the estate holds real estate or other assets that take time to be liquidated to cash. As reported by moneygeek.com, even though over 70% of Americans surveyed think life insurance is a necessity, only about half of Americans actually have some kind of life insurance. As with other types of estate planning, the statistics often show that there is more commitment to the idea that it needs to get done than to the effort to follow through, but in the case of life insurance, the work to get it is often fairly minimal, with some sites offering instant policies . This article will highlight some of the ways life insurance can be part of an estate plan.

• Payment of Estate Taxes

Federal estate tax applies to the gross estate of the person who has died and must be paid within 9 months after the death of an owner. Proceeds of a life insurance policy can pay these taxes. Life insurance policies are generally not subject to income taxes.

• Estate Equalization

A life insurance policy can help fill in the gap where there are assets that are not liquid but you want each child to get an equal share. For example, if one child received a farm or a home, where the child receiving that asset does not want to sell it or break it up, then the life insurance policy can help the other child or children get an equal share, where liquidating the asset would have a negative consequence to its value.

•  Business Asset Coverage

If you die, the surviving business owners will receive death benefits and your family will get the payment for your interest in the company.

•  Quicker Payouts.  

The death benefit of a life insurance policy can be claimed immediately, which makes is helpful for paying out expenses and lessening the financial burden on your family.

•  Special purposes

Life insurance proceeds can be dedicated for a special purpose, like divorce obligations for spousal or child support or to providing continuing support for a minor, a child with special needs or an aging adult.

CONSULT THE LAW OFFICE OF DAVID KNECHT

Life insurance is one of many estate planning tools to choose from, so it is important to create a customized plan that is right for your goals, assets and loved ones. If you want to get started on an estate plan, contact the Law Office of David Knecht. Call us at 707-451-4502. We have extensive experience in estate planning.

 

A recent article published on Kiplinger.com was authored by an estate planning attorney whose own mother received a terminal cancer diagnosis. It was a poignant perspective from a woman who was a veteran in the estate planning field, only to have to call on that knowledge for her own family member.  

This article will summarize the takeaways from the unique perspective of an estate planner who had to plan for her own family member.  

 

How has the Schiavo case influenced estate planning?

• Terri Schiavo was a woman who suffered a massive heart attack in 1990 and was left in a permanent vegetative state. Her husband and parents had a complicated and bitter legal battle over whether she would have wanted to be maintained in that vegetative state. 
• This case was a horror story of what can happen in the absence of a clear advance medical directive. 
• The number one lesson from this case is that the battle between the husband and the parents was preventable, had Schiavo properly prepared by making her wishes known and documented. 
• Here you can see more details about the Schiavo case.  

 

Why might estate planning be particularly important for those of a particular faith?

• In the Schiavo case, the role of faith played prominently in the push and pull of the end of life debate. 
• Similarly, the author’s mother was part of a faith-based community and therefore had very strong beliefs about what her end-of-life care should look like and how her body should be treated in the final moments. 
• The takehome lesson here is that family members can benefit from directives as to what the person wanted, what customs to follow, and what preferences to adhere to.   
• The author’s experience with her mother helped her realize that the stress and emotion of a tough diagnosis are draining, so it can be particularly challenging to start on estate planning when someone’s health is in the declining stages.
• It’s much easier to plan ahead during times of health.

CONTACT THE LAW OFFICE OF DAVID KNECHT TO GET STARTED ON ESTATE PLANNING

If you need help getting started on estate planning, or if you are looking to update or expand on work already completed, contact the  Law Office of David Knecht. We have extensive experience with estate planning in California. Contact us at 707-451-4502 for more information.  

 

A recent article published on CNBC.com highlighted a surprising trend:  although the Covid-19 pandemic has greatly increased awareness and conversations regarding estate planning, Americans are still not taking action, with 67% of Americans without any estate plan according to sources cited by the CBNC.com article.  See This article will summarize the CNBC report on what Americans are missing and how to get started on planning for the future. 

What does the research show as the reason why 67% of Americans are leaving what happens to them and their assets in the case of disability or death up to others?

• A study from Caring.com showed that the main reason for the apathy toward estate planning is just procrastination (approx. 40%). 

• Meanwhile, about a third of respondents didn’t think they had enough assets to pass on to their loved ones, and about 10% said that estate planning was too expensive or that they didn’t know how to get a will. 

How has Covid impacted estate planning motivation?

• Those who have had a serious case of Covid are 66% more likely to prioritize estate planning.  See 

• 41% of people age 18-34 report seeing more need for estate planning after the pandemic. 

• Even with Covid providing increased motivation, there are opportunities to do better: the Caring.com study found that only 48% of people who had severe Covid have an estate plan in place. 

What is the recommendation from the CNBC report on how to get started on estate planning?

• The first step is to become as informed as possible and consult with a financial advisor or estate planning attorney. 

• For those with fewer assets, online resources may be useful for planning.

• California Residents – With online resources, be sure to confirm whether they are valid and binding in California 

CONTACT THE LAW OFFICE OF DAVID KNECHT TO GET STARTED ON ESTATE PLANNING

If you need help getting started on estate planning, or if you are looking to update or expand on work already completed, contact the  Law Office of David Knecht. We have extensive experience with estate planning in California. Contact us at 707-451-4502 for more information.  

 

Some would assert that the pandemic and shifting landscape around wealth transfers is fueling increased trust and estate disputes.  This article will summarize a podcast with an interview of the Honorable Glen Reiser, a judge who serves as educational trainer for all trust and probate judges throughout California.  He spent more than 20 years with the Superior Court in Ventura County, California, and before that, more than two decades as a civil litigator.  The full transcript of the podcast can be found here:  https://www.jdsupra.com/legalnews/podcast-jams-neutrals-on-the-evolution-5378200/

Contested cases have risen dramatically over the last five years, and particularly recently due to COVID. 

• With Covid, we are seeing a high number of unexpected deaths.

• There is an increase in the will disputes, with issues relating to blended families and sibling rivalry.

• More people are dying without a will due to the unexpected nature of Covid.

• In the “old days” more wealth was earned individually, but now we are seeing that more frequently, wealth is transferred through family deaths and trust and estate matters, so that seems to be where large amounts of capital are exchanged.  Contests in that area have risen dramatically.

The Court system is increasingly encouraging mediation over trial.

• With Covid, we are seeing a high number of unexpected deaths.

• There is an increase in the will disputes, with issues relating to blended families and sibling rivalry.

• More people are dying without a will due to the unexpected nature of Covid.

• In the “old days” more wealth was earned individually, but now we are seeing that more frequently, wealth is transferred through family deaths and trust and estate matters, so that seems to be where large amounts of capital are exchanged.  Contests in that area have risen dramatically.

 

•  Mediation has advantages the court cannot offer.

Mediation can save time and money.

• Attorneys can work with the mediator and other parties to craft often creative solutions.

 

• Mediation can allow for more customized solutions, since they can be tailored specifically to the parties.

Capacity tends to be a significant issue and cases require a lot of court resources. 

• Will and trust contests tend to be judge decided not jury
• The burden on judges for these types of cases is large because the cases require trial and long opinions, so judges generally would like to encourage settlement
• The testamentary instrument is either a trust or a will. That document in most cases, not always, was drafted by an estate planner or a lawyer who dabbles in estate planning.  Thorough preparation would be to interview the estate planner to see what their recollection is, even if it relates to issues such as capacity, undue influence, document interpretation or intent.
• With capacity cases, a geriatric psychiatrist or PhD psychologist with expertise in geriatrics should be consulted.

 

The role of undue influence in estate disputes. 

• In our mobile society, many family members move away, but someone stays to help take care of the elderly person.  So, when the elderly person changes their instrument to benefit the person taking care of them, then that’s a common circumstance where undue influence will be alleged.

• Undue influence is a particularly fact specific factor, and questions that should be asked are:  Is the person isolated?  Are they competent to write emails?  Who is taking them to the lawyer’s office?  Whose lawyer is it?  Who is sitting in on meetings with an estate planner?  These issues and more are the type of fact-specific inquiry needed on these cases.

 

 Tips for successful mediation of estate disputes.

• Preparation is key.

• Consider spending money on the science up front.  There is a lot of development in the science of cognitive deficits with scientific evidence that can be relevant to undue influence and capacity, and it may be that spending money on the science up front will make the negotiating position stronger.

• Find a mediator who will read everything, understand the positions and get involved.

• Avoid selecting a mediator who is just a “carrier pigeon” to take the offers back and forth.  Look for a mediator who has the skill set to add to the discussion.

Conclusion

At the Law Office of David Knecht, at 707-451-4502, we have extensive experience in estate planning and litigating estate disputes.   Contact us today!

If you are considering estate planning, one of the important aspects of the future that is probably on your mind is how to make sure your children do not squander what you are leaving them.  At the Law Office of David Knecht, we have extensive experience in estate planning and can help you think through many of the important issues, and especially a plan to help your heirs utilize their inheritance effectively. 

Business Insider highlighted a few of the worst things that can be done with an inheritance, and this article will summarize a few of those topics to help you begin to strategize the best estate plan for your family. See https://www.businessinsider.com/personal-finance/worst-things-inheritance-financial-planner-2021-1.

Sitting on the money—often better to invest the money.  

There are a few risks of sitting on the money:  inflation, opportunity cost, and the temptation to spend.  A quote attributed to Warren Buffett is “The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worthless over time. But good businesses are going to become worth more over time.”  See Warren Buffet quotes at https://www.insightssuccess.com/a-compilation-of-warren-buffett-quotes-that-will-add-perspective-to-your-investorlife/?gclid=Cj0KCQjwqKuKBhCxARIsACf4XuH2NAAwThinvlMnBvwSJIYXWAcNoskp5xpFzFZjtQWMq7SrlSmTRfkaAnu5EALw_wcB

Cash is an excellent asset for heirs to receive in an inheritance because it is so flexible, so it is not a negative in an estate plan.  However, you may consider providing your children with instructions, education or just simply helpful advice on how to invest after you are gone so that they can make the most of what you are leaving them. 

 

• Holding onto an inherited property that the heirs can’t afford – often better to sell or rent. 

 

If an heir inherits a property, they may not want to sell or rent it for sentimental reasons.  For some, the desire to keep it “as is” can prevent the best financial utilization of the property.  There can be maintenance costs, taxes, and other expenses that the heirs may not have the funds readily available to cover.  One strategy for estate planning is to anticipate in advance how the property will be used and maintained and to leave sufficient cash to cover the potential expenses the heirs may face in keeping the property.  This is just one plan, but there are many other choices here as well to make the transition smooth and effective.  

 

• Putting all of your money in one place – often better to diversify. 

 

Your heirs may not be as experienced in money management as you are and one common mistake with inherited assets is to put the money all in one place.  Many financial planners recommend diversification rather than putting all your eggs in one basket, and this holds true for inherited assets as well as assets that are obtained other ways.  The idea behind diversification is that a variety of investments will yield a higher return and investors may face a lower risk by investing in different vehicles.  See https://www.investopedia.com/articles/03/072303.asp.

Consult with the Law Office of David Knecht

At the Law Office of David Knecht, at 707-451-4502, we have extensive experience in estate planning in California.  We can help you create a plan that is right for you and can help make the transition smooth for your heirs.  Contact us today!