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PostPosted: Sun Apr 05, 2009 7:23 pm   Post subject:   

"It may happen at times that the primary beneficiary may pre decease the policy holder. Therefore, one may add contingent beneficiaries to aviod the benefits to go to the estate, which will then become taxable."



This has zero impact on the taxability of the policy. If the owner and the insured are the same person, it is part of the insured's estate. The beneficiary is meaningless.

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PostPosted: Sun Apr 05, 2009 7:27 pm   Post subject:   

"Do you own the life insurance policy that covers your own life? In other words, are you both the owner and the insured under a contract? This is known as "first-party ownership" of a life insurance policy: when the policyowner and the insured are the same person. If you were to die having first-party ownership of a policy- your estate will be grossed-up by an amount equal to the life insurance death benefit paid. Even if you don't have a taxable estate because you "don't own enough stuff," without prior planning, this will have an adverse affect on your probate costs."



Incorrect. It will be part of your taxable estate, but it does not go through probate.
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PostPosted: Mon Apr 06, 2009 1:26 am   Post subject:   

Quote:
It just seems like your kid would come before your friend.

Of course my child comes first,..however......right now he is a Minor. I can't put him down as 'Primary' until he turns 18 years of age.
Quote:
Since your son is a minor, most likely the court will have your son's guardian set up an UTMA account for your child
What is this??..never heard of this.
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PostPosted: Mon Apr 06, 2009 1:37 am   Post subject:   

Of course my child comes first,..however......right now he is a Minor. I can't put him down as 'Primary' until he turns 18 years of age.



That is incorrect. In fact, if you want the money to go to him or be used for his benefit, he needs to be the beneficiary or there needs to be a trust set up for him.



An UTMA stands for Uniform Trust for Minors Act. An UTMA account is one in which the money must be used to benefit the minor. At the age of majority (depends on the state), he can take over the account.



As it stands now, I think that you said that the beneficiary is your friend. The money would be his to do with it as he pleases.
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PostPosted: Mon Apr 06, 2009 1:45 am   Post subject: insurance  

Oh...I never knew that. SERIOUSLY.....I din't know I could put my son as a 'Primary' now. I already have stated how the money would be used, etc. My 'primary' is a VERY good friend of mine. She was my POA when I was overseas, etc. Thanks, again, for the advice. OHH.......can I 'specify' the age i want my son to be ( ie: 25 years ) for him to take over the policy? I just don't think at 18 years old many people can be very responsible.

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PostPosted: Mon Apr 06, 2009 1:51 am   Post subject:   

If this is a decent amount of money, it's not ok to do it how you are doing it even if you trust your friend completely. Let's say that it is $500,000. Your friend will get $500,000. Having this money that she isn't supposed to use could cause all sorts of negative implications for him/her. Also, how is she going to give it your your son? She can't give him a large sum without cutting into her gifting exclusion.



The age for an UTMA depends on the state. The better alternative may to set up a trust for this money. With a trust, you can have more control. Your friend can serve as the trustee. You should really talk to an attorney about this.

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PostPosted: Mon Apr 06, 2009 1:58 am   Post subject: insurance  

Quote:
Having this money that she isn't supposed to use could cause all sorts of negative implications for him/her.
She IS suppose to use it. Having her as Beneficiary, I gave her permission. The money is split between her and my son. That is how it is 'detailed' on my policy.
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PostPosted: Mon Apr 06, 2009 2:01 am   Post subject:   

If your son is not a primary beneficiary, no part of the policy proceeds will go to him.

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PostPosted: Mon Apr 06, 2009 8:31 am   Post subject:   

primary beneficiary has all the rights

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PostPosted: Tue Apr 07, 2009 6:17 am   Post subject:   

Insurance Expert said I was wrong when I said in my last post:



Quote:
this will have an adverse affect on your probate costs."




From one source:



Quote:
Does it ever happen that pension or life insurance benefits become subject to probate?

Nothing is absolutely fool proof. Pension or life insurance benefits usually are not subject to probate because beneficiaries have been designated. If no beneficiary has been designated or if the pensioner or insured has outlived all of the designated beneficiaries, the benefits will become subject to probate.
(Note- this infers the death benefit is payable after the death of the beneficiary or annuitant and payable to the estate)



Another quote:



Quote:
Probate Issues

When you designate an individual as beneficiary, life insurance proceeds are paid directly to the beneficiary and are not subject to probate proceedings. The beneficiary has quick access to a source of funds that may be used for costs, such as lawyer's fees, associated with settling your estate. If the policy is payable to your estate instead, the proceeds are subject to probate the same as any other asset. Because the probate process for a complicated estate may take as long as a year, your heirs may have to wait longer before accessing the proceeds.




A third:



Quote:
4. Probate



This is the legal process that is followed at the death of an individual when that individual owned assets in his/her name at death.



Certain assets are not subject to probate:



Assets jointly owned with another person with right of survivorship. Assets jointly owned as tenants in common are subject to probate.



Assets held in the name of the trustees of a revocable living trust.



Assets can be distributed by beneficiary designation. These include: life insurance, annuities, tax-qualified accounts and payable-on-death or transfer-on-death accounts.




Life insurance payable to an estate is considered an asset and subject to probate costs. The way to avoid probate is to name a person (natual or non-natural) as you beneficiary.



Now, probate being a state kinda thing, I could be whack here.



Hey Gary---> are you listening???



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PostPosted: Tue Apr 07, 2009 10:20 am   Post subject:   

Gary, I made an assumption in my post that a beneficiary was named. You are certainly correct that if the policy is paid to the estate, it will go through probate. I think that I partially misread your post. Please accept my apologies.

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PostPosted: Wed Apr 08, 2009 4:20 am   Post subject:   

Insurance Expert- apology absolutely accepted. Don't think you're the only one who's misread something here, trust me- you aren't the first and you certainly won't be the last! Smile We appreciate your contributions and promise that we won't hold it against you! Wink



Not to go off post, but it's this kind of dialogue that keeps us honest. If a member misstates something or gives factually incorrect info, it needs to be corrected as our readers need to be able to trust and believe in what we say.



I'm done. BTW- I'm not Gary- I was referring to another one of our forum experts.



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PostPosted: Wed Apr 08, 2009 10:51 am   Post subject:   

Hey Insurance Expert..would you please share more about this UTMA thing. If I'd have a secondary beneficiary to be treated as a "trustee", does that turn my child into a tertiary beneficiary?

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PostPosted: Wed Apr 08, 2009 11:17 am   Post subject: insurance  

I really need to get a 'Civilian' Will, as well. I have some 'general' things, written out in my Military Will. But, a Military Will doesn't have you list anything 'specific'. I've heard I can do one VIA the Internet. Does anyone know WHERE, on the Web, I can find one and do it myself?

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PostPosted: Wed Apr 08, 2009 2:31 pm   Post subject:   

You're setting your policy up for failure SD....perhaps you should speak with a real agent who actually knows what he is doing. The way your policy is currently set up, your son will get nothing, your friend will have 100% of the benefits to do as she wants, and even if she did give it to your son, she could only give him $13,000 per year without paying taxes on the gift. You'd be surprised how friendly your "friends" are when it comes to massive sums of money.

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