Last Day of Disability Insurance Awareness Month

by NFS | May 30, 2016 | Archives

Today is May 31st, the last day of “Disability Insurance Awareness Month”…Let’s end the month off with a story about Valerie King and how Disability Insurance Saves a Family—Twice.

When Valerie King transitioned from her medical residency to practicing as an emergency room physician, her group disability plan was going about to terminate so she converted her plan to an individual disability policy. Although Valerie never thought she would need it, a condition called ulcerative colitis made the decision for her. The disease and a series of surgeries made it impossible for her to carry out her duties, and she found herself unable to practice the profession she loved. It was her disability insurance that allowed her to survive financially and care for her three young daughters who she was raising as a single mother.

Life also had a second chapter for Valerie. She met and married Tim, also a divorced parent. They looked forward to raising their blended family together and sought the advice of insurance professional Larry Ricke, CLU, ChFC. In addition to the life insurance he had recommended, Larry made sure Tim understood the importance of disability insurance. Tim didn’t believe he’d ever need it, but with Valerie’s urging he finally agreed to get coverage.

“No one thinks lightening will strike twice,” says Larry, “but in this case it did.” Tim, who had a high-profile position in the printing business, came close to dying from an undiagnosed aneurism and valve issue with his heart. A risky operation saved his life but ultimately left him unable to return to work. Again, disability insurance made it possible for the family to go on financially. “We didn’t have to put a ‘for sale’ sign in the yard or make any drastic lifestyle changes that would have been forced on us without that coverage,” says Tim.

“Most people think, ‘It will never happen to me,’” says Valerie. “But the truth is it can—and does. Everything else goes away if you don’t have disability insurance coverage and you can’t work.”

Happy Memorial Day from NFS

by NFS | May 29, 2016 | Archives

It’s not about the sales, the bbqs, or the three-day weekend… but rather the heroes whose lives we sacrificed that we may enjoy our live, our liberty, and the pursuit of our dreams while you spend today with your family who have lost sons, daughters, husbands, wives, mothers, fathers, others while supporting and defending the ideal which have made and kept America the lad of the free for our everyday is memorial day.

Happy Memorial Day from all of us at NFS.

Could You Live on $1125 a Month? If Not, Read This

by NFS | May 26, 2016 | Archives

You’ve just become disabled, but you’re not worried. Why? Because you think Social Security
disability payments will “take care of you.” Really? According to statistics from the Social Security Administration, the average person who has qualified for Social Security benefits receives $1,125.10 a month.

If you’re making $50,000 per year, how long could you (and your family) survive on a disability payment of $1,125.10 per month? That’s only $13,501 per year, or 27% of your income. This assumes you qualify for benefits, and not everybody does. And if you do, it may still be more than two years—yes, years— before you start to receive any payments. What will you do in the meantime?

It’s time for you to protect your paycheck.

What am I talking about? You protect your home by insuring it against loss. You do the same for your car, boat, motorcycle, RV and personal property, but have you insured your paycheck?

Yes, I am talking about disability insurance. You protect your worldly goods with insurance, and you also need to protect your income against loss. If you become ill or injured and are unable to work, disability insurance pays you a percentage of your income until you can return to work.

May is Disability Insurance Awareness Month, the perfect time to talk to us and learn how to protect your paycheck.

-Marvin H. Feldman, CLU, ChFC, RFC, President and CEO of the LIFE Foundation

by NFS | May 26, 2016 | Archives

Don’t Let These Myths Stop You From Getting the Proper Coverage

Figuring out if you need disability insurance is pretty easy.  If you have a job, you need it.  Why then do the majority of American workers lack this basic protection?  Common misconceptions are largely to blame.  Here I will debunk four of the big myths surrounding this essential insurance coverage.

1.    Myth:  “I’d rely on my savings until I could get back to work.”

Reality:  Most people overestimate the resources they have to cover their expenses if a disabling illness or injury kept them from earning a paycheck.  According to a LIFE Foundation survey, half of working Americans say they couldn’t make it a month before financial difficulties would set in, and more than one in four would have problems immediately.  Keep in mind that disabling illnesses or injuries often last for months or even year.

2.    Myth: “I don’t need it – I don’t work in a dangerous profession.”

Reality:  You actually have a three in 10 chance of suffering a disabling illness or injury during your career that would keep you out of work for three months or more.  While it’s true that people in professions like farming, law enforcement, and construction face greater risks, the odd of suffering a long-term disability are high for all workers because illness – not accidents – account for 90 percent of disabilities that keep people out of work.

3.    Myth:  “The government provides assistance when people get disabled.”

Reality:  According to the National Safety Council, 73 percent of long-term disabilities are a result of an injury or illness that is not work-related and therefore wouldn’t qualify for state-based Workers’ Compensation programs.  If you were hoping for Social Security disability benefits, know that about 45 percent of those who apply are initially denied, and those who are approved receive an average monthly benefit of just $1063, which would leave you with an income barely above the poverty online.  Government programs are a good back-up plan, but shouldn’t be your main line of defense.

4.    Myth:  “I have disability coverage at work.”

Reality:  Disability insurance through work is a great benefit, but you need to find out exactly what coverage you have.  According to the U. S. Department of Labor, more than 70 percent of employers don’t offer long-term disability coverage.  And short-term or partial coverage wouldn’t be enough to allow you to meet your current and future financial obligations if you were unable to work for an extended period of time.

Call our office to see how we can help you get your protection today – 800-560-4637

April 15 a Good Reminder to Avoid the Estate Tax Trap

by NFS | Mar 31, 2016 | Archives

By Robert Deschene, Esq

During tax season, I’m reminded of Ben Franklin’s old saw:  nothing is certain in life but death and taxes.  As we approach the dreaded April 15, many of us are focused on our income tax returns.  Still, many people also wonder or worry about whether, upon their deaths, “estate tax” will be due.

What is the Estate Tax?

When we hear the words “estate tax,” we might think they can’t possibly apply to us, but only to very wealthy people, like Warren Buffett.  Not necessarily.  The government imposes a tax on the transfer of your wealth at death.  Estate tax is the amount that your estate will owe the government, and is calculated by the value of all the property you owned at your death.

Right now, the federal government’s estate tax does not apply unless you own at least 5.45 million at death.   Relatively few of us have to worry about this.

Massachusetts’ Separate Estate Tax

The bad news is that Massachusetts is one of the states which impose its own separate estate tax, which is imposed if you die owning $1 million or more.  The graduated tax rate can run as high as 16%, which can be a significant sum that you will not be leaving to your family.  Massachusetts seniors with taxable estates often migrate to Florida, not only for the warmer weather, but because Florida has no state estate tax.

Who Pays? – Your “Taxable Estate”

Some people ignore the issue of estate tax because they don’t think of themselves as a “millionaire”.  But remember that this tax is imposed on your “taxable estate,” which includes your home and/or vacation home, death benefits payable on any life insurance policies you own (i.e., not the cash surrender value), and any balances paid out of your retirement accounts (e.g., IRAs, 401ks) when you die.   If you total up these assets, or project their future value, you may easily exceed the $1 million threshold for paying estate tax, even though we don’t feel like millionaires.  So do the math.

Ways to Reduce your Taxable Estate

If you think you exceed, or will exceed, the threshold, there are ways to avoid or minimize paying estate tax, but you have to plan ahead.   You can’t just give away large assets to your family during your lifetime so they won’t be included in your taxable estate.   But the government will allow you to make many “small” gifts ($14,000, or $28,000 for spouses) every year, and you can give that amount to as many people as you want, even to non-family members.  You also can make direct payments to a college or medical provider to pay for someone’s tuition or medical expenses, even if the gifts exceed $14,000.   Over time, this repeated annual gifting can reduce your taxable estate dramatically, while still using your property to help your family.

If You Don’t Plan …

Married couples can protect up to $2 million from estate tax, provided they use the right estate plan, and not “simple wills.”  Although you can leave any amount to your spouse tax-free on your death, each spouse has their own $1 million tax exemption“coupon,” which can shelter that amount of assets from estate tax.   Married couples can leave any amount to their spouse tax-free, using the unlimited marital deduction.  But if they rely only on the marital deduction, the first spouse dies without using their $1 million coupon, and it was wasted.  The surviving spouse will then own $2 million when he or she dies, but will have only their own $1 million “coupon” left to use.  Estate taxes will be due.

Using Bypass Trusts to Eliminate Tax

Robert Deschene, Esq.

To avoid this result, an estate plan can provide that the coupon of the first spouse to die will be used to shelter $1 million of their assets, which will then be placed tax-free into a “bypass” trust.   The surviving spouse can still use the money in the bypass trust during their lifetime, but later, the surviving spouse can use their second “coupon” on the remaining $1 million of assets.  Result: no estate tax paid on $2 million!

Irrevocable Life Insurance Trusts

Finally, your ownership of life insurance policies that will pay out large death benefits to your family may expose you to estate tax.   Who owns the policy is usually not that important.  If you create an irrevocable life insurance trust to act as owner of these policies, your family will still get the proceeds without your estate paying estate tax.

Although death and taxes may be certain, you can do something proactive to avoid death taxes.

Many Retirees Face April 1st Deadline to Take Required Retirement Plan Distributions

by NFS | Mar 28, 2016 | Archives

WASHINGTON — The Internal Revenue Service today reminded taxpayers who turned 70½ during 2015 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Friday, April 1, 2016.

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, a taxpayer who turned 70½ in 2015 (born after June 30, 1944 and before July 1, 1945) and receives the first required distribution (for 2015) on April 1, 2016, for example, must still receive the second RMD by Dec. 31, 2016.

Affected taxpayers who turned 70½ during 2015 must figure the RMD for the first year using the life expectancy as of their birthday in 2015 and their account balance on Dec. 31, 2014. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.

Most taxpayers use Table III  (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2015 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation  in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

The IRS encourages taxpayers to begin planning now for any distributions required during 2016. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2016 RMD, this amount would be on the 2015 Form 5498 that is normally issued in January 2016.

IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners 70½ or older, the maximum annual exclusion for QCDs is $100,000. For details, see the QCD discussion in Publication 590-B.

For more information on RMDs, including help in calculating what your RMD should be, please contact our office today.