1 Life & Health Insurance Advisor MRCT Benefits Plus is a comprehensive employee benefits, wellness and Human Resources consulting firm offering a variety of financial services to businesses and individuals Life Insurance June 2012 Volume 5 Number 6 A One-Time Opportunity to Protect Your Estate 230 S. Bemiston; Suite 900 Clayton, MO (314) FAX (314) Thanks to the Tax Relief Act of 2010, for 2012, the lifetime gift tax exclusion increases to $5 million, while the estate tax exemption increases to $5.12 million. Unless Congress extends the Act, next year both the estate tax exemption and gift tax exemption amounts will revert back to $1 million. This creates what could be a one-time opportunity to protect your estate from taxes. Gift taxes prevent property owners from avoiding estate or inheritance taxes by making gifts while they are still alive. They differ from estate taxes in that the donor, rather than the recipient. pays the tax. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an This Just In The largest open long-term care insurance claim has reached $1.7 million in paid benefits, according to a report from the American Association for Long-Term Care Insurance (www.aaltci.org). The claimant, a woman, purchased coverage at age 43, paying an annual premium of $881. Three years later her long-term care insurance claim began and has continued for almost 15 years. [Note: Payment of policy premiums ceases when an individual is receiving policy benefits.] Long-term care insurers paid approximately $6.6 billion in benefits to approximately 200,000 individuals last year, said Jesse Slome, executive director of the
2 Life Insurance Life & Health Insurance Advisor June 2012 interest-free or reduced-interest loan, you may be making a gift. The tax applies whether the donor intends the transfer to be a gift or not. In general, any gift that falls into one of the categories below is exempt from tax: Y Tuition or medical expenses paid directly to an educational or medical institution for someone else, Y Gifts to your spouse, Y Gifts to a political organization for its use, and Y Gifts to charities. tion. For 2012, the gift tax exclusion amount is $5 million. Unless Congress extends the Act, after December 31 the lifetime gift tax exclusion will revert to $1 million. Irrevocable Life Insurance Trusts Leverage the Gift Tax Exemption Many types of trusts can help you shelter your estate from taxes. Setting up an irrevocable life insurance trust can help you take advantage of the higher lifetime gift tax exemption before it expires. Although life insurance proceeds are generally exempt from income taxes, they can be subject to estate taxes if the total value of the death benefit plus the rest of your estate exceeds the estate tax exemption amount ($5.12 million for 2012). To prevent insurance proceeds from becoming part of your estate, you can set up an irrevocable life insurance trust. The trust uses the gift tax exemption to buy an insurance policy on the life of the grantor or grantor and spouse, leveraging the gift tax exemption into a larger tax-free death benefit. The beneficiaries will receive the policy s death benefit outside the estate and free from income taxes. This type of arrangement can be particularly helpful to heirs of estates that contain illiquid assets, such as a going business concern or real estate, since they can use policy proceeds to pay any estate taxes due without selling these assets. Of course, the benefits of this arrangement come with many strings attached. This type of trust must be irrevocable, meaning you cannot change its terms once it is set up, so it is not something to enter into if your This Just In AALTCI. The five most common reasons for a long-term care insurance claim are Alzheimer s disease, stroke, arthritis, circulatory issues or injury. One in 10 (10.4 percent) of new individual claims initiated during 2011 began before the claimant reached age 70. While most long-term care insurance claims begin at older ages, typically in one s late 70s or 80s, accidents and illnesses are also a common reason younger people need this care for extended periods, Slome noted. Gifts that do not meet these criteria generally count toward your annual exclusion amount and lifetime gift tax exclusion. You do not have to file a gift tax return for any gifts that fall under the annual exclusion amount. This amount adjusts annually for inflation; for 2012, it s $13,000. This means an individual can give gifts valued up to $13,000 per person, to any number of people, without paying gift taxes. Your spouse can also give up to $13,000 per person. You must file a gift tax return if any of these gifts exceeds the annual exclusion. Any gifts given that exceed the annual exclusion amount apply to your lifetime gift tax exclusion. This is the total amount that you can transfer to individuals, other than a spouse, during your lifetime without incurring a gift tax. After you reduce your lifetime gift tax exemption to zero, you may have to pay gift taxes on further gifts. Any credit used to eliminate the gift tax will reduce the estate tax exempcircumstances could change. To avoid tax consequences, it must be set up properly, a complicated process that requires an attorney s services. Expect to pay several thousand dollars for these services. As with any trust or other arrangement that could have tax implications, you will also want to consult your tax advisor. For more information on using life insurance in estate planning, please contact us and consult your tax advisor for information on any tax implications.
3 Health Insurance Life & Health Insurance Advisor June 2012 Getting the Most Out of a Visit to the Specialist In 2007, visits to medical specialists represented 22.2 percent of all physician office visits, while visits to surgical specialists accounted for 19.8 percent. Seeing a specialist costs more than seeing a primary care physician. A specialist also does not know your entire medical history like your primary care physician does. Here s how to make a visit to the specialist worth your time and money. Planning Your Visit What is the purpose of your visit? If your primary care physician refers you to a specialist, ask why. Does he/she want the specialist to confirm or make a diagnosis, put together a treatment plan or provide a service (such as surgery) that your primary care physician doesn t provide? Knowing the goal of your visit can help keep you and your providers on track. What level of care do you need? Some specialists have very narrowly focused practices. For example, oncologists treat cancer patients, but some oncologists treat children only, while others focus on gynecological cancers, for example. Do you need the expertise of a specialist with a highly focused practice, or will one with a more general practice do? Usually the more specialized the practice, the longer you will wait for appointments and the more you will pay for care. Which specialist will you see? Your primary care physician will likely give you the name of a colleague or two. But ultimately, it s your decision because you are responsible for the quality of healthcare you receive. A physician can specialize in any field of medicine regardless of whether he/she has received advanced training. To check whether a physician has completed an approved residency program and passed an exam in his/ her specialty area, check the listings at the American Board of Medical Specialties, www. abms.org. The Medicare Physician Compare site provides performance information on physicians and other healthcare professionals who are Medicareenrolled. You can find physicians by geographic location and specialty at care.gov/find-a-doctor/provider-search.aspx. What does your insurance require? Before making an appointment, review your coverage. Some plans require a primary care provider s referral and/or preauthorization before it will pay for a visit to a specialist. Check to see what type of documentation your plan requires and follow requirements to the letter to avoid claim disputes. Have you selected an in-network provider? Check your plan s preferred provider list. Choosing an out-of-network provider can add hundreds or even thousands of dollars to your out-of-pocket costs. When will you see the specialist? If time is critical, ask your primary care provider s office to request an appointment for you. What information will your primary care provider give the specialist? Before the appointment, ensure your primary care provider communicates the reason for the referral and provides your medical history and relevant
4 Life & Health Insurance Advisor June 2012 test or imaging results. What medications do you take? Before your visit, list all medications you take, including dosages and frequency. Don t forget over-the-counter medications, vitamins, supplements and herbs, as many of these interact or interfere with other drugs. At Your Visit What will you discuss? To start, ask your specialist if he/she knows the reason for the referral and whether your primary care physician has provided all relevant records. After a review of your records and an examination, you will want to discuss your treatment plan. What are the potential side effects or complications and how likely are they? How will your condition and any recommended treatments affect your general health and quality of life? Feel free to discuss, even debate, your treatment plan. If you have concerns, you can always ask for a second opinion. Depending on your situation, you might also want to discuss preventive or self-care. Are there things you can do to improve your condition or prevent it from worsening? Will you see the specialist again? If your treatment plan includes surgery, will the specialist provide follow-up care, or will your primary care physician? Will you visit the specialist on an ongoing basis, or will your primary care physician manage your treatment? For more information on the benefits provided under your health plan and how to use them, please contact us. Roth IRAs vs. Traditional IRAs Retirement Planning Many of the rules that apply to traditional IRAs apply to Roth IRAs. You can contribute up to $5,000 this year ($6,000 if you re age 50 or older) to all of your IRAs. However, Roth IRAs have some features that could make them preferable to traditional IRAs in certain circumstances. Read on for more information. With a traditional IRA, you can deduct contributions from your income, subject to certain limits. Your funds also grow income tax-free. But when you make withdrawals, you will owe taxes on these funds at your current rate. With a Roth IRA, you make contributions with after- tax dollars, but you receive withdrawals tax-free. Tax-free withdrawals under a Roth IRA might make them a better option for some individuals, since taxes can take a big chunk of your funds, and you might not be in a lower tax bracket after retirement. You can make contributions to a Roth IRA even if you participate in a qualified employer retirement plan, such as a 401(k). For singles, the maximum contribution allowable
5 Retirement Planning to a Roth IRA begins dropping when income exceeds $110,000 and phases out completely for those with incomes of $125,000 or more. Couples married filing jointly and qualifying widowers can contribute up to the limit if your modified AGI is less than $173,000 for Those with incomes between $173,000 and $183,000 can contribute a reduced amount; those whose incomes exceed $183,000 cannot contribute. Traditional IRAs require you to begin taking minimum distributions, or withdrawals, after age 70½ or pay penalties. You cannot make new contributions in or after the year you turn 70½. Roth IRAs have no minimum distribution requirements, so your funds can grow longer. And as long as you have taxable compensation such as wages, salaries, professional fees, taxable alimony and the like you can contribute to your Roth IRA. If a Roth IRA owner dies, a sole beneficiary spouse can combine the inherited Roth IRA with his/her own Roth IRA if he or she elects to treat it as his or her own IRA. Finally, Roth IRAs have estate tax advantages over traditional IRAs. If an IRA owner bdies with funds left, the balance might be included in the estate. If your estate is large enough, this could subject your funds to estate taxes. On top of that, beneficiaries of traditional IRAs might also have to pay taxes on their withdrawals when they take distributions. Since you have already paid income taxes on your Roth IRA contributions, your plan s assets might be subject to estate taxes, but distributions to your heirs can avoid income tax. If you think you will be in a lower tax bracket after retirement, a traditional IRA Life & Health Insurance Advisor June 2012 may prove the better option. You benefit now through the IRA tax deduction if your income meets the requirements, and only the growth on your IRA is taxable at retirement. However, if you meet the income eligibility standards, don t need the deduction now and don t anticipate being in a significantly lower tax bracket after retirement, the Roth IRA could be right for you. You give up a deduction now for tax-free money at retirement. For more information on Roth IRAs and other retirement plans, please contact us, and consult your tax advisor for information on any tax implications. Benefits of Saving Now Why should you enroll in a retirement plan or contribute to an IRA? Did you know Y That retirement can last for 30 years or more? Y That a retiree will need up to 80 percent of his/her annual income today to retire comfortably? Y That the average benefit amount paid monthly by the Social Security Administration is $1,177? Example of time value of money Future Retirement Savings Value - Assuming 6% annual return Monthly Savings 5 years 15 years 20 years $50 $3,506 $14,614 $23,218 $200 $14,024 $58,456 $92,870 $500 $35,059 $146,136 $232,176 You can find a calculator at Bankrate.com that helps you estimate how much you will need to save to meet your retirement goals at retirement/retirement-calculator.aspx. The calculator considers your income goals, number of years until retirement, number of years after retirement, annual inflation and average annual yield on balance. For more assistance in retirement planning, please contact us.
6 Life & Health Insurance Advisor June 2012 Another Reason to Think Before You Drink? Did you know that your insurance plan might not cover you if you are involved in an accident while using alcohol? Most states have alcohol exclusion laws, which allow insurance companies to deny reimbursement to hospitals for treatment to those who are intoxicated at the time of injury. Although many insurers apply alcohol exclusions only to auto policies, they may also apply them to health policies in states that allow them to do so. The National Highway Traffic Safety Administration (NHTSA) says although these laws were intended to discourage drinking, they may limit the ability of physicians to recognize people with alcohol or drug problems and refer them to treatment. In addition, the laws may reduce the incentives for physicians to test BACs [blood alcohol concentration] of injured people who may have been driving at the time of their injury and may also deter injured drivers from seeking medical treatment. Both the NHTSA and National Association of Insurance Commissioners encourage the repeal of alcohol exclusion laws. States that either have repealed their alcohol exclusion laws or expressly prohibit insurers from denying health insurance claims due to the insured s intoxication are California, Colorado, Connecticut, Illinois, Indiana, Iowa, Maine, Maryland, Nevada, North Carolina, Oregon, Rhode Island, South Carolina, South Dakota and Washington, and the District of Columbia. The Bulletin of the American College of Surgeons (November 2010) says that Virginia still has alcohol exclusion laws, but insurers operating there do not apply them. In all other states, you might want to check your auto and health insurance policies for alcohol- and drug-related exclusions. In states that never enacted an alcohol exclusion law, Courts have ruled in favor of allowing insurance companies to deny insurance coverage... reports the Bulletin of the American College of Surgeons (November 2010). These states include Massachusetts, Michigan, Minnesota, New Mexico, New Hampshire, Oklahoma, Utah, Vermont and Wisconsin. For more information on what your insurance policies cover, please contact us. SmartsPro MARKETING The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing does not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher s permission. All rights reserved SmartsPro Marketing. Tel