The Importance of Life Insurance in NJ Estate Planning

nj estate planning

If you have people relying on you, no doubt you have spent some time thinking about how to protect them in the event that something happens to you. In order to create a solid estate plan, life insurance should be a component of providing security for your loved ones even after you’re gone. Most life insurance policies fall into two categories: term life insurance and whole life insurance. How do you know which life insurance plan is best for you?

  • Term life insurance is only in effect for a specified period of time.
  • Whole life insurance covers you until death no matter when that is.

You’ll pay lower premiums for term life insurance than for whole life insurance. Other things to consider when selecting a life insurance policy include:

1. How much coverage do you need?

The end goal of term life insurance is to substitute the income you would have provided your family with. If you live past the coverage period of the policy, you receive nothing. Most policies cover for 10, 20, or 30 years. The premium (payment) for a term life policy is static throughout the life of the policy and is based on your age, health conditions, and lifestyle. Regarding term life insurance, the insurance company is betting that you will outlive the policy and they will not have to pay anything to your beneficiaries. Hence the lower premiums.

2. What kind of payments can you afford?

Whole life policies, on the other hand, are more complex. Because there is an absolute value and guaranteed payout for every policy, premiums are much more expensive. Insurance companies cannot gamble on whether or not they will have to pay out for your policy—they know they will have to.

3. How is your general health?

4. Do you make relatively smart lifestyle choices?

5. Do you want the option to borrow from your insurance policy?

Often, a complete health and wellness exam is required before an insurance company will issue a whole life policy. With whole life policies, part of the money you pay in premiums will go directly toward the value of the policy itself. This is your money. If you cancel the policy, you would still get some money back. While it will diminish the death payout of the policy, you can even borrow against a whole life policy.

6. What is your relationship status?

7. How much debt do you have?

If you are single, debt-free, and dependent-free, you probably don’t need life insurance at all. For most of us, this isn’t the case. Ask yourself what problems may arise if you were to die today. For instance, if you still have 20 years left on your mortgage, you might want to consider a term life insurance policy for 20 years so you know your mortgage will always be covered. On the other hand, if you have a lifelong dependent who requires constant care, setting up a whole life policy to cover their long-term care is probably the better choice.

8. How old are you?

Some people decide to invest in both a life and a term life insurance policy. When you’re younger, you may not be in the financial position (or have the need) to pay the premiums for whole life insurance. Many life insurance companies allow you to convert your policy from term to whole life as your circumstances change and as you age. Your new premiums would be based on your age when you convert. You may have to submit to a new medical exam, but by converting, you can benefit from lower premiums when you are younger while still putting money toward (what will become) a whole life policy to cover you later in life.

Estate planning, and life insurance in particular, can seem like intimidating tasks, but they don’t have to me. Veitengruber Law offers long-term planning guidance for all stages of life. We believe in utilizing personalized strategies to help our clients protect themselves and their loved ones. Schedule your free consultation to discuss all of your estate planning concerns.

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NJ Estate Planning for Small Business Owners

NJ estate planning

No one wants to plan for their untimely death. It’s a terrifying prospect that your family could be suddenly left without you. However, planning for your estate is an important part of being an adult. You need to designate what happens to your possessions and who will care for your children. What most people don’t realize is that planning for your business is just as important, if not more so. With careful planning, small business owners can ensure that their business endures and will help support their families for years to come.

Succession Planning

What is your plan for your company’s future without you? Do you want to pass on your business to your family to continue to run or do you want to make it easy for them to sell it? Do you have a plan for your employees and have you ensured that their futures will be safe without you? These are just some of the questions to consider.

Your family may not want to continue in your footsteps and these are conversations you will want to have with them before you start planning. While starting and growing your business may have been your dream, it might not be theirs. Make sure that if you plan to leave your business in the family that it is not a burden for them after you’re gone.

Death and Taxes, the Two Certainties in Life

Tax law is ever-changing and it is important to modify your plan accordingly. The good news is that New Jersey’s law recently changed and no longer imparts an estate tax (also known as the death tax) on deaths occurring in 2018 and afterwards.

New Jersey does still impose an inheritance tax, but close relatives such as parents, grandparents, spouses, and children are exempt. Other relatives will be subject to the inheritance tax which can range from eleven to fourteen percent depending on the amount inherited. These relatives can include siblings and spouses of deceased children.

There is good news when it comes to the federal estate tax as well. Businesses valued at less than 11.4 million dollars are exempt from the tax. Most small businesses fall under this valuation. If your business does meet this criterion, there are several actions you can take to minimize your tax exposure. You can develop a family limited partnership or divide the estate into several trusts depending on the size of the business.

Life and Disability Insurance

These two policies are essential for ensuring that your family and business continue to thrive without you. First you want to set up policies that will benefit your family. Then you will need policies that benefit your business. The payouts from the policies will enable the business to continue to operate during the transition between owners, enable payments to estate taxes, and/or buyout from other owners and partners in the business. Term life policies are expensive but the alternative is leaving your family and business without a safety net.

Keep Updating Your Plan

Approximately thirty percent of small business owners have no estate plan. Among those who do have a plan, the majority are over five years old. If your business is growing, your estate plan may no longer match your needs and it most certainly is not taking advantage of the ever-changing tax code. Once established, you should review and update your estate plan every three to five years. This is why it is so important to enlist the help of an experienced estate planning team like Veitengruber Law. We can help you create your last will and testament and other documents pertaining to end of life like power of attorney, living will, succession plan, and estate plan. With careful planning, you can ensure the success of your business and the security of your family in the future.

NJ Estate Planning: CPA or Attorney?

nj estate planning

Estate planning and asset protection are broad terms that encompass a wide array of financial and legal arrangements. A lot of people think that if they have a will in place, their estate planning is complete. A good estate plan, however, uses many more tools to help protect your assets and your legacy. There are so many different options when it comes to estate planning that it can be hard to know where to turn for the best advice. CPAs and attorneys both offer NJ estate planning services, but which professional is right for you?

Ultimately, choosing between an attorney and a CPA for your estate planning needs will come down to the kind of advice you are looking for and your overall estate planning goals.

CPAs, or certified public accountants, are trusted financial advisors with detailed knowledge of tax laws. An understanding of tax laws is important to estate planning because different estate planning tools are subject to different taxes. Tax laws change constantly and it is a CPA’s job to understand the implications of these changes. A CPA will be able to provide insight into estate and gift tax laws that could save you and your beneficiaries’ money in the long run. Complex estates with a lot of financial resources would benefit the most from the expertise of a CPA. That being said, a CPA is not a substitute for an estate planning attorney.

Experienced estate planning attorneys will also be familiar with the intricacies of how each estate planning tool will impact taxes and fees. Additionally, attorneys bring their vast legal knowledge to the table. There is a wide array of estate planning tools and each one will offer different protections for different situations. An estate planning attorney experienced with asset protection will know which tools to use and how to maximize the protections on your estate to ensure you and your loved ones are protected for the long-term.

With so many estate planning tools available, it can be difficult to understand which tools are best suited for your purposes. Most people have a will, but is that enough? This is where an attorney can make all the difference in the strength of your estate plan. The process of establishing a power of attorney, revocable and irrevocable trusts, and other estate planning tools is complex and will require a deep knowledge of the law. An experienced estate planning attorney will be able to help you make informed legal decisions by creating an estate plan made up of purposeful tools customized to meet your specific goals.

Your attorney can work with you and your family to distribute your estate as you wish and create plans that will benefit you and your loved ones in your lifetime and after. Estate planning attorneys may even be able to help you with the administration of your estate plan, either through the probate process or as the trustee of a trust. An attorney will have first-hand knowledge of your wishes and know exactly how to make sure to see your plans through to the end.

The more complex your estate, the more likely it is that you will want to work with both a CPA and an attorney. While certainly not necessary for everyone, this kind of estate planning “team” can work together to create a detailed, tightly woven plan to protect you and your loved ones. A CPA can offer the financial and tax advice to supplement the legal knowledge of an experienced estate planning attorney. However you decide to seek advice on your estate plan, do your research. These professionals will be intimately involved with you and your family’s affairs during your lifetime and after you’re gone. It is important to choose someone you can trust.

Estate planning is a very detail-oriented, complex legal process. It is in the best interest of you and your loved ones for you to consult with an attorney experienced with estate planning. The dedicated legal team at Veitengruber Law has years of experience providing personalized asset protection strategies based on each individual client’s needs. We treat our clients like family. Our attorney and legal team will work hard to protect your future so you can rest easy today.