Posted on Thu, Dec 31, 2009
It’s a human tragedy when a terminally ill patient’s life or death struggle comes down to how much they will pay in estate taxes. But that is the unintended consequence of what could happen at the stroke of midnight on January 1, 2010 when changes in federal tax law dictate that the estate tax will disappear for one year.
One wealthy, terminally ill real-estate entrepreneur told his doctors he is determined to live until the estate tax law changes. “‘Whenever he wakes up,’ says his lawyer, ‘He says: “What day is it? Is it Jan. 1, [2010] yet?’”
Starting Jan. 1, the estate tax — which can absorb up to half of a wealthy person’s estate — goes on hiatus for a year (UNLESS reinstated by Congress before the year is up, which can make it retroactive back to January 1!). For families facing end-of-life decisions in the immediate future, the change is making one of life’s most trying episodes considerably more taxing, emotionally and in every other way.
No one believed that Congress in its ultimate wisdom, with all the deficits looming, with a recession and two wars … would ever allow the estate tax to lapse. But that’s what is happening. As USA Today reported, “The seeds of the impasse were sown in 2001, when Washington enacted legislation that gradually raised the tax’s exemption ceiling while also cutting the tax rate.
At the time, estates valued at $675,000 or higher were subject to the tax. And they were taxed at a rate of 55%. This year’s exemption threshold is $3.5 million, and the tax rate is 45%. The levy brought in an estimated $26.5 billion in gross collections in 2008, according to the IRS.
The levy is set to disappear for 2010. Barring any agreement to extend or change the 2001 law, the tax is scheduled to resurface in 2011 at a rate of 55% on estates valued at $1 million or higher.
During the time the tax is not in effect, it would be replaced by a 15% capital gains levy on inherited property that’s sold. That could be a deep bite, according to Michael Halloran, president of the National Association of Estate Planners and Councils.
Will this New Year’s Eve have maudlin and morbid consequences for patients on life support when it comes to taxes? That is an ethical line no person should ever be induced to cross.
What’s your view on what some call the Estate Tax and others the Death Tax? Online
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Posted on Mon, Dec 28, 2009
As we prepare to turn the calendar page at year’s end, and commence a new chapter at the opening of a new decade, Father Time reminds us of something important. Life insurance serves many families as the financial binding in the “book of life,” connecting both family estates and generations as years go by.
A controversial question can arise: Should children consider life insurance for their elderly parents, planning for the eventuality of their passing, so that a sum of money can be left for their children and grandchildren?
The question has both financial and familial repercussions.
Economically, a grandparent who is say, age 65, may be facing 20 years or more of premiums that are costlier at an advanced age. Children might prefer to set money aside in the event a parent cannot care for themselves, such as for healthcare or long term living assistance.
Besides the budget, an essential question is how does the elder parent feel about it?
The opportunity could be viewed as the same as taking the policy out for oneself, except that the children are there to help pay for it. Assuming eligibility for insurance, the arrangement is an equitable one since the family will be the ones who will receive the insurance benefit in time.
So long as the motivation is not to take out a policy solely for monetary gain, any moral question is averted.
The primary purpose of life insurance to provide for family who can’t adequately cover themselves. Assuming the children are all on their own two feet financially, it may not be necessary to create a death benefit for an elderly parent, but for thoser who can afford this form of estate planning, the option may be sound.
What’s your view on life insurance for parents?
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Posted on Tue, Dec 22, 2009
At this introspective time of year, it’s worth reflecting that the joy of the holidays isn’t found in a shopping bag and the yuletide spirit isn’t limited to a single day on the calendar.
The perfect gift is one where you give of yourself to others, either in the form of your creativity -— a hand-crafted gift like a tin can pencil holder or a hand-painted paperweight — or your time — the preparation of a home cooked meal, a nature walk in the woods, or a chess or photography lesson.
As written in A Christmas Digest, “The dictionary defines a gift as simply, ‘a thing given.’ It says nothing about cost — only the condition of the heart. One person giving to another. That’s all.”
Give yourself away and see what happens. You may just get what you really want for Christmas.
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Posted on Fri, Dec 18, 2009
Every day through Christmas, Amazon.com is unveiling a new holiday song available to
download free for a limited time.
If there’s a new MP3 player on your shopping list, here’s a way to add the gift of music with holiday favorites from an international lineup of recording artists, from Tori Amos to Lady Gaga.
Happy Holidays from our family to yours…from Efinancial!
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Posted on Tue, Dec 15, 2009
Claremont McKenna College and University of Washington collaboration says whether you’re a cautious investor or a high roller, heredity’s at play
Investor behavior is largely determined by nature rather than nurture according to a new study by finance professors at Claremont McKenna College and the University of Washington. By studying twins and their financial behavior, researchers found that genetics account for one-third, on average, and as much as 45 percent of investor behavior. Other factors previously studied, such as age, gender, education, wealth and home ownership, when combined explain only five to 10 percent of investor behavior.
The study, “Nature or Nurture: What Determines Investor Behavior?” cross-referenced nearly 38,000 twins in the Swedish Twin Registry, the world’s largest, with comprehensive personal financial data–stocks, bonds, real estate, cash–collected by the Swedish government. This data allowed a comprehensive method to measure genetic versus environmental impact on investing and personal finance.
“We found that genetics explains differences in investor behavior much more than everything else that people have proposed,” said Siegel.
To separate genetics from environmental drivers of financial behavior, the researchers compared each twin pair’s stock market participation, asset allocation, and portfolio risk. In all three measures, the data showed a significantly higher correlation between identical twins than non-identical twins. Correlation of a random sample of the population is close to zero. This stark difference between the identical and non-identical twins relative to the general population is strong evidence that investing behavior is, in significant part, hereditary.
“We found that the correlation among twins held true, no matter what their age and life experience,” said Barnea. “Although family environment has a limited impact on young twins’ behavior, that disappears as they age.”
The researchers considered 716 twins from the Swedish registry who were raised apart and found their average correlation in investing behavior to be virtually identical to those raised together, adding more evidence that genetics drives investor behavior.
“There is always going to be some part of you that is predetermined at the moment you are born, and we’re learning that the way you invest is at least partly hereditary,” said Cronqvist.
The full study is available for download at http://papers.ssrn.com/abstract_id=1467088.
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Posted on Mon, Dec 14, 2009
We at Efinancial place a premium on the value of a “guiding hand” helping to save you money at every turn while you shop (that’s the power of our Internet guidance when
shopping for life insurance).
So we can’t help but admire InvisibleHand, a handy download for your Internet Web browser that shows a discreet notification when the product you’re browsing can be bought for a lower price elsewhere.
InvisibleHand works automatically while you browse to find you better deals on products from more than 100 top retailers in three different countries. It’s effortless comparison shopping that’s designed to work for you as a seamless addition to your standard browsing experience.
That’s very much akin to what Efinancial.com can do for you in the life insurance category, helping you find the lowest life insurance premiums among America’s top insurance companies, but of course men and women cannot live on life insurance alone! Why not give InvisibleHand a try!
How are you using technology to give you the advantage of locating the best prices on the things you buy, be they holiday gifts or life insurance savings?
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Posted on Wed, Dec 09, 2009
Is it possible to put a value or a price on human life? Strange as it may sound, that is exactly what underwriters and insurance companies attempt to do when they are qualifying an applicant for a life insurance policy.
One of the first considerations an insurance company will make when evaluating a new customer is whether the amount of insurance being applied for is consistent with the net worth of the individual. These underwriters need to do what can sound a bit inhuman, but the calculation of “human life value” is used by life insurance companies to determine the maximum amount of insurance that they can offer you.
How does the calculation work? The “life value” is based either on the financial assets of the insured, or the earning potential, typically whichever is greater. An asset calculation is pretty straight forward, as the insurance company will generally insure you for the same amount of total financial assets you possess with no questions asked. Earning potential gets a bit more complicated but the conventional guidelines are to follow an Age Income Multiplier.
Here’s the basic formula:
Age 20-35 30x
Age 36-40 20x
Age 41-45 14x
Age 46-50 12x
Age 51-59 10x
Age 60-65 7x 66+ 5x
There is one more factor to figure in to determine the total amount of life insurance a company can offer you. That is your income. Depending on your income earnings, many insurers will only allow you to pay a certain amount of your income towards insurance.
For example, if you make less than $80,000 you are only allowed to contribute up to 5% of your income to life insurance. If you make between $80,000 and $120,000 it goes up to 8%, between $120,000 and $250,000 it’s 10% and over $250,000 is decided on an individual basis. If you want to maximize your human life value then you would get the most insurance you could.
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Posted on Fri, Dec 04, 2009
Two-thirds of customers are dissatisfied with their life insurers and nearly half would be inclined to bolt to a competitor if they could get a better deal, according to consulting firm
Accenture Ltd.
A survey of 5,600 consumers in 14 different countries and 10 industry sectors was conducted between April and May of 2009. About 2,500 of the participants were asked to evaluate their life insurance providers.
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Posted on Tue, Dec 01, 2009
Interested in a fast, easy-to-absorb guide to personal financial news and information you can “eyeball” literally at a glance.
Mint.com (
www.mint.com), a leading online personal finance service from Intuit, Inc., has condensed it down to a salvo of messages in bite size Twitter chunks of just 40 characters each.
The new “Money Tweets” service deliver news and advice from from across the Twittersphere, and synthesizes it in a single, streamlined platform at www.mint.com/twitter.
Money Tweets includes five categories, allowing people to home in on whatever content most interests them:
- Topics – Collects information relating to budgets, saving, investment, loans, and retirement feeds. Sources range from industry leaders, such as Morningstar (@morningstarinc.) and the Wall Street Journal (@WSJ), to bloggers with cult following and specific expertise, including Wisebread (@wisebread), Stocktwits (@stocktwits) and Budgets are Sexy (@budgetsaresexy).
- Tweets about Mint.com – Tracks, in real-time, what people are saying about Mint.com.
- Tweets from Mint.com - Updates followers on the latest from Mint.com -product upgrades, new blog content, economic indices and awards or speaking opportunities. This tab helps people keep up with what the company is doing, and shows the interaction between the Mint.com team and customers that happens in the Twittersphere.
- Questions – A question of the day – based on spending patterns, budgeting tips or other relevant topics – helps users learn from each other and crowd sources fun and useful tips and tricks.
- Popular – Keeps followers on top of hot financial topics, anything from the bailout, interest rates or Bernie Madoff. Money Tweet tracks and reports on volume and trending patterns over a selected period of time.How has Twitter influenced the way you manage your money? Could you benefit from financial advice in short message bursts?
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