“We all — in the end — die in medias res. In the middle of a story. Of many stories.” — Mona Simpson
These poignant words were part of Mona Simpson’s tribute to her late brother, Apple founder, Steve Jobs. Mona’s words really get to the heart of the matter, though, in that, not only do we all die, but we all die in the midst of our lives, in the middle of our stories.
We wanted to end our month-long focus on preparing for and managing the inevitable with this quote. Ensuring that you, your loved ones, and your business are adequately protected from the ill-effects of an unforseen death or tax liability can make all the difference in the world.
Here at St. Croix Advisors, we seek to minimize the financial implications those inevitables can have on your story (and the stories of those around you). We just can’t say it enough, proper planning is the key.
Contact us today to ensure that your story is adequately protected.
To read the full eulogy (and we highly recommend it), please visit the October 30, 2011 New York Times article, A Sister’s Eulogy for Steve Jobs.
The transfer-for-value rule is an important, yet often overlooked, component of life insurance planning, particularly in the business spectrum.
Enacted to prevent tax-free windfalls from life insurance policy speculation, the transfer-to-value rule could come into play without you even knowing it. Investopedia defines the rule as, “The stipulation that, if a life insurance policy (or any interest in that policy) is transferred for something of value (money, property, etc.), a portion of the death benefit is subject to be taxed as ordinary income. This portion is equal to the death benefit minus the item(s) of value, as well as any premiums paid by the transferee at the time of the transfer.”
There are some exceptions to the rule (particularly applicable in the business environment). According to Glenn E. Stevick Jr.’s Advisor Today article, “The Transfer-for-Value Rule,” the five exceptions are:
- Transfers to the insured,
- Transfers to a partner of the insured,
- Transfers to a partnership in which the insured is a partner,
- Transfers to a corporation in which the insured is a shareholder, and
- Transfers in which the transferee’s basis in the transferred policy is determined by reference to the transferor’s basis.
While examples of the above abound, examples of situations in which people assumed they were exempt but actually weren’t are just as prevalent.
Therefore, if you’re facing a situation that involves a transfer of a life insurance policy, your best bet is to tread carefully and make sure you ask for assistance from your tax advisor.
For more information, contact Brett Anderson with St. Croix Advisors today.
No matter your goals, St. Croix Advisors is your one stop solution to managing your business and your life, so you may enjoy both to the fullest.
While it’s becoming repetitive, I can’t stress it enough (especially in my profession), a good offense of preparedness is your best defense against the unknowns in life.
Last week, we discussed the additional steps one must take to ensure their assets are distributed according to his or her wishes upon his or her death. (Click here to read Your Will Isn’t Good Enough). This week, we’ll explore that concept further as we outline the documentation you need before you die.
Saabira Chaudhuri’s Wall Street Journal article, The 25 Documents You Need Before You Die (Weekend Investor, July 1, 2011) outlines the following items as must-haves prior to death or incapacitation.
- The Essentials
- An original will on file
- A copy of your revocable trust
- A signed “Letter of Instruction” (should include names and contact information of attorneys and other advisors)
- Proof of Ownership
- Houses, Land, Cemetery Plots, Stock Certificates, Savings Bonds, Partnership or Corporations Agreements, Mortgage Accounts, etc.
- Detailed information on loans that you made to others
- The most recent three years of tax returns (a great snapshot of what investments heirs should be looking for)
- Make a list of all Accounts (along with login information and passwords)
- Safety Deposit Boxes
- Health-Care Confidential
- Durable Healthcare Power of Attorney form
- A Living Will
- Life Insurance & Retirement Accounts
- Copies of Life Insurance Policies
- List of Retirement Plans
- Pensions, Annuities, IRAs, and 401(k)s
- Marriage & Divorce
- Marriage Certificate
- Divorce Judgment and Decree
- Copy of the most recent Child Support Payment Order
- Copies of Life Insurance Policies that benefit your children
- A copy of the “Qualified Domestic Relations Order”
Note, it’s useless to have spent the time compiling the above documents unless your loved ones know of their existence. Therefore, make sure that your heirs know where to look for your important paperwork in the event you’re not around to ask. Should you at any time need to amend any of the information, be sure the most current copies and information are on file. (An annual review of your compilation could prove most helpful).
Read the full article: The 25 Documents You Need Before You Die
- Chaudhuri, Saabira. (2011, July 1). The 25 Documents You Need Before You Die. The Wall Street Journal. Retrieved July 4, 2011. http://online.wsj.com/article/SB10001424052702303627104576410234039258092.html