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 1.NOW IS THE TIME TO PICK UP LOW-COST LIFE INSURANCE.

2.USING UNIVERSAL LIFE INSURANCE WITH SECONDARY GUARANTEES FOR ESTATE TAXES.

3.ARE YOUR OLD SAVINGS BONDS STILL EARNING INTEREST.?

4.DON'T OVERLOOK THESE LESSER-KNOWN FEATURES FOR LTCI POLICIES.

INFORMATIONAL NEWSLETTERS BY MAIL

*Ten Most Common Estate Planning Mistakes
*How To Keep The Family Business In The Family
*Ten Most Common Life Insurance Planning Mistakes
*Ten Most Common Retirement Planning Mistakes

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Now Is The Time To Pick Up Low-Cost Life Insurance

If you need life insurance, now may be the time to buy it.  Insurance premiums are expected to drop 4 percent this year, following 5 percent decline last year, according to the Insurance Information Institute, New York.  In fact, premiums are less than half of what they were a decade ago. 

There are two basic types of life insurance policies that have lowered their premiums: terms and permanent.

Term insurance is basic coverage.  You pay a premium and just get life insurance for a specific period, typically from 1 to 20 years.  Upon the renewal of a term insurance policy, though, you'll pay a higher premium because you're older.

Permanent insurance, on the other hand, provides both insurance coverage and a savings account, known as the "cash value."  Cash value policies include whole life, universal life, variable whole life, and variable universal life.  Cash value insurance is permanent protection.  You lock into a premium when you purchase the contract.  Universal policies let you make flexible premium payments.

Why are life insurance rates dropping?  People are now living longer.  The longer you live, the lower your insurance premiums.  Life insurance rates are dropping because death rates for the 25 to 44 age group-the primary purchasers of life insurance-have decreased significantly over the past 10 years, according to Weisbart.  In 1996, the death rate per 100,000 for the 25-to-44 age group was 177.8.  By 2004, it had dropped to 161.8, based on National Vital Statistics Reports preliminary data.  That represents nearly a 10 percent drop in the death rate in less than a decade for the prime insurance buying ages.

The drop in insurance rates can represent a substantial savings.  The annual premium for a 40-year-old male nonsmoker buying a $500,000, 20-year level term life insurance policy in 2007 would run $615 if he qualifies for a "standard" risk and $340 if he meets the more stringent requirements of a "preferred" risk.  Rates for women, younger people and for larger amounts of insurance would be lower.

Premiums rates for traditional whole life, universal life, and variable universal life insurance also are lower.  Today, someone age 35 would pay $8 per $1,000 of coverage for permanent protection.  Ten years ago it was more like $12 per $1,000 of coverage.

With rates lower than they ever have been, parents might reassess the amount of life insurance they carry and consider purchasing more.  For example, it takes, calculated in the most simplistic of ways, a $500,000 death benefit to pay a widow $2,500 a month for 17 years.  Yet, in 2004, according to LIMRA International, Hartford, Conn., the average 25 year-old to 34 year-old adult with life insurance had only $145,000; the average 35 to 44 year-old adult had only $323,000 of life insurance.

So what should you do if you're sitting on a higher rate term insurance or cash value policy?  Have an experienced life insurance agent conduct an insurance needs analysis to determine how much coverage you need.  On average, you need about five to eight times your wages to be adequately protected.

Most life insurance companies charge lower rates for larger amounts of insurance. So buying one larger policy rather than keeping a smaller one and starting a second policy should further lower your premium.  Rates often drop at the $250,000, $500,000, and $1 million levels.  Do note on the application that you plan to replace an existing policy.  And, don't drop the existing policy until the new one is is place.

The drawbacks: If your age, occupation or health has changed, you may not be able to get lower premiums from another insurer.  You can check term insurance rates at Web sites such as www.accuquote.com or www.selectquote.com.

There are more factors to consider when switching a whole life, universal or universal variable insurance policy.  In addition, consider:

-Although you can do a 1035 tax-free exchange to move the cash value from your old policy to a new policy, you'll pay commissions and other insurance costs on the new policy.  This can mean more than 50 percent of your premium in the first year and other commissions on the cash value that is moved to the new company.

-If the total of all prior premiums is less than the cash value in the policy you are replacing, you will owe income taxes on the difference.  A 1035 tax-free exchange should be considered in this situation.

-Usually, if cash value policy has been in force for 7 to 10 years, with a quality carrier and you are not changing the type of underlying investment from a fixed portfolio to a variable portfolio, it is unwise to make a change.

-Life insurance policies are incontestable after they have been in force for two years regardless of any errors or misstatements on the intitial application.  Replacing an existing policy with a new policy will start the incontestability period over again.

-Any policy loans on your old policy will have to be repaid.

Tip: Always check the financial strength of the insurance company you are considering.  The strongest companies are rated A++ and A+ by A.M. Best and AAA by Standard & Poor's.

Using Universal Life Insurance with Secondary Guarantees for Estate Taxes

At present, for 2007 and 2008, the estate tax exemption is $2 million per person, rising to $3.5 million in 2009, repealed in 2010, and then the tax returns in 2011 with an exemption of $1 million. Given existing laws, experts suggest that using life insurance to pay for potential estate taxes is a very viable solution.

According to industry reports, the number one product sold for estate liquidity today is universal life with a secondary guarantee. In short, this is a policy whereby insurers guarantee the insurance benefit on a universal life insurance policy even if the cash value in the policy goes to zero. This is known as a “secondary guarantee.” The policy owner agrees to pay a premium which is often less than a whole life insurance premium and if the policy owner keeps-up payments, the policy’s death benefit is guaranteed to age 100.

Policies with secondary guarantees are often used for estate planning where the crucial component is a guarantee of the death benefit and cash value build-up is secondary.

Survivorship life insurance (also called joint and survivor life insurance or second-to-die life insurance) can also be used for estate planning to create the cash liquidity to pay the estate taxes. However, in order for the insurance death benefit to avoid both income and estate tax, the policy must be set-up properly within an Irrevocable Life Insurance Trust (ILIT).

So what in general is universal life, what are its advantages and disadvantages, and when should it be used? According to Tools and Techniques of Life Insurance Planning, universal life – which was first introduced in the late 1970s -- is often referred to as a “flexible premium,” “current assumption,” “adjustable-death-benefit” type of cash value policy. It’s flexible premium because the policy owner can pay whatever premium they wish within a given range and adjust later as needed. 

Policy owners can even skip premium payments provided there’s enough cash value in the policy to cover policy charges. It’s called a current assumption because current interest rates and current mortality and expense charges are used to determine the cash value of the policy. And it’s called an adjustable death benefit because the policy owner can lower the death benefit at anytime and can raise it with evidence of insurability.

 Given this flexibility, universal life is a useful product should a person’s estate tax liability rise or fall with the Congressional tides. Typically, a universal life is best suited for long-term coverage needs; while a non-renewable term policy will generally be more cost-effective for short-term needs. Generally, however, such policies work best when flexibility is needed and policy owners need to reconfigure their premiums or death benefits.

According to some planners, the biggest advantage of using guaranteed universal life is this: The policy owner pays the least expensive premiums to guarantee a lifetime death benefit. The policy owner can also adjust the premium. If, for instance, there’s enough cash value to cover the mortality charges, the policy owner could even skip premium payments.

However, caution should be followed in skipping or delaying payments on these contracts since the “guarantees” could be impacted. Even premiums received during the grace period could affect the accumulated values and “guarantees.” Policies differ on this and need to be reviewed before any change is to be made.

The policy is also transparent – the policy illustrations and annual reports break out and report each element of the policy, such as premium, death benefit, interest credits, mortality charges, expenses and cash value, separately.

Universal life policies also offer two death benefit options, one that is similar to a traditional whole life policy and one that is like a traditional whole life policy with a term rider. The first, a level death benefit; the latter, an increasing death benefit.

When selecting a universal life policy, it’s especially important to consider the amount credited to cash values. The prospective policy owner should know how the insurer determines the amount credited to cash values. The amount credited to cash values depends on the expenses charged against the policy, the mortality charges assessed against the policy, net investment yield earned by the insurer on its portfolio investments and the method used to allocate interest to various blocks of policies.

Are Your Old Savings Bonds Still Earning Interest?

Do you, your parents, or elderly relatives have old E bonds, H or HH bonds, or the rare Savings Notes, lying around? If so, it may be time to cash in some of these bonds because they are no longer earning interest, and in some cases could have tax problems.

According to the U.S. Treasury Department, $12 billion in outstanding U.S. savings bonds no longer earn interest. Are your bonds among them? To answer that question, you need to know a little about how the various savings bonds came into being, how they work, their different maturities, and how they’re taxed.

The federal government first began issuing savings bonds, called E bonds, back in the mid-1930s. The bonds were issued in a range of denominations and citizens bought them at a discount of 75 percent of face value. You paid $75 for a $100 bond, for example.

The government stopped issuing E bonds after June 1980 and replaced them with EE bonds, which calculate earned interest slightly differently than E bonds. Investors buy EE bonds at half of their face value.

Investors receive interest from E/EE bonds only when they redeem the bonds. The bonds earn interest up to their “original maturity”—that is, when the accumulated interest and the original price paid for a particular bond total the face value of the bond. But interest payments are automatically extended after that, usually for periods of ten years, until the bond reaches its “final maturity.” At that point, the bond quits earning interest.

This is where matters get confusing for investors, because the final maturity dates vary. E bonds issued from May 1941 through November 1965 had 40 years to final maturity. As of this writing, nearly all of them have stopped earning interest.  E bonds issued from December 1965 through June 1980, however, have only 30 years to final maturity. As of this writing, all E bonds issued through April of 1975 have stopped earning interest.

The final maturity for all EE bonds is 30 years, and since none are older than July 1980, you have a few more years before they stop earning interest.  Do you still own any Savings Notes, also known as Freedom Shares, issued from May 1967 through October 1970 during the height of the Vietnam War? Like E/EE bonds, these bonds were issued at a discount with the interest deferred until redemption. Savings Notes had 30 years to final maturity and no longer earn interest.

H and HH bonds differ from other savings bonds in that investors buy them at face value and the bonds pay out interest in cash semiannually. The government first issued H bonds in June 1952. Those issued through January 1957 had final maturities of 29 years, 8 months. All H bonds issued after January 1957, until HH bonds replaced them in January 1980, have final maturities of 30 years. Again, as of this writing, H bonds issued up to April 1975 have stopped earning interest.

But HH bonds, which the government quit issuing after August 2004, have final maturities of only 20 years. Consequently, any HH bonds you have that are older than 20 years should be cashed in to get back the original investment (the face value).  Taxes on savings bonds are free of state and local taxes, but you pay federal taxes at your ordinary income tax rate. Because H/HH bondholders pay taxes on the interest as they receive it each year, they don’t owe any taxes when they redeem them—the final payment is simply a return of the original principal.

But with E/EE bonds and Savings Notes, you will owe taxes on the accumulated interest, assuming you elected to defer reporting the interest over the years, when you redeem them—or when they reach final maturity, even if you haven’t redeemed them. This interest income is taxable for the year of redemption or final maturity. If you missed that year—say you now realize some old E bonds you’ve got lying around the house matured years ago—you may need to file an amended tax return and possibly be subject to a late penalty and interest. Confer with your tax specialist.

For current information on whether any bonds you hold have reached final maturity, go to http://www.publicdebt.treas.gov/ and to “Are Your Savings Bonds Still Earning Interest?”

Don't Overlook These Lesser-Known FeaturesFor Long-Term Care Insurance Policies

When buying a long-term care insurance policy, most consumers concentrate on the basic features of the policy such as the dollar amount of the daily benefits, the length of coverage and what circumstances trigger the policy’s benefits. But newer LTC policies offer features and options consumers frequently overlook, yet can be very beneficial to the insured.

Survivorship benefits. This is an attractive feature for couples who buy individual policies from the same insurer. When one spouse dies, the company waives the remaining premiums on the surviving spouse’s policy. For this to go into effect, the insurer generally requires that both policies have been in force for several years (typically seven to ten years), and some policies require that no benefits have been paid to either spouse during that period.

Shared benefits. Couples who buy policies with benefits for a limited number of years, such as two or five, versus lifetime benefits, might find this feature attractive. This comes in three forms. One type allows people who exhaust their benefits to dip into their partner’s policy benefits. Another version creates a third pool of benefits that either partner can dip into. A third form is to have a single pool of benefits that both partners draw on.

The obvious risk here is that with two of the types, you could drain the other partner’s benefits. Financial planners commonly recommend that consumers buy lifetime benefits if they can afford it.

Alternate plan of care. One reason consumers are reluctant to buy an LTC policy when they are younger (say in their 50s) is the concern that the policy will become obsolete and not cover newer forms of care. For example, adult day care centers and assisted living facilities weren’t around years ago, and older policies still in force won’t cover them. With the alternate plan-of-care feature, the insured, his or her doctor, and the insurance company will ideally agree on a plan of care not currently specified under the policy but which the company will pay for.

Accelerated payments. This allows you to pay up the policy within a certain period instead of over the rest of your life by making accelerated premium payments. Examples include ten-year pay or payments made until you turn 65. Accelerated premiums, which are not allowed in some states, might run two to three times more than lifetime premiums.

This feature eliminates the challenge of making payments when you’re living on limited retirement income, and it can provide a tax advantage for some business owners (especially C corporation owners). On the other hand, should you need the policy earlier in your lifetime than is normal, you’ve “overpaid” your premiums. Disciplined savers also could bank the extra premium money they otherwise would have made, letting it earn interest and drawing on it for premiums once you’re retired.

Enhanced elimination period. LTC policies offer a choice of elimination periods, which is the number of days you must pay for long-term care out of your pocket before the policy starts paying. The elimination period may range from zero days up to 180 days or even a year. The longer the elimination period, the smaller the premium.

With an enhanced elimination period, you can start or accelerate the elimination period “clock” with just a few home health care visits. This can save you out-of-pocket expenses during the elimination period.

Respite care. It’s common for family members or friends to provide informal care at home to someone who otherwise would have qualified for their policy benefits. When this occurs, some policies will pay for temporary care while the family caregiver takes a “break,” even though the insured has not met the elimination period. Policies typically limit the number of respite days you can take.

These are just of a few of the lesser-known long-term care features. Others include bedreservation benefits,non-forfeiture benefits, geriatric care management coverage, international care,return of premium upon death, restoration of benefits and caregiver training. Some are standard in most policies, others are offered as options at additional cost.Review these and similar features with your financial planner and long-term care insurance agent to see if they’re available and if they make sense for you. written legal documents to serve as a proxy in place of a marriage contract and to help minimize potential financial disputes or complications in the event of a breakup or death, say financial planning professionals.

Goldstrand Planning Group
2800 W. March Lane, Suite 326
Stockton, CA 95219-8202
Toll Free 1-800-507-9911
(209) 472-7000
FAX: (209) 472-1551
e-mail: planning@goldstrand.com