Is Your Financial House Built on a Solid Foundation?

By David Kauwe, CLU, ChFC, LUTCF, RFC 
Associate with Consultus, LLC

A Solid Foundation is Necessary to Insure the Stability of Any Structure.

Many Folks are Looking to a Revocable Living Trust to Help Built that Strong, Solid Foundation for Your Financial House.  Here’s Why:

1.       First of all, any asset that is placed into the Living Trust is not subject to the probate process.  The average cost to probate an estate across the US is 5% of the Gross Estate.  The Gross Estate means the Current Market Value of the asset without subtracting out any loans owed on the asset. 
2.       By avoiding Probate you eliminate the average time it takes to go through the process which is 12-18 months. 
3.       By avoiding Probate you also keep your estate private as a Living Trust is not a matter of public record unlike a Will.
4.    A Living Trust avoids the need for a conservator appointed in a “Living Probate” situation in the event of a mental or physical incapacitation.  This allows a spouse with one signature to carry on the affairs of the couple when one becomes incapacitated due to illness or injury. 
5.  A Living Trust allows any appreciable asset to receive a “Stepped-Up Basis when it is passed to the beneficiaries.  This means there is less capital gains to have to pay taxes on.  
6.   A Living Trust allows for greater control on when assets are distributed to heirs. 
7.   A Living Trust allows for protection for children from previous marriages to receive their inheritance and not be unknowingly disinherited.   
8.   Properly structured a Living Trust with a Credit Shelter Provision will allow both spouses to take advantage of the Federal Unified Credit Exemption of $5,430,000 saving Millions in Estate Taxes. 
9.   By using a QTIP - Qualified Terminable Interest Property provision in your Living Trust, you will also be allowed to defer any Estate Taxes that would have been due on the amount over the Unified Credit of $5,430,000 for the deceased spouse until the death of the second  spouse.

In Building Your Financial House Think About Using a Revocable Living Trust to Start as the Foundation.  You Can Co-Ordinate Other Types of Trusts Easily with a Living Trust.  Irrevocable Life Insurance Trusts, Charitable Remainder Trusts, Generation Skipping Trusts and So on!

Don’t Be Foolish With Your Foundation!  Make it Solid as a Rock with a Revocable Living Trust.

David A. Kauwe, CLU, ChFC, LUTCF, RFC is an Associate with Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC. dave@hawaiiandaves.com or at (919) 698-8832 cell.

Got Your Umbrella?

“Got Your Umbrella?”

  

By David Kauwe CLU ChFC LUTCF RFC

Consultus LLC

Do You Have Your “Umbrella”?

It’s More Than Just to Protect You Against the Rain!

The Umbrella Liability Policy is One of the Best Buys in the Insurance World!!!

In this world of frivolous litigation, folks are very concerned that as they try to get ahead in the world, there are crooks and cons out there scheming to take your hard earned wealth.

Then there’s the legitimate accidents, spill a cup of coffee in someone’s lap, kid’s left their skateboard out in the yard, dog got out through a hole in the fence and bit the neighbor’s child. 

If you have come into some money, how will you protect your assets? 

You could spend Thousands of Dollars setting up All Kinds of Trusts to protect everything from your house to your car, your kids to your dog.  But what if You Aren’t quite the Rockefellers and your assets aren’t worth 5 million dollars? 

The Umbrella Liability Policy just might be what the doctor ordered!!!

An “Umbrella” Policy is a Liability Insurance Policy written by most Property Casualty Agents like your friendly neighborhood, home and auto insurance agent.  A typical “Umbrella” Policy is written in denominations of 1 million and can cost as little as $120 a Year for 1 million dollars of liability coverage.  My coverage for instance cost a little under $200 a Year for 2 million dollars of liability coverage.  This type of coverage covers you for physical damage, property damage and other types of liability either you or anyone or anything in your control (i.e. spouse, kids, animals, house, car etc.) causes.  You will have to raise the underlying limits on your Auto and Homeowners policies, but the increases are minimal.

Next to Life Insurance, in my opinion, This IS the BEST Value in the Insurance World.  See your home/auto insurance agent to get set up today!

Now You Know Enough to come out of the rain and get under the “Umbrella”!!!

Hawaiian Dave

David A. Kauwe CLU ChFC LUTCF RFC is an Associate with Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC. dave@hawaiiandaves.com or at (919) 698-8832 cell.

Give! Even If It Doesn't Hurt!!!

Give! Even If It Doesn’t Hurt!!!

            

By David Kauwe, CLU, ChFC, LUTCF, RFC

Associate with Consultus, LLC

 

Several Charitable Estate Planning Tools Can Be Extremely Profitable to You as well as Your Chosen Charity!

You can receive the following benefits when you choose to bless the lives of others:

1.      A Tax Deduction for the Remainder of the Assets that will ultimately go to the charity.

2.      The Capital Appreciation on the Assets Donated to the Trust will Escape Taxation due to the Charitable Nature of the Trust.

3.      You will Receive a Certain Percentage of the Value of the Charitable Trust Assets at least Annually and You will Receive that Income for Up to 20 Years.

4.      As Trustee of the Charitable Trust, You Will be able to Manage the Assets and Diversify the Investments in the Trust to Benefit You and Ultimately the Charity.

5.      By Setting Up a Life Insurance Contract to Replace the Asset Donated to the Trust You Can Provide a Source of Tax-Free Income for You and Provide a Income Tax-Free Benefit for Your Heirs.

Let’s look at an Example:

Let’s say you purchased stocks for $500,000 20 years ago and they have now appreciated to be worth  3 Million Dollars.  You decide to sell them.  You would pay Long Term Capital Gains of up to 20% or $500,000 would go to Uncle Sam.  That would then leave you $2,500,000 to invest.

If you invested it in a 5 year CD at the current rate of 2.23%, After taxes you would have $30,328 to spend each year.  Then upon your death, you may be subject to up to 40% Estate Taxes. 

Let’s see what would happen if you set up a Charitable Trust. Donate the 3,000,000 Dollars to it and set up yourself as the Trustee and Recipient of the Trust.  Upon the selling the stocks, you’ve now got the Full $3,000,000 to invest.  You pay No Taxes.  The capital appreciation is not realized because of the Charitable Nature of the Trust.  You’ll receive 10% of the Trust or $300,000 each year for the Next 20 years.  With different types of assets you invest in, you would actually receive monies based on a four-tier accounting system, some ordinary income, some capital gains, some tax-free and return of principal.  Over the 20 years, that would yield a Gross Total of $6,000,000 or After Tax Total of $3,900,000 .  As an added bonus you would receive a Current Tax Deduction on the expected ultimate donation to the Charity.

By setting up a $3,000,000 Life Insurance Contract and funneling dollars into it over the first 20 years, you then would be able to withdraw TAX-FREE Income for the subsequent 20 years. You could receive close to $3,440,000 TAX-FREE, in addition to the previous Net Spendable $1,480,000 from the Charitable ­­­­­­Trust, imagine up to $4,920,000 Net Spendable Income.  Upon your death, the Remaining Benefit from the Life Insurance will go Income Tax Free to your beneficiaries, but you may be still subject to the Estate Tax.    

This is an Awesome Way to provide for You, Your Heirs, Your Favorite Charity, sadly leaving the IRS to miss out on taxes they were so much looking forward to receiving. 

David A. Kauwe CLU ChFC LUTCF RFC is an Associate with Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC. dave@hawaiiandaves.com or at (919) 698-8832 cell.

Indexed Annuities

Indexed Annuities

By David A. Kauwe, CLU, ChFC, LUTCF, RFC, 
Associate with Consultus, LLC

Confused about Annuities? Fixed, Deferred, Immediate, Indexed, Hybrid, Single Premium, Flexible Premium, Caps, Fees, Highwater Mark.

What’s it all Mean???

Today I’d like to give you a simplified overview of the Indexed Annuity.

These Annuities are issued by Insurance Companies. They are tax-advantaged products that defer taxes on the interest earned until some future time that the monies are withdrawn.

The early 20th century comedian Will Rogers once said, “I’d rather have a return of my money, then a return on my money!”

Since the beginning of this century we’ve seen some crazy ups and down as a nation financially. The tech boom, 911, sustained growth, the housing crisis, much like a yo-yo!

Thousands have seen their 401-K’s reduced to a pittance of what they once were. We have more Seniors having to continue working or go back to work because of the losses they incurred during this time. What if they had had a product where when the market was doing great, they could have benefited, and when the market was tanking, they could have breathed a sigh of relieve knowing that their accounts would not have lost a single penny! This is the exact results that one will receive if they purchase an Indexed Annuity.

These products tie their returns to your choice of any of the Financial Indices that are out there; The S & P 500(Standard and Poors Top 500 US Companies), The Nasdaq, The Dow Jones Industrials, The Hang Seng Index, The Euro Stoxx Index etc. Because they are tied to these Indices and not the actual individual stocks and bonds, the principal is never at risk. When the market is up, they participate in the rise in equity of the market, hence the name Indexed Annuities. In a down turn in the market, the balance of the accounts do not earn earnings, but more importantly they DO NOT LOSE a Single Red Cent either.

These make a perfect product for the individual who wants to participate in the Upside Potential of the Stock Market, and NOT have the Downside risk of Losing Money! These products certainly are worth looking into to protect your hard earned monies!

David A. Kauwe CLU ChFC LUTCF RFC is an Associate with Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC. dave@hawaiiandaves.com or at (919) 698-8832 cell.

All Things Being Equal!

All Things Being Equal!

By David A. Kauwe, CLU, ChFC, LUTCF, RFC, 
Associate with Consultus, LLC

If you have children, you know that it’s always been a struggle trying to keep everyone happy in the family!  I have 6 kids and going out is always an adventure….I want Chinese…..No, we had that yesterday….I want Mexican….No, that gives me gas…You know the story!!!!

Imagine, you now have come into some money through this blessing and you start a business or you may have already had a business going for some time. Perhaps one of your children participates in the business.  Let’s say the business booms with the added capital you’ve acquired and it becomes worth Millions of Dollars!!!

Fast forward now, you’re no longer here.   The Business is worth $5 Million Dollars and it’s really your only valuable asset in your estate.  Your one child has pretty much ran the business for years and was a major factor in it’s growth.  The other 2 children will inherit some of your estate.  They have not participated in the business. 

The Child in the business feels since they’ve put their blood, sweat and tears into the business that it belongs to them.  How will the other children feel? Will they now want to be partners in the business not knowing anything about it.  Will the Child running the business want them as partners?  The business is worth $5 Million Dollars and your other assets, $300,000.  Can you see a potential problem here?

What could you have done to remedy the situation so that all your children are happy with the outcome?

Estate Equalization:

By doing some prior planning involving the children and utilizing Life Insurance, you could have made the playing field even.  Let’s say you met with your Financial Planner and here’s what you came up with:

The business projected out to be with $5 Million Dollars over your life expectancy.  Your other assets were worth $200,000 and with conservative growth were projected to be about $300,000.

You decide that you want your child to inherit the business totally by themselves and you want the other children to be equally treated. 

Your $5.43 million dollar Federal Unified Credit Exemption pretty much covers any Estate Tax that would have been due.  So the child running the business inherits the business free and clear.  You purchase a $10 Million Dollar Life Insurance policy to be paid to the other two children equally at $5 Million Dollars each.   The other $300,000 would be divided equally among the three children.  The Child running the business is happy with the outcome and the other 2 are as well.  You have treated all the children equally and fair, all through the miracle of planning and Life Insurance.

David A. Kauwe CLU ChFC LUTCF RFC is an Associate with Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC. dave@hawaiiandaves.com or at (919) 698-8832 cell.