Bethenny Frankel Divorce: she wants a Life Insurance Policy

According to TMZ, Bethenny Frankel means business, even in divorce. She wants Jason to pay child support and a lot more.

Bethenny filed for divorce last week against Jason Hoppy. Now we've learned ... Bethenny -- who is reportedly worth between $25 million and $55 million -- has filed legal docs asking for the following from Jason:

--- Child support ... retroactive from the date she filed for divorce
-- Medical, dental, optical, therapeutic, and orthodontic expenses for HER and her child
-- Life insurance that makes both her and the kid beneficiaries

Read more: http://www.tmz.com/2013/01/07/bethenny-frankel-ex-jason-hoppy-divorce-child-support-prenup/#ixzz2HOoXRrAS

What Bethenny Frankel should know when asking for a Life Insurance Policy to give to her child?

Life insurance proceeds are usually subject to death taxes, depending on the form of ownership. Therefore, proper ownership of a life insurance policy is very important.

If you own insurance (or even retain the right to change the beneficiary of the policy) on your own life, the death proceeds are part of your taxable estate. To put it simply, if you are single, and have a $600,000 policy, and $100,000 of other assets, at your death, your estate will owe $37,000 in taxes.

If the beneficiary owns the policy, there are no taxes at your death; the policy is not taxable in your estate because you didn't own it.

Young beneficiaries pose a problem. A young child cannot (or should not) be outright beneficiary of a life insurance policy.

The best method of owning insurance is in a Life Insurance Trust.
[A Life Insurance Trust different from a Living Trust. It has different rules and purposes.]

A life insurance trust is a trust that is set up for the purpose of owning a life insurance policy. If the insured is the owner of the policy, the proceeds of the policy will be subject to estate tax when he dies. But if he transfers ownership to a life insurance trust, the proceeds will be completely free of estate tax. (The proceeds will be exempt from income tax either way.)

Given the current estate tax rate of 35%, a life insurance trust can save hundreds of thousands of dollars in estate taxes.

When a Life Insurance Trust is formed, you name a person to manage it. Normally, that will not be you or your spouse.

If you have an existing life insurance policy, you can put that into the Trust, or you can have the Trust buy a new policy. The annual premiums are paid from funds which you contribute.

A Life Insurance Trust is irrevocable. If you form a Trust for the benefit of all of your children equally, and later would like to `disinherit' one child, you cannot change the Trust. All you can do is to stop making gifts to the Trust, leaving it with an insurance policy which lapses due to nonpayment of premiums.

Of course, the major reason to have a Life Insurance Trust is to avoid the risk of ownership by another person, and to ensure that the beneficiaries do not receive substantial assets until they are mature enough to handle them.

Adult Children as Owners: Of course, if your children are mature and stable, they may be the owners personally, paying premiums with money you give them. However, a Trust could provide them with the asset protection they need.

Conclusion: Bethenny Frankel should know (or her lawyers) that the best method of owning insurance is in a Life Insurance Trust.

Questions? Call Mintco Financial Team. We are specialists in Estate Planning and our Team has been saved millions of Dollars in Taxes to our clients.

www.MintcoFinancial.com

Phone: 813-964-7100 

Estate Planning: Why you need one

Why do you need proper Estate Planning?

Proper estate planning that takes into account past and potential changes in estate tax laws can help you to:
 
Protect against federal and state-level wealth transfer taxes
 
Ensure proper distribution of estate assets
 
Provide creditor protection
 
Avoid probate
 
Grant powers of attorney to make financial and health decisions in the event of incapacitation

Appoint guardianship for minor children
 
Instruction on the proper distribution of assets to family members


Got a question?  We offer a complimentary evaluation of your Estate Planning. Or we can help you building one.


www.MintcoFinancial.com

Estate Planning:Selection of a Trustee

Selection of a Trustee....A Search for Wisdom

by Bill Roberts

We have seen in 30+ years of our practice, clients struggle with the selection of a trustee and successor trustees to oversee the trusts they are creating under their will and trust documents.  Do they select individuals or corporate trustees?  

Should they use their local bank trust department as the trustee?  If selecting individuals, should it be a family member or a trusted friend? 

If using an individual, who will be a back up or successor trustee, should the individual not be able to continue to serve?  Should the successor be a trust department of a bank, or a trust company?  What financial parameters should the selection have to qualify?

Further complicating this decision is a growth in litigation cases between beneficiaries and trustees, making the selection of trustees and the acceptance by the trustee even more thought provoking.

In considering the selection of a trustee, many people turn to family members.  This may be appropriate for a number of reasons, the knowledge of the family by the trustee and the awareness of the assets owned by the family; both are advantages in selecting a family member. 

However, on the other side of the ledger is the potential for family conflict (and possible litigation) because a family member is "in control" of the distributions to other family members.

Since this is often a difficult decision, we thought it would be helpful to think about a checklist of characteristics to consider in your selection.  

1. An early consideration is the amount of time required to handle the duties of the trustee, filing annual tax returns, making sure the records are kept up to date and following the requirements for distributions to beneficiaries as set forth in the trust document. 
2. What remuneration is appropriate for the trustee? 
3.  Expertise – Often individual trustees lean on the family lawyer for the expertise to handle basic administration of the trust.  If that is not available, will the individual trustee have the skills to handle the basic administrative items?  
4. Wisdom – Does the selected trustee(s) have the wisdom to follow the trust provisions, as well as making wise investment decisions with the assets of the trust?  Will the trust assets include stock of the family business?  Does the trustee have the skills and wisdom to make decisions regarding the business?  
5.  Knowledge – Closely aligned with wisdom, does the trustee have the pertinent knowledge to manage the assets in the trust?  Will they make the necessary effort to acquaint themselves with the uniqueness of the trust assets, or to acquire the appropriate advisor(s) to assist them? 
6. Integrity – Trustees are sometimes in a position that can be abused by an unscrupulous investment advisor, a self-centered beneficiary, or the beneficiary’s spouse.  Selecting a person or a corporate trustee who you trust to maintain the integrity of your wishes and direction in the trust is vitally important. 
7. Successor Trustees – Clients often have not put as much thought into the selection of a successor trustee as with the selected trustee.  Obviously a successor trustee may be put in the same position if the original trustee dies, becomes disabled or is incompetent to serve.  You will want to consider this as you design your trustee arrangement and consult your attorney regarding their recommendation.  Often attorneys will suggest a corporate trustee to back up an individual trustee.

The selection of a trustee is often difficult and requires a great deal of thought.  A poor choice could have significant impact on your beneficiaries.  A discussion with your attorney and other estate planning advisors will help guide you to a wise decision.

Need an Estate Planning financial advisor ? Call us at 716-565-1300

Email: anecamara@mintcofinancial.com

www.MintcoFinancial.com