by sireproxy1 » Fri Oct 22, 2010 03:19 pm
My Dad recently passed away and I am trying to learn as much as I can about collecting on his life insurance policies as I can. Can you please give me your advice or provide me with some links or suggestions of sites that I can go to, to learn about how many different options there are to claiming and receiving life insurance as a beneficiary?
I live in Wisconsin and the deceased is from Wisconsin, if that matters in your answers. The policies have either two or three beneficiaries.
Some things I would like to learn about are:
How do I make a claim?
How is the money delivered? There are three beneficiaries.
Are taxes taken out of the money?
Is there more than one way to receive the money to reduce or eliminate the amount of taxes taken out of it?
Is there anything I can invest the money in that would eliminate or reduce taxes?
You probably get the idea of what I am after, but I'm sure I missed a bunch more questions, so if you have more answers to questions I didn't ask, please give me as much info as you can. If anyone else out there reading this has questions to ask, please add them on. If anyone has suggestions or answers, please reply.
Thank you and best regards to all.
I live in Wisconsin and the deceased is from Wisconsin, if that matters in your answers. The policies have either two or three beneficiaries.
Some things I would like to learn about are:
How do I make a claim?
How is the money delivered? There are three beneficiaries.
Are taxes taken out of the money?
Is there more than one way to receive the money to reduce or eliminate the amount of taxes taken out of it?
Is there anything I can invest the money in that would eliminate or reduce taxes?
You probably get the idea of what I am after, but I'm sure I missed a bunch more questions, so if you have more answers to questions I didn't ask, please give me as much info as you can. If anyone else out there reading this has questions to ask, please add them on. If anyone has suggestions or answers, please reply.
Thank you and best regards to all.
Posted: Fri Oct 22, 2010 07:37 pm Post Subject:
Thank you for both the information and the kind words. Best of luck to you and again, if you have more to say, I'd love to hear it. I'll check in a few days a week.
Posted: Fri Oct 22, 2010 10:42 pm Post Subject:
SIreproxy . . .
First things first. Very sorry for your loss. And I'm also sorry you've gotten some very wrong information here from dbpmnn. And some correct information, too.
Life insurance proceeds, when paid as a "lump sum", are not taxable as income to the beneficiary. Doesn't matter if it's $1,000 or $1,000,000 or $10,000,000. So you have nothing to worry about when it comes to taxes if you receive all of the life insurance money from each policy as a lump sum. What you choose to do with the money can result in taxation in later years.
Estate taxes are a different discussion.
The legislation created by Congress and signed by Pres. Bush in 2001, known as EGTRRA, will "sunset" on December 31, 2010. Among other things, that legislation changed the formula for estate taxes that existed on January 2, 2001 in a way that allows a person to die in 2010 and not expose their estate to taxation. If Congress does nothing before 12-31-2010, all of the estate tax rules in place on 1-1-2001 will return on 1-1-2011.
So you have nothing to worry about as far as estate taxes are concerned in 2010.
To answer your other questions, to collect on a life insurance policy, you file a claim with the insurance company. Call them to report the death, to receive the necessary form, and to verify the beneficiaries on the policy. You'll need to submit a certified copy of the death certificate with the claim form (if you enclose a letter requesting the certificate back, they will send it to you).
On the claim form you will be asked how you wish to receive the proceeds. When you select "lump sum", each of the beneficiaries will receive their portion in a single check (or possibly in the form of a checkbook, from which you may write a single check to cash out the account -- no tax implication).
There are several other ways to receive policy proceeds, but each of them INCREASES the taxability due to INTEREST paid as part of the benefit. So the only option that "reduces" taxation is the lump sum option. It eliminates it.
All of the other "advice" about what to do with your proceeds (retirement accounts, CDs, gold, oil, foreign currency) is dubious at best. You should meet with a knowledgeable financial adviser (not a 29 year-old who only knows what his dad tells him) who will evaluate your particular situation and objectives and will recommend SUITABLE investments or other reasonable possibilities for you to consider. Each beneficiary must do this for himself -- it's not a "group" exercise (although it could be, I suppose, if you really all do get along -- but that's not always the case when money is involved).
My Dad was terminal for about 6 months and didn't get anything in order. No will or instructions of any kind for anything.
This is definitely of greater importance than your questions about taxation. If there was no will, your father's estate will probably have to be "probated" through the courts. All of his creditors will have the opportunity to file claims against the estate and the right to collect up to 100% of their claims (as parceled out by the court). This could force the family to have to sell some or all of dad's property to pay those claims.
The good news is that the creditors cannot interfere with the payment of life insurance proceeds to named beneficiaries, so that money is "off limits". But to avoid being forced to sell any of dad's "stuff" to raise money to pay claims, you could consider using the life insurance proceeds to do that.
That is, if it's even necessary. If there are no real creditors of the estate, and there is no "in-fighting" among the heirs over the property dad left behind, the estate could settle quickly and easily. You'll probably need an experienced estate planning attorney to navigate that process on behalf of dad's estate, and he'll be paid from estate assets.
Posted: Sat Oct 23, 2010 12:31 am Post Subject:
So sorry Mr Max--obviously I was merely giving them some food for thought--I figured the whole 29 yr/old part of my post would let them know my lack of credibilty --as far as listening to my father--he's all I've got now--when you lose a parent you tend to charish everything from the only one you have left-- and he's not the only one I listen to--He's just in a very comfortable life position--so I figure he must be doing something right--so again I'm sorry if my words offended you or the leader of this post--
Posted: Sat Oct 23, 2010 05:36 am Post Subject:
dbpmnn, Don't worry about your advice. I understood right from the get-go that you were not a professional and was very happy that you were sharing your thoughts.
MaxHerr, Thank you for all the great information. You were very helpful, especially with the EGTRRA legislation dates. This makes me think I need to hurry a bit and get his estate settled before the end of 2010, in case the government does nothing and the 2001 laws come back. I have a few more questions if you would be so kind as to tell me what you know.
If a person such as my Dad passes away in 2010, is his estate then "grandfathered" into the 2010 law so his estate is not taxable even if it doesn't get settled until 2012? Or if the 2001 law comes back and I don't have things settled, will we then have to pay taxes on his estate even though he passed on during the 2010 laws?
What are the rules for probate? Do we have to hire a lawyer and go through the probate process? Or if the beneficiaries all get along, can we just split things up amicably without breaking any laws?
Before my Dad passed he put me on his banking accounts (savings, checking, cd's) basically making them joint accounts. Does that give me any legal rights to that money differently than the rest of the beneficiaries? I guess it may not matter if it currently isn't taxable, but if it were taxable as inheritance, since I am listed on the account jointly, would that money already be considered mine so my share wouldn't be taxable as it would be for the other beneficiaries?
Kind regards.
Posted: Sat Oct 23, 2010 10:49 pm Post Subject:
This makes me think I need to hurry a bit and get his estate settled before the end of 2010
No, this is not a correct bit of thinking. And if the estate has to be probated, that process will take at least 12-16 months, and quite possibly even longer.
If a person such as my Dad passes away in 2010, is his estate then "grandfathered" into the 2010 law so his estate is not taxable even if it doesn't get settled until 2012?
Theoretically, yes. The way the law currently stands, everything is based on the date of death, not when everything has been settled.
Now, here's the potential rub. Congress writes the laws, and Congress can change the laws. And the rub is that in 2010, a couple of billionaire types have won the contest and chosen "the perfect year" in which to die. And some Democrats in Congress have spoken about repealing or modifying the "unlimited exemption" that currently exists in 2010, and will disappear on 1-1-2011 (Obama has made that clear) in order to get their hands on the estate tax revenue. B*st*rds (insert an A for the * . . . no finer word to describe the rats)!
Chances are they won't get the votes necessary to make it happen, and even if they did, they would probably modify the law in a way that it did not affect most anyone other than the few really wealthy people who died in 2010 and got the main benefit that the Bush Congress intended with EGTRRA in 2001.
What are the rules for probate? Do we have to hire a lawyer and go through the probate process? Or if the beneficiaries all get along, can we just split things up amicably without breaking any laws?
Just because the heirs get along is not what determines whether an estate is probated or not. Even with a will, there can be a requirement to probate the estate, so that the creditors can have first "dibs" on what is owed to them. State probate laws vary considerably from one to another, and the value of the estate is usually the determining factor -- if it's less than $50,000 in Wisconsin, then probate is not necessary. I found this link to an article by the State Bar of Wisconsin that you might find beneficial:
http://www.wisbar.org/AM/Template.cfm?Section=Consumer_Resources&Template=/CM/ContentDisplay.cfm&ContentId=92182
Without a will, the state probate code will determine how the remaining estate is divided after all the claims have been taken care of (usually "equal shares per stirpes", which is somewhat more complicated than it sounds). The final division of assets might end up something much different than everyone was expecting . . . because judges and lawyers are involved.
Before my Dad passed he put me on his banking accounts (savings, checking, cd's) basically making them joint accounts. Does that give me any legal rights to that money differently than the rest of the beneficiaries?
There's a BIG difference between being made a signatory on an account (like giving your child a duplicate version of your credit card to use while they are away at college -- they can charge, but it doesn't really obligate them to pay the debt, since they are not really the accountholder), and being made a JOINT OWNER ("Joint Tenant With Right of Survivorship" -- JTWROS). If you are merely a signatory, the values of all those accounts are still part of Dad's estate, not your separate property following his death.
But if you were truly made a JOINT OWNER/TENANT, then you bet it gives you different rights, and it is ALL your money, and it is not likely a part of Dad's estate. And none of your siblings are entitled to share in any of it. The taxation part of your question is moot, if you are a joint tenant.
And if you are a JTWROS, unless you intend to do "the right thing" and share that money with the other heirs, it won't make them happy at all when they find out, and it could easily become the single biggest arguing point in the whole probate process -- with accusations flying that you forced/coerced Dad into signing over all this stuff so you could gain an advantage over everyone else. And only the lawyers are going to profit over that.
Posted: Sun Oct 24, 2010 08:06 am Post Subject:
WOW! More great information. Thank you again. I am not sure if I am a signatory or a joint owner, but I will find that out. I will, without a doubt, split everything equally between me and the other beneficiaries. My main question was if I could get away with not having to pay any inheritance taxes (if there are any) since it was already "my money".
If you have any other helpful information, I would be grateful to read it.
Posted: Sun Oct 24, 2010 08:21 pm Post Subject:
As a "signatory", you are simply one of the persons allowed to withdraw funds from the account. It does not make you the account owner (or joint owner). A phone call to the bank should be able to get you an answer to the question. If you are not a joint owner, but only a signatory, the account is supposed to be "frozen" (preventing most withdrawals without probate court supervision) until released by the probate court (or register).
As for inheritance taxes, on the federal side, you should have no problem. I don't believe Wisconsin has any state inheritance tax, but I am not certain. You should be able to find that out using the link I provided above.
Posted: Sun Oct 31, 2010 12:25 am Post Subject: Car Insurance
thnks!
Posted: Thu Nov 04, 2010 06:49 am Post Subject:
Can a life insurance company deny a claim on a valid policy if the insured dies?
no deposit car insurance
Posted: Fri Nov 05, 2010 06:00 pm Post Subject:
A claim may be denied for any reason stated in the contract. If no such reason exists, then the claim is payable.
Common life insurance EXCLUSIONS include SUICIDE in the first one or two years (governed by law in most states), death in an AVIATION related incident other than as a fare-paying passenger (excludes, pilots, cabin attendants, persons flying/occupying general aviation aircraft, experimental aircraft), WAR/MILITARY SERVICE/RIOT/TERRORISM. And some policies may also exclude hazardous occupations/hobbies (such as jumping out of perfectly safe airplanes for no apparent reason other than to see if the parachute really works, or racing cars, trucks, motorcycles, boats).
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