A Tax Deductible Fund For Education

There comes a point in life for many senior citizens when they recognize that they are really managing assets for the benefit of their heirs. This point is reached when they have resolved the problems involving funding for unexpected health problems, and have also satisfied the question of having adequate lifetime income.

Sometimes it is possible to provide funding for health care needs in such a way as to benefit the heirs with the funds that are not lost to long term care expense because of good luck or good health.

What we are talking about here is a form of life insurance recently made available to retirees that allows access to the insurance benefit if funds are needed for home care or for nursing facility care. For example, a $200,000 life insurance policy would allow a retiree to have $4,000 monthly to pay for care. If the benefit was not used for such care, it would then be available to the estate as a life insurance benefit, and those funds could then be available to fund a grandchild's college education.

There is a way that allows retirees to set up VERY SIGNIFICANT educational funds for the grandchildren and to TAKE A TAX DEDUCTION for doing so. It combines two very efficient financial tools -

A CHARITABLE GIFT ANNUITY
LAST SURVIVOR Life insurance (A wealth Replacement plan)

Let us look at an example:

John is 72 years old and his wife is also 72. John has a substantial IRA account and is required to take money from it each year even though he really would prefer to allow it to remain in the account to grow free of taxation.

His adviser gives him this idea:

Why not transfer $100,000 from the IRA account to a GIFT ANNUITY? By so doing, he would not only satisfy the mandatory IRS withdrawal, he would develop a tax credit to help pay the tax on his withdrawal. Quite important also, was this simple fact: he would receive $6,500 income from the annuity every year for as long as he lived.

This money would be sufficient to pay the premiums for a last survivor life insurance premium with a face amount of

$200,000

That is correct! You have just managed to transform a $100,000 gift into a $200,000 benefit that you can dedicate to colleges expenses for grandchildren if you so wish, or to pay the tax bill on the remaining IRA account. You also have done the following -

Benefited a favorite charity
Satisfied a current IRS requirement for your IRA account
Received a tax deduction for the current tax year.
Reduced the ultimate tax owed on your IRA account

In the process, you have also eliminated the problem of funding the cost of the insurance, since the check to pay the premium comes at the same time as the billing from the insurance company. The funds are guaranteed to last for your lifetime, and the insurance costs are also guaranteed to never increase.

You may wish to split the program into two segments in order to benefit two separate charities, and spread the tax benefits over two tax years. You have a number of planning alternatives that your adviser can help work out.

Here is the question for you: If your circumstances allow, is there any reason you would not make an investment with a guaranteed 2 for 1 return?

Like it or not, we all must be financial planners. Bob Zimmerman now brings over 50 years of experience to the aid of those seeking to better inform themselves. Holding a BS degree in Finance from the University of Detroit, he also has an MBA degree from that institution.

He spends his senior years devoted to advancing the goal of educating the public. To that end, he has published a book - THE ANNUITY-FROM MYSTERY TO MASTERY. It is further described on his website - http://www.safemoneyplus.com

He also has a website devoted to education the public about the practical usses of CHARITABLE GIFT ANNUITIES. That site is http://www.cga-advisor.com

For those with a charitable mindset, he is more than happy to offer NO FEE counseling .

Hire Your Family As Workers and Make Them a Tax Deduction

You can legally hire members of your family to work for you and make them a tax deduction. He or she must provide a value to your business for you to justify their hiring. Hiring your husband or wife could also make some everyday expenses tax-deductible. Life insurance payments, health insurance payments, tuition for education related to work, and work travel and entertainment expenses are tax deductible.

You can hire your kids or grand-kids to work for your business part time doing jobs like cleaning the office, maintaining the work vehicle, addressing envelopes, answering the phone, tracking inventory, making deliveries, data entry, or just running errands.

The money you pay them becomes a tax deduction, even if it becomes their allowance or is deposited into a savings account. In this manner, money you might ordinarily just be handing to your children or squirreling away for them becomes a tax deduction for you.

Of course any salary you pay to any member of your family must be recorded on their own income tax return. However, you can pay out up to $7,756 annually and not take any tax deductions from their pay.

Of course, they have to work, like any other employee. You can pay a deductible salary to a member of your family, as long as it is not substantially more than you would have to pay a non-family member to do that same job. The pay can't be considered disproportionate to the work.

If the person performing the job were not a member of your family, you would have to pay them at least minimum wage. So, it would make sense to pay minimum wage to them. Salaries are tax-deductible to you, as an employer, and taxable to your family members as income.

The pay to your family members must be periodic, at least once a month. You lose any tax benefit if you pay wages to a family member whose tax bracket is higher than yours. Pay by check, not in cash. Do not treat the family members pay any differently than any other current employee.

Of course, this works best if you are running your business from your home, as home business tax deductions become applicable as well. In this scenario, along with your family members' earnings becoming tax deductible, many costs of the daily operation of your house like electricity and heating could qualify. Check on all the deductions available to you if you combine hiring family members with working from home. There is a lot of tax benefit to running your business this way.

Can you employ your family members in your business? Well you can do it but you need to convince IRS that this is not just a family adjustment. If you employ, what expenses can you claim as a deduction? What precautions should you take? Chintamani Abhyankar explains.

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous Tax eBook "Stop donating your money to IRS" which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.

Life Insurance Used in Estate Planning

Life insurance is no longer solely used for funeral expenses today. It has evolved through the years to become a product that is used for multiple purposes. These could range from covering burial costs, compensating for a loss of income, as a means to pay off mortgage and other debts, to provide for children's education, as a donation to charity and as a crucial part of estate planning.

Estate planning is an essential means to preserving and transferring your assets. By reducing the possibility of any future legal issues, proper estate planning can also increase the amount of wealth left behind for your beneficiaries. Estate planning is a must for anyone with assets that need to be transferred after you die and is no longer just the prerogative of the wealthy. In such cases, life insurance along with wills, trusts and the Power of Attorney can be the most effective way to handle your estate after your death.

Life insurance can often constitute a large part of a person's estate. Since any estate whether large or small demands funds for the payment of taxes, administration costs and any other debts of the deceased, insurance can be used to offset these expenses. If you plan ahead, your insurance could cover the costs of settling your estate including any taxes, fees, or debts you may have incurred over the years. Life insurance can also help you divide and distribute your estate equally. If you have more than one heir or beneficiary, the proceeds from your life insurance could be used to balance the distribution of inheritance.

There are many cases when estates are composed of property that is not liquid such as art or jewelry that your dependents might not want to sell in order to pay off any debts or expenses. Once you die, the death benefits paid out are generally tax-free. This creates a ready supply of liquid cash for your family and dependents to use to fund estate taxes and other expenses without touching your other assets and sources of income. In comparison to the small amount you pay for your monthly premiums, insurance is a cost-effective way of funding estate expenses.

In case you wish to leave something towards your favorite charity after you die, insurance can help. Since gifts to charities using life insurance are generally estate tax-deductible, this process is made simpler. With a sound financial plan, you can minimize the tax burden on your family with the help of an adequate life insurance policy. Your family will be left with enough access to funds to meet their needs and that all members of your family are equally taken care of after you die.

There are of course many more ways in which life insurance can be used in estate planning. For this you would need to speak to a qualified professional who will help you determine which planning techniques are appropriate for your situation. Also remember that estate planning is not something that you forget about once its done. Just as your life situation can change over the years, tax laws can be altered, and your needs may be different from when you made your original plan. Most professionals and financial experts recommend that you conduct an annual review of your estate plan and make the necessary changes in your insurance policy, if needed.

About AccuQuote: AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.

Life Insurance Guidelines For Beginners

The general principle of life insurance is an agreement between an individual who purchases an insurance deal and the insurance company he purchased it from. This bond benefits both parties, as both get paid but in different ways. The insurer gains by the premiums paid gaining a profit as the years go on, and the individual benefits in retrospect, as his partner and children will be compensated when the unfortunate happens.

There are many types of life insurance an individual can buy, and the type best suitable depends on various alternating factors such as critical illness, accidental death, temporary, permanent or even if he has the mortgage tied in with the policy.

So, who needs Life Insurance?

That Question is probably the most simple you will ever come across. Depending on the status of your loved ones, I think most people will require it for the sole purpose of helping your family escape financial difficulty and for your own peace of mind.

The Basic types of insurance as stated above suit different individuals in different ways depending on what they want to get out of their insurance. Now Life Insurance can get a lot more complicated when digging deep, such as including riders and add-ons for extra benefit, but below summarises the basics.

Whole Life;

This insurance provides cash value over time with a tax-deferred basis, and some insurance companies may even pay the policyholder a dividend. This type of insurance would be highly recommended by many due to the cash value that is available for you or your family before you die. It helps with many life aspects such as providing for your children's school education, or for your retirement funds. This type of cover is more situated for protection of your family's interests.

Temporary (Term);

Being the least expensive, it is also the simplest. Temporary policies are fixed over an extended period of time (usually 1-10 years) and don't amass a cash value. This form of life insurance pays a fixed amount to your spouse in the event of your death. Simple in the fact that the premiums are paid and the beneficiaries are looked after.

Universal Life;

This type of life cover is a flexible plan. These policies increase interest and allow the owner to adjust the death benefits and premiums to their current life circumstances. You decide the amount to be paid as a premium for this type of insurance, and if you miss out a payment, this will be taken away from your death benefit. Universal life insurance stays in consequence as long as your cash value can cover the costs of the policy.

Variable Life;

Variable life cover is for individuals who like their life insurance policy to act simultaneously to the financial market. The policyholder, not the insurer, decides how the money is invested and the cash value, if done right, can gain at a much more rapid rate in comparison to other plans. The disadvantage of this plan is that if the financial market is in poor economic state, then so will be your life policy. Similar to whole life and universal life insurance, you may withdraw against the cash value.

Hope this helps with the general basics of life insurance cover and the various types.

Critical illness life insurance is a difficult choice to make as there are so many options of life insurance tax deductible properties to consider.