The Asset Protection Against Judgments and Creditors You Gain from Life Insurance and Annuities

Creditors and judgments are a fact of life, especially if you’re wealthy. The more money you make, the more some people will try to get. A lot of our clients come to us looking to protect their assets from judgments and liens. At the same time, they want to be able to continue to grow wealth for the rest of their lives. Yield is important to them, but so is legal protection.

That’s why many of our clients use life insurance and annuities as part of their asset protection strategy. Life insurance and annuities have the rare advantage of being protected from most judgments and liens. While laws vary from state to state, often these insurance proceeds are considered uncollectible assets. As a matter of policy, they also bypass probate.

If protecting your assets from creditors is your goal, then life insurance or annuities might be the ideal financial vehicle for you.

Skipping Probate with Contractual Obligations

One of the benefits of using insurance and annuities is that they bypasses probate. Most of your assets will go through probate when you pass away, with your will determining their final disposition. However, life insurance and annuities don’t do that. These are contractual obligations between you, the insurance company, and the beneficiary. As such, the funds from those policies don’t go into your estate. 

This is important because anyone who brings a judgment or debt against your estate is going to be able to use its value to prove you have assets to pay the case. Life insurance policies, for example, aren’t considered part of that estate in probate court and are uncollectible as a result. But life insurance doesn’t just protect your money when your estate is being settled. It can also be used to protect your assets when you’re alive. 


How Life Insurance Policies Protect Your Wealth

In the case of judgments and liens, collectible assets are any assets with a cash value that aren’t protected by law. For the most part, these assets are just about anything you can sell for cash. So property, stocks, bonds, and other investments are considered collectible assets. If you were to get sued by a creditor, those assets could be claimed to satisfy the judgment. 

There are a few things that sit on the “uncollectible” end of the spectrum. Among those are insurance policies and annuities. Annuities and life insurance policies are considered protected assets in many states in the United States. Different states may protect different amounts from these policies. In some states, the cash value of the policy is protected. In others, only proceeds paid to beneficiaries are protected. Finally, in the best states, all the funds from the policies are protected. 

However, if you’re in a state where life insurance policies and annuities are considered collectible, then you may want to consider the use of a trust. The trust helps to provide an additional layer of insulation to the account by removing the funds from your name. As long as the trust is irrevocable, most states have held that the assets in those trusts can’t be used to satisfy judgments or debts. 

Of course, the key to asset protection is preparation. Life insurance is one of those products that’s best purchased when you don’t need it. Using it as a part of asset protection is no exception to that rule. 


When Do You Need Asset Protection?

The answer to when you need asset protection is the sooner the better. Just about all of our clients have assets that need to be protected, even those who are middle class. While the basics in your life, like the home you live in and the car you drive, might be safe from collection, many of your investment and cash accounts aren’t. The same goes for any vacation properties. 

The key is to use life insurance and annuities to protect these assets before you ever need to. Once you’re the subject of a lawsuit, then moving those funds around could be impossible. In some cases, if someone has enough assets, the court will prevent them from being able to move them if a judgment is imminent. 

People tend not to plan for this because they think it’s unlikely. The issue is that we live in a very litigious society. The wealthier you are, the more likely it is that people are going to try to claim you owe them money. Even something as simple as someone tripping and falling in your yard or a former business partner claiming you stole clients could cost millions. No one ever expects to be the subject of a lawsuit or creditor claim, but the ones who plan for it tend to do better in the long run. 

We use life insurance and annuities as a way to protect clients’ assets during and after their lives. Our strategies help our clients reduce the risk of asset loss while ensuring they’re also building a legacy. For more information on our asset protection strategies, contact us today at 800-DIE-RICH.

source:  howardkayeinsurance.com

Buy Life Insurance with Social Security Benefits to Create a Retirement Nest Egg for Your Kids

Are you at or near the point of qualifying for Social Security benefits? If so, you may or may not need those payments to supplement your other income sources. For many of us, the focus becomes repositioning those payments to create a greater legacy for our kids or charity. We’ve dealt with this issue at length and below you’ll find a few ideas about how to handle this situation. 


Using Social Security to Buy Life Insurance

Let’s take Jim, a retired executive who has accumulated $15 million in assets over his lifetime. At 69 years old, Jim still has not turned on Social Security benefits because he knows they continue to increase each year that he waits. However, at 70 years old, the payments max out and there is no further benefit to waiting.

Jim’s plan is to turn on the roughly $40,000 of income and have it directly deposited into his checking account. In the process, he will withhold one-third of the payment to cover taxes that will be due on the income. Jim is trying to figure out the best way to leverage those payments into an eventual legacy, either for his kids or charity, and how to do so without increasing the size of his taxable estate.

We believe Jim should use his payments to buy a life insurance policy. Doing so will allow him to access some incredible advantages not offered through other vehicles. First, to prevent his Social Security payments from increasing the size of his estate, Jim decides to set up an irrevocable life insurance trust in which to purchase the policy. He decides to make his cousin the trustee and his two kids the beneficiaries. 

Given the roughly $25,000 that is left after paying taxes, Jim can purchase over $1 million of life insurance. As soon as he makes that first premium payment, the $1 million benefit is locked in. This strategy perfectly meets Jim’s desire to create a future nest egg for his kids without increasing the size of his estate. Plus, he can do so without taking on the market risk associated with stocks and bonds. 


Charitable Giving with Social Security Payments

Now, let’s suppose Jim wanted to use those payments to support his favorite charity instead. Rather than own the policy himself, he can $40,000 each year to the charity and have them use the money to buy a life insurance policy. Why would he do this? By donating the money, he can more than likely take a tax deduction for the full $40,000, part of which is the net amount of his Social Security income.

Also, by having the charity own the policy rather than himself, he is avoiding the death benefit being included in his estate: Nothing would upset Jim more than watching 40% of his gift slip away to unnecessary taxation. Also, because his premium is now $40,000 per year instead of $25,000, the face amount of his policy has jumped from $1 million to $1.5 million.  

When we compare the results of these strategies against the alternatives, it’s hard to rationalize a different move. If Jim just took his Social Security payments, paid the tax, and gave the proceeds to charity, he would likely give them somewhere between $300,000 and $600,000 in total depending on how long he lives. By using life insurance, he creates a $1.5 million gift, even if he dies in year one! 

If the charity is wise, they can choose to only spend the interest from that lump sum and create a gift that gives forever into perpetuity. Life insurance also provides a guaranteed death benefit, avoiding the volatility and uncertainty of market investments.   


The advisors at Howard Kaye can show you how to think differently about your estate plan. A fairly simple strategy such as the one illustrated above can change lives, just by taking an extra income stream and repurposing it for the benefit of your family or charity. Call 800-DIE-RICH to speak with us today and let us start crafting a similar plan for you.

source: howardkayeinsurance.com

Swiss: $800M misappropriated from ex-unit of Malaysia fund

GENEVA — Swiss prosecutors investigating suspected embezzlement at a Malaysian state investment fund say that $800 million appears to have been misappropriated from investments in natural resources by a former subsidiary.

The Swiss attorney general’s office also said Wednesday that a Ponzi scheme appears to have been used to hide the embezzlement from both the 1MDB fund and its former SRC unit.

Switzerland’s attorney general opened an investigation last year of two former 1MDB officials and persons unknown on suspicion of bribery and money laundering, among other offenses.

The Swiss office said it has made a new request for legal assistance from Malaysia, aimed at obtaining further evidence to corroborate its findings as well as securing the help it initially requested in January. It said that is “still pending.” TVJ

source: business.inquirer.net

Credit rating upgrade fans 'hot money' inflows in April

Net inflow of foreign portfolio investments more than tripled in April as the country’s first investment grade fueled more demand for peso-denominated securities, the Bangko Sentral ng Pilipinas reported Thursday.

Central bank data show portfolio flows—also known as “hot money” given the ease with which they enter and exit economies—netted $1.13 billion in April, up by 239 percent from $333.43 million in the same month last year. 

Gross inflows of foreign hot money for the month amounted to $3.5 billion, while outflows reached $2.38 billion, data further showed.

The latest hot money data pushed the net inflow tally to $2.218 billion as of end-April, up 178 percent from $797.88 million in the same period last year.

Unlike direct investments, hot money flows do not directly strengthen industries. Such portfolio flows are, instead, put into domestic securities and  bonds market.

The central bank, however, said the rise in foreign hot money was an indication of improved sentiment on the Philippines after  Fitch Ratings  gave the Philippines its first investment grade.

On March 27, Fitch raised the country’s credit rating by a notch from BB+ to BBB-, which is the minimum investment grade. It was the first investment grade received by the Philippines from an international credit-rating agency.

The credit watchdog cited favorable macroeconomic fundamentals—such as declining debt burden of the government, rising foreign-exchange reserves, and robust growth of the economy—for its decision. — BM, GMA News

source: gmanetwork.com

Design: Lose the Combined "Investments & Insurance" Navigation Category

I spent many hours in November looking at how banks and credit unions position insurance offerings online (our report here). Many banks don't even mention insurance. And those that do often bury it under an "investments & insurance" tab. Wells Fargo is the most notable example.
While I understand the need to keep navigation choices to a manageable number, these two really shouldn't be lumped together. It's like Amazon having one tab for "Shoes and Goats." It's confusing for both the shoe buyer and goat shopper.

Although a number of investments contain an insurance component (e.g., annuities), for most shoppers, this is unclear. Usually investing comes first, so it's unlikely the auto insurance shopper is going to pay much attention to a navigation item beginning with "investments." That's the furthest thing from the mind of someone trying to save a few bucks to keep the family fleet running.

imageBottom line: If you are serious about selling insurance, it needs proper attention in website layout and navigation. Notice how Wescom Credit Union (Pasadena, CA) splits investments and insurance into two categories, with appropriate calls to action at the bottom of each column . The CU has some work to do on the landing page (it's cluttered and hard to find the quote I was promised), but it's still better than most.

source: netbanker.com

11 Common Investment Mistakes To Avoid While Investing In Stocks

There is only one rule to be successful while investing in stocks and that is “to not lose money!” Despite the information overload these days, people still make mistakes investing in stocks and lose money. I am not an exception in this case as I too made all of the mistakes that I have listed below, at one time or another, while investing in stocks earlier in my investment life. I am sharing here those experiences so that somebody else could learn from my mistakes. So here are those 11 common investment mistakes to avoid while investing in stocks.

Borrowing to Invest in Stock Markets

 

We hear success stories about making easy money in the stock markets from our relatives, friends, stock broker etc. Often we fail to know that only success stories are propagandized and failure stories deliberately have been hidden from us! By the time we hear those success stories, we might have already invested our spare cash in some other assets like real estate, gold etc. Greed spares none! We become enthused. To get the seed money, we would either pledge those assets or would borrow new unsecured debt. To be successful in the stock market, we need to have a long-term view and some cash that doesn’t need to service debt, money that we do not need for at least the next five or ten years. If we borrow to invest, interest adds up monthly to our investment costs. So we will be investing under a compulsion to find more returns than what we pay out as interest. That drags down our chances of success. Ultimately we would end up making only our lender rich!

Investing in Startups and IPOs

 

In order to ascertain the investment worthiness and to arrive at a rational investment decision based on some conclusions, we should look for a business or a company that has at least withstood one economic cycle (business cycle). An economic cycle is usually 8 to 11 years long. Based on how the company or the business withstood tough times of an economic cycle, we make an assumption that it will withstand in the same manner at tough times down the lane in the next 5 or 10 years. Fragile companies and business ideas hardly survive an economic cycle and wither away in a matter of years. Eg., the Internet companies of the 1990s that went bust along with the dot com bubble. So any company without a history or track record is undoubtedly not investment worthy howsoever brilliant the business idea or marvelous the company is. To preserve our capital, it is better to go for OPOs (old public offering) at a discounted price than going for IPOs (initial public offering) or startups.

Heeding to Advices, Tips, and Stock Market Predictions

 

Investing heeding to the stock tips, advices, and stock market predictions is the next big mistake that most of us make. You get a ton of them; from your stock broker, on the Internet, in the dailies, magazines, TVs etc. Never rely on such stock market predictions to invest your money. Heeding to those stock tips outright, even if the information is from paid sources, will rip you off your money because those who make those predictions, those who propagate those tips and advices have their own underlying vested interests in making you buy or sell. You should be able to substantiate yourself the reasons why you invest in a stock or why you sell a stock. Else, you would end up making only your stock broker rich.

Investing in Actively Managed Funds and Through Money Managers

 

Most people spend maximum time and effort earning money but hardly any time managing and growing it. If you want to become rich, you should be able to manage your money on your own. You should learn how to invest rather than depending on an investment manager (portfolio manager). It is not rocket science. All of us are not born intelligent, we learn by reading and listening. Why not apply that here too? If you still cannot find time to research about individual companies, investing in an index fund regularly over time should fetch you average market performance. The results still should be far better than an actively managed fund run by the so called pundits who eat 2% a year of your funds as fees. If the fund managers have that secrets of making you rich, why not they themselves become rich using those secrets rather selling you the investment products? So have in mind that no one else could be a better money manager for your money rather than yourself. Find time and will to make it on your own. Do investments in the stock market on your own or you would end up making only your money manager rich.



 Looking to Time the Market


Another mistake that investors often make is trying to time the market. You either sit sucking the thumb expecting the market to fall more for you to start buying where as Mr. Market does the opposite or you end up selling too soon expecting the price to fall thereafter. Sometimes, people don’t sell at all even after the P/E having run into exorbitant numbers! I would sell my business if some potential buyer or if Mr. Market expresses interest to buy my business for an upfront payment of 40 or 50 years of profit. I buy and sell stocks as if I would buy or sell a business. Anytime is a good time to invest, as long as you are able to find a stock (business) that you believe is undervalued and you have the patience to sit tight. If the price falls below your purchase price, be greedy, try to buy more diverting all your cash flows! Time and markets wait for none. In the short term, the stock markets act like a voting machine where as in the long term, they act like a weighing machine. Only you need to identify when it is a voting machine and when it is a weighing machine.

Investing in a Company with Questionable Management Integrity

 

Investing in a company that has questionable management integrity is like giving your money to a thief for safekeeping. So the companies that care a damn about shareholder wealth maximization, minority shareholder interests, and labor interests are needed to be avoided to preserve your capital while investing in stocks. We have seen a lot of companies vanishing into air along with shareholder money. Honesty is a very expensive gift; don’t expect it from cheap people. If you are still compelled to invest in such companies, donate the money to charity rather than betting on thieves!

Buying into Turnaround Stories

 

Often you hear turnaround stories in the market but they may be the propaganda by those who are already trapped in the shares of those companies. These companies may end up without turning around at all. Transforming a multi-million or a multi-billion company is terribly difficult. Only exceptional people do it and failures are more common than success stories. So unless you have thorough evidence that the information is true to your satisfaction, investing in such turnaround stories will prove to be a blunder. Buy turnaround stories on proven results, not faith.

Investing in a Company That has no Competitive Advantage

 

Inflation adversely affects the purchasing power of consumers. If a company is finding it tough to pass on the rising costs to the consumers due to reasons like stiff competition, it is ought to wither away in due course. It is here where the competitive advantage of a company over the other companies in the same industry, a widening economic moat which the competitors are unable to break, comes to the advantage. Buying a company that has got no competitive advantage puts your capital at risk.

Investing in a Changing Technology Company

 

Technology is changing at a fast pace in today’s world. We are seeing personal computers and laptops giving way to tablets and smart phones. We saw phonograph records giving way to magnetic tape cassettes which in turn gave way to CDs and DVDs and now to pen drives. Same is with fat TVs to flat TVs, film photography to film-less photography. All these made a lot of companies go bust, belly up. Eg. The Gramophone Company, Kodak etc. Who knows what is in store for tomorrow? So why should we risk our money investing in an industry where the technology is constantly changing?

Investing in a Business Outside Your Circle of Competence

 

People get attracted to investing in glittery businesses that seem attractive from outside but fail to create wealth. For e.g., airline business. If you look at the airline stocks globally, they have little history of creating wealth for the shareholders. The net wealth creation in airline business since Orville Wright flew his first flight at Kittyhawk in 1903 has been next to zero. However, as I said earlier the glamour of the business keeps attracting new investors to set up airlines or to invest in existing airlines. It has evaporated capital over the past century like no other business but people still keep coming back to it and put fresh money in. So study the business model before investing in a company. Invest in a company that is within your circle of competence, invest in a simple business that you know the best rather than succumbing to the glitter and glamour surrounding a business.

Investing in a Debt Laden Company

 

Debt, especially huge, is a major concern both at an individual level as well as at a company level. It is like trying to run with your legs tied. If a company becomes solvent, creditors have utmost rights on the cash and assets of a company than the shareholders, though the money has the same value irrespective of whether it is brought in by the creditors or the shareholders! So investing in a heavily debt laden company is nothing but suicidal! Why should we want to risk our capital, hard saved money, investing in such a company?
Investment mistakes are abound and aplenty. Should you screen your stock pick for these common investing mistakes before you make an investment and buy it at half the price below its intrinsic value, undoubtedly you should be successful with your strategy investing in the stock markets. All these investment mistakes have made me prudent but with a cost. That doesn’t necessarily mean that you too should lose money to learn these lessons. Learn from the mistakes of others because you can’t live long enough to make them all yourselves!

source: mtherald.com