Could This Ever Happen to Your Family?

Before I share with you the need for estate planning, I want to relate a true story involving a couple who  thought all was well with their estate plan until after reading my book, after reading chapter 3 they  wanted to have a conversation with me concerning what they had done in the past with their retirement  and estate planning. The facts are as follows:

They had $1.3 million in checking, earning almost nothing. 

They had one account that was costing them approximately $18,000 per year in fees and commissions. 

Their previous attorney had set them up with two separate Living Trust back in the late 1990s, and  then charge them another large sum of money to make amendments to those Trusts in 2012.

Through my discovery process we found that none of their assets were funded inside any of their trusts  from the get-go. At death, most of those assets would have been subjected to the Probate court costing  them thousands and thousands of dollars. 

We also discovered that the same attorney was the Trustee of their two Irrevocable Life Insurance Trust,  worth $1.5 million. The attorney basically had total control of their estate. You need to always be in  control of your assets. Not an attorney, financial advisor, bank, or anyone else except your family, if  possible. 

They were able to solve their problems by using a very qualified estate planning attorney which I have  recommended over the years. He charged them $1,500 for a new Revocable Living trust (ABC Trust),  with a By-Pass provision using a QTIP Trust for any excess money. I made sure the new attorney had  everything they owned placed inside their new married revocable Living Trust and none of their assets  will have to experience the Probate court, again saving them thousands and thousands of dollars. They have also replaced their old attorney as the trustee of their irrevocable life insurance trust and now have  their daughter as the Trustee. This action gives back to the family the control of these assets. Not  replacing the old attorney could have been a major problem for their daughter and another major  expense in fees to their estate. 

They now pay no fees or commissions, or will they have to worry about ever losing money again in the  market as their principal and accrued earnings are protected from the possibility of loss. This case took  over a year to complete, but it gave back control of the estate to the family and saved an estimated  $200,000 and got rid of a very crooked attorney. 

This was a large case, and most people will not have this large of an estate, and in most cases, they  can eliminate Probate and the other outside predators for just a small sum of money. 

I wanted to share this case with you as an example of people thinking all was well until they started to  open their minds to the information given to them through the pages of this book. They were challenged  to think, and then began the thought process of “have we truly done all the right things with our assets in  the event of our deaths. Is there anything we have missed?” 

Elvis said it the best, we need to be always “Taking Care of Business!” Please get serious about protecting  your wealth. It will be so much better for your family if you have everything in order prior to your death,  and as I said earlier, it isn’t that complicated or hard to do so, and it is not that expensive when you know  what to do and use a qualified attorney. Just get it done! If you don’t, someone else will, and your family  may suffer the consequences. 

My WebSite  www.tommylruff.com

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Estate Planning: Another tremendous and stressful challenge families most likely will face is the transfer of  one’s wealth when they die, especially if the person doesn’t have their affairs in order.

The Pecking Order of Probate:

1. Costs/ expenses of administration

2. Funeral expenses

3. Taxes and debts

4. All other claims, finally  the family.

Do you realize nearly every American who owns something has a possible Probate problem, and will  fall prey to a court system that is not user-friendly? Why is it important to have a professionally, well designed estate plan?

What is Estate Planning? Estate planning is simply passing property from one generation to the next. It is also  known as family wealth planning. Proper estate planning keeps as much of your family’s wealth in the family,  then allows you to pass what you want, to whom you want, when you want, the way you want, without probate,  the government’s red tape or other outside predators.

What is an Estate?  It is everything you own, wherever it is and whatever it is worth. It’s all your assets, bank  accounts, insurance products, investments, your business, your equipment. It everything you own, and the  attorneys love the Probate system. It is their future retirement program. You can eliminate this agony and  expense for pennies on the dollar. You just need knowledge on how to do it, call me at 870-741-7550 for a free  consultation.

The Goals of Estate Planning

*Note: AARP estimates the next generation will lose more than Two  Billion dollars annually to the Probate process. Conservatively, 8% to  10% of estate will be consumed by Probate unless proper steps are  taken. Do you have your ducks in a row, will your family avoid the  agony of the Probate Courts?

What is Probate? It is a court process that validates your Will, passes ownership of your property to your heirs,  and clears title. If you have a Will, your family will go through the Probate process. In addition to the costs of  settling an estate, the government has created a generational debt that will be passed down to your  grandchildren, great grandchildren, and future generations. I can promise you from personal experience Probate  is not the way to go! 

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Because of a lack of estate planning, when my father died a few years ago, our family had the experience  of going through the probate court. We had a family member who was our attorney, and the costs were  reduced tremendously, but it still cost us several, several thousand just for attorney fees. It was stressful  on the executor (my brother) and very time consuming. Dad’s estate could have been settled much  sooner and the total cost would have been less than $1,500 had he not procrastinated and set up a well designed estate plan. 

People just do not realize the agony of going through probate; especially living probate where one is  responsible for the financial and health care of another individual while that individual is still alive.  

I am not an attorney and I do not give specific legal advice. If you need estate planning documents, you  should seek the advice of a qualified estate planning attorney. However, prior to that, I will give you a  free consultation that could save your family a lot of money and I do work very closely with a couple of  qualified attorneys who understand estate planning and who work with me as a team member. 

Thank goodness the Estate Tax Exemption has been increased to $12,060,000 per person and this will  exclude most families. So, why have an estate plan? It is simple, why not eliminate the problems of being  unprepared for death. I have given you my family’s story. One needs to be prepared and occasionally  review your documents. 

The Legacy of a Breadwinner: With his final breath, it has all ended. All the lifelong dreams, the fifty years  of work, raising a family, the pain of losses, the memory of joys and happiness was gone. Now all that is left of  that life are the memories of that person and the legacy of a lifetime. To those left behind, the memories are  theirs to keep, but everything else must be divided into two categories: What they can keep and what the  government claims to be theirs. What is truly unfortunate is that the government claims must be settled first,  and what is left is divided between creditors of the deceased and members of the family. 

Thinking of a Charitable Gifting Program? I am not going to spend a lot of time on Charitable Giving, but I do  want to share a story with you. 

I had a client who, when his wife died, wanted to gift a large of sum of money to a small denominational church  in his community. When he came to me as his financial consultant, I advised him to set up a Charitable  Remainder Unit Trust (CRUT), making himself the income beneficiary until his death. I suggested he named a  couple of family members as Successor Trustees, so upon his death they could manage the CRUT and carry out  his wishes. 

Why? What would have happened to the large sum of money had he given the money to the church without any  accountability? Could they have closed the church down, had a church split or a dishonest board or pastor could  have left town with the money, if they had total control of the money? 

Yes, to all these scenarios. But instead, regardless of what happens  to the church, they can only receive a portion of the amount each  year and should the church disappear, the trustees are instructed by  the trust document to find another quality church of the same  denomination to give future disbursements. Remember, I  encourage you to always be in control of your estate and where  your assets are to go. 

I shared with you earlier the advantages of my favorite scenario for  a gifting trust is the Charitable Remainder Unit Trust (CRUT). A  CRUT can produce as many as three separate tax savings for a  family. The first is an income tax charitable contribution deduction  for the grantors of the trust; based on age, interest rate and income  options. The tax deduction allowed, and the resulting tax savings  are greater for older donors.

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When long term capital gain property is used to fund the trust, the second savings come from the  avoidance of the capital gains tax. If the assets would otherwise be sold for market reasons, avoiding the  gains tax further reduces the net cost of the transfer; this, in turn, improves the effective rate of return.  The trust itself is not subject to capital gains tax when it sells assets to reinvest proceeds more favorably. 

The third possible tax savings is a reduction of estate taxes at, for example, the second death of a married  couple when the marital deduction is no longer available. The value of the charitable remainder is not  part of a taxable estate. 

An irrevocable charitable remainder trust can be especially useful to grantors when it makes feasible  the diversification of a single, large stock holding or real estate, without capital gains taxation. 

What will your family think about you giving away all this money to a charity? By using a charitable  trust, the problem has an easy solution, paid for with tax savings, while providing your family with additional income. Life Insurance is a great tool to use for wealth replacement when giving to a charity. 

Life insurance has always been a key element in estate planning. Its primary uses have been to provide  an “instant estate” for young families without accumulated wealth, to increase the total estate at a  favorable cost, and to provide liquidity for estate taxes and other costs. 

In recent years, the greatest increase in the use of life insurance as part of philanthropic plans, has been  not to provide a direct gift to a charitable organization, but rather to provide death benefits for heirs,  which replaces the asset values that have been given by other means to charitable organizations. 

In its simplest form, a significant outright charitable gift may produce enough income tax savings for the  donor to purchase additional life insurance where death benefits equal the after-tax amount the heirs  would have received had the asset been left in the estate. For a married couple, a two-life, second-to-die  policy can offer the most coverage per premium dollar. 

When the donors’ estates are in the taxable range, ways to keep death benefits from the policy out of the  estates should be considered. If one or two responsible adult children are the primary heirs, the most  direct method is to make them owners of the policy or policies. Annual gifts within the gift tax exclusion  amount ($18,000* per recipient, or $36,000 if a husband and wife join in the gift) can be made to cover  the owners’ premium costs. 

For multiple heirs, an irrevocable life insurance wealth replacement trust may be the preferred policy,  typically with a bank trust department or trust institution as trustee. An individual may also be trustee. By  giving beneficiaries of the policy, the temporary right to draw out any contributions to the trust  (“Crummy powers”), and the gifts for their benefit are considered present interests that qualify for the  annual gift tax exclusion. Trusts have the additional benefit of individual ownership of asset protection  (i.e., protection from creditors). 

Wealthy families with high incomes may wish to offset major charitable distributions at death. Transfers  to the trust to cover the insurance costs can be sheltered from gift tax by lifetime use of unified estate and  gift tax credits. 

The maximum amount is $18,000 per person. This means a person can give away $18,000 to any person  for any reason without having to worry about gift tax possibilities. A married couple can give double this  amount or $36,000. For example, a married couple who have three children, all married, and they have  five grandchildren could give away to their family without any gift tax a total of $396,000. 

A well-designed Wealth Replacement Trust using a well-designed, high-grade, dividend paying life insurance  can prevent the loss of wealth transfers to outside predators and unwanted relatives.  

Other Issues to Think About: You need to consider having your attorney prepare a Durable Power of  Attorney to cover your bases when it comes to making healthcare decisions. He should also prepare a Legal  Conservator for allowing someone to act as your attorney-in-fact for making financial decisions. 

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Don’t cheat yourself, getting your house in order may cost you some money, but believe me, not having your  estate prepared correctly can be much more expensive and can create a lot of unnecessary stress for your family. 

And don’t forget Guardianship documents for the children. And think about the financial burden this can cause  the people who are responsible for caring for your children in the event of your demise. How are you going to  fund taking care of this expense? Children are expensive to raise; so, consider the responsibility you are asking  someone else to shoulder in the event of your death. How would you feel if presented with this challenge? 

I may have already shared this information with you but at age 66 I entered the Institute of Master Certified  Estate Planners and achieved the Master of Estate Planners designation. 

However, they taught theory. What I have been through has pretty much made me an expert on how to create a  rock-solid estate plan that avoids the probate courts, guardianship, and unwanted relatives.  

My granddaughter passed away in 2014 at the age of 24 leaving behind an orphaned three-month-old son. My  great grandson. Peggy and I spent fifteen months and a little over $16,000 in the adoption process fighting a set  of grandparents that were not good people. We won. We spent 8 months in the Probate courts trying to close out  her bank account. We won, but it cost $1,050 to get $752 out of the bank. She didn’t have POD in her account and the bank couldn’t tell us how much she had in her account. 

Then in 2019 Peggy passed away after being with me for 55 years. I was lost, lonely and devastated. I made  some stupid mistakes. Thank God I have always carried life insurance on my wife and grandchildren.  

Anyway, I wanted to now get guardianship for Greyson, and I wanted it bullet proof. My attorney, a good  attorney, said this was impossible. I told him he was wrong. He called me that afternoon to tell me he had  spoken with two custody judges, and they also said it was impossible. I told him he and they were wrong. I  suggested they re-visit their lawbooks. The next morning, my attorney called to say, “I’ll be damned, you are  100% right, and it can be done”. Again, I have a master’s in estate planning with 38 years of experience.  However, shortly thereafter, I was challenged again in court by one of the same x-grandparents. After and year  and a half and $6,500. I won and they are forever gone out of our life. 

Unwanted relatives can be your greatest pain in the ass and pocketbook. Be prepared, you owe it to your  family to have your house in order upon your death and you are going to die whether you want to deal  with it or not. 

Just another thought, in most cases, you will never know the peace of mind your family will have  known that you knew Jesus as your personal Savior. It’s also a great benefit for you.

Who Will Provide Income for a Spouse During the Blackout Period of Social Security? Meeting the Income Needs of a Widow Utilizing an A+ Superior Life  Insurance Company’s Guaranteed Death Benefit.

What is the Blackout Period for widows/widowers? According to the Social Security  Department a widow/widower cannot receive any benefits from Social Security until  the age of 60.

This Blackout Period can cause severe financial hardships on the family. In many cases the widow must change  her standard of living dramatically. After suffering the emotional stress of losing a spouse, why add the  additional burden of making lifestyle changes such as being forced to downsize her home, sell family assets, or  stop doing the things she enjoys most because of financial shortfalls due this gap in income. With proper  planning we can eliminate the worry of the Blackout Period.

Some financial advisors, estate planners, CPAs and attorneys recommend purchasing term life insurance to  meet the needs of the widow. However, I strongly disagree with this strategy because purchasing term insurance  is like renting an asset for a certain time-period. 

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What happens should the insured need life insurance after the term period has expired and he/she has become  un-insurable? It just does not make any financial sense to ever use term insurance or variable life insurance for  estate planning needs.

Here’s the story of Ted and Jane. Five years after losing his wife, Ted (age 55) fell in love and married Jane  (age 35). Jane was an employee at Ted’s gym and has an annual income of approximately $24,000 a year.

Moving forward Ted is now 68, with Type 2 diabetes, and is receiving Social Security and income from  his IRA. He has been happily married to Jane for the last 13 years. Their income together is about  $80,000 and Ted wants 50% of his IRA to go to his two granddaughters when he dies. 

They have two nagging concerns. First, how would they replace Ted’s social security income should he  die while Jane is in the Blackout Period which could be as long as 12 years? Secondly, how would they  pay for long term care expenses should he become chronically ill? Since Ted has Type 2 diabetes, he  doesn’t qualify for LTC insurance. 

After having a conversation, they agreed to purchase an A+ Superior Rated Guaranteed Death Benefit  Life Insurance policy that guarantees the death benefit through age 105. This type of policy also includes  a long-term care and chronic illness rider. Both riders are provided at no charge. Should Ted use the  benefits and at that point the premiums on his life insurance are waived. For Ted to qualify for this  benefit, he must be unable to perform two activities of daily living (ADLs) for 90 days. 

Why is this important? First, should Ted die during the Blackout Period, Jane would receive the Tax Free death proceeds that could be used to replace the loss of Ted’s social security income and half of the  IRA which then goes to the two granddaughters. Secondly, should Ted become chronically ill, the  policy could also be used for LTC, Home Health, and other qualifying expenses– all provided Tax Free. 

The Greatest Challenges You Will Face is Longevity – Who Pays the Bills When You Can’t?

Yes, longevity, should you run out of money, and it can happen in a short time. Case in point. My mother-in law worked until she was 85 years old when she retired to enjoy spending a lot of time with her family. 

However, she has been in Hillcrest Nursing Home for the past three plus years and the cost per month is a little  over $7,300. She had not planned on this expense and refused to listen about planning for it earlier in her life.  Now, all that is left is her house with no one living in it, so next will be the lien on the property. 

You really have only three choices:

1. You can be very wealthy and can be able to self-insure yourself and your spouse. And if this is the case,  you could take advantage of shifting the burden of long-term care expense to an insurance company. I  mean, this is what you have done by purchasing home-owners insurance all these years and the chances  of your house burning is much less your need for an extended stay in a nursing facility.

2. You can be so poor that the state will pay for your nursing home care expense, but only after you have  spent down your assets and prove your poverty and you need to be very aware of Medicaid fraud. Also,  wouldn’t it be nice to be able to choose a private own nursing home or home health care. 

3. And finally, you can be a middle-income family and be insured during a time of long-term care expenses  and allow an insurance company to pay for your long-term care costs. This is the smartest means of  transferring risk.

Another problem with longevity is that feeling of unimportance to your family. Family members scatter and it is  time consuming, sometimes inconvenient, and expensive for travel and lodging to visit parents or grandparents.

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In any cases grandparents are raising their grandchildren. 

Then, when your spouse passes away you must deal with grief and loneliness, and this can be suicidal unless  you regain your sense of direction. I made the decision that I was going to live and raise my son. I made the  decision to find myself a new wife. I joined a couple of websites looking for that perfect mate. I pray and I  explored until on May 23^rd of 2020 I met my future bride. 

Her name is Marcela. Greyson and I call her Marcie and she has brought a new meaning to life for me. We have  been going through the immigration process since July of 2020. Have been to Cancun, Mexico six times in the  last year and she should be home in Arkansas with the next two months. The waiting has been tough but thanks  to Whatsapp.com we see each other daily and we pray together every night at 7 pm. My son and Marcie talk  every evening on Whatsapp.com.  

Thank God for technology or this could never have happened. If you are not using Whatsapp.com with your  family and friends, I encourage you to try it. It is better than facetime and it’s free. We must use it on our cell  phones because we can’t get video on computers. 

And finally, is the problem of inflation. It affects all of us but especially folks on a fixed income. Using  just a 4% inflation rate, what a person could purchase in 2010 for $2,000 will cost $3,202 to buy the  same goods and services in the year 2022. When our government calculates inflation, they do not include  food and energy. Not that a family needs these items. How misleading our elected officials can be is  scary.