In the event of an unforeseen accident or illness, disability insurance may be a good way to protect your income and savings.

The Social Security Disability Insurance program paid out over $140 billion in benefits in 2021. And with new applicants each year, the system is expected to exhaust its reserves at the end of 2034 if changes aren’t made.1,2

Rather than depending on a government program to protect their income in the event of a disability, many individuals prefer to protect themselves with personal disability insurance.3
Disability insurance provides protection by replacing a portion of your income, usually up to 60 percent, if you become disabled as a result of an injury or illness. This type of insurance may have considerable benefits since a disability can be a two-fold financial problem. Those who become disabled often find they are unable to work and are also saddled with unexpected medical expenses.4

What About Workers Comp?

Many people think of workers compensation as a disability safety net. But workers compensation pays benefits only to individuals who become disabled while at work. If your disability is the result of a car accident or other off-the-job activity, you may not qualify for workers compensation.

Even with workers compensation, each state makes its own rules about payment and benefits, so coverage may vary considerably. You might consider finding out what your state offers and plan to supplement coverage on your own, if necessary, especially if you have a high-risk profession. Likewise, if you have an active lifestyle that puts you at a higher risk of disability, considering an extra layer of protection may be a sound financial decision.

If you become disabled, personal disability insurance can be structured to pay a benefit weekly or monthly. And benefits may not be taxable if you have paid the premiums in full with after-tax dollars.4,5

When you purchase a policy, you may be able to tailor coverage to suit your needs. For example, you might be able to adjust benefits or elimination periods. You might opt for comprehensive protection or decide to define coverage more specifically. Some policies also offer partial disability coverage, cost-of-living adjustments, residual benefits, survivor benefits, and pension supplements. Since coverage is designed to replace income, many people choose to purchase protection only during their working years.

Even as changes are made to federal disability programs, they typically provide only modest supplemental income, and qualifying can be difficult. If you don’t want to rely solely on Uncle Sam in the event of an unforeseen accident or illness, disability insurance may be a sound way to protect your income and savings.

Out of Commission

According to the most recent data available, about 19.1 percent of working-age disabled Americans are employed.

Source: BLS.gov, 2022

1. SSA.gov, 2022
2. SSA.gov, 2022
3. Disability insurance is issued by participating insurance companies. Not all policy types and product features are available in all states. Any obligations are dependent on the ability of the issuing insurance company to continue making claim payments.
4. Investopedia.com, 2022
5. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which would have an impact on after-tax investment returns. Please consult a professional with legal or tax experience for specific information regarding your individual situation.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Overview of Medicare Advantage, what’s in them, special rules, and more.

Medicare Advantage, sometimes known as “Part C,” is something of a catch-all choice for those who are ready to sign up for Medicare. Medicare Advantage plans are offered by private insurers in conjunction with the Medicare program, and can provide you with additional health insurance coverage.

What’s in them?

In addition to signing up for Medicare Part A (hospital stays) and Part B (medical coverage), Medicare Advantage plans offer their subscribers extra features. This frequently, but not always, includes the Medicare Part D prescription drug plan.1

In some cases, Medicare Advantage plans offer coverage for areas not normally offered within regular Medicare plans. This can include dental, hearing, and vision insurance.1

What are the rules?

Medicare pays for a fixed amount of your health care to the company offering your Medicare Advantage (MA) plan. Beyond that, each MA plan requires different out-of-pocket fees. Those fees can vary from plan to plan.1

Depending on your plan, you may have different rules you need to follow when seeking a medical referral to get treatment from a specialist or if you are seeking non-urgent care (even from health care providers within the plan).

It’s also important to remember that rules, requirements, and features may change from year to year. It will be important to make sure that those changes line up with any treatment that you need.

What about my prescriptions?

While most MA plans offer Part D coverage for prescription drugs, some don’t. One example would be for Medicare Medical Savings Account plans. In cases where the plan can’t or chooses not to offer prescription drug coverage, you may have the ability to join a separate Medicare Prescription Drug Plan, depending on the type of plan you enroll in.1

You will likely have a number of questions and concerns as you examine your options for Medicare Advantage plans. Discuss these with a trusted financial professional who can help you make choices that may best fit your lifestyle.

1. Medicare.gov, 2022
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Whole life insurance remains in force as long as you remain current with premiums. Here’s how it works.

Insurance Benefits Graphic

In exchange for fixed premiums, an insurance company promises to pay a set benefit when the policyholder dies, but also offers additional benefits as well. Whole life insurance policies can build up cash value — effectively a cash reserve that pays a modest rate of return, and the growth is tax-deferred. Guarantees are based on the claims-paying ability of the issuing company.

  Policy Loan Graphic

Most whole life insurance policies allow policyholders to borrow a portion of their policy’s cash value. Access to the cash value can allow you to pay for things like college expenses, a home down payment, or any other needs you may have. Interest payments on policy loans go directly back into the policy’s cash value.

Insurance Benefits Graphic

When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.

Whether whole life insurance is the best choice for you may depend on a variety of factors, including your goals or circumstances.

When you borrow against this cash value of your policy, there are some important points to consider. Accessing the cash value of the insurance policy through borrowing — or partial surrenders — has the potential to reduce the policy’s cash value and benefit. Accessing the cash value may also increase the chance that the policy will lapse and may result in a tax liability if the policy terminates before your death.

As with all types of life insurance, several factors will affect the cost and availability of whole life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency or bank or savings association.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

“I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.”
Entertainer Arthur Godfrey

The irrevocable life insurance trust (ILIT) can be an important estate strategy tool that may accomplish a number of estate objectives; however, it may not be appropriate for every individual.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

What Is an ILIT?

An ILIT is created by an individual (the grantor) during his or her lifetime. The ILIT owns a life insurance policy on the grantor’s life via the transfer of ownership of an existing policy or through the grantor’s annual contribution of cash to pay the premiums on a policy purchased by the trust.

The grantor designates beneficiaries, usually family members, who will typically receive the proceeds upon the death of the grantor.

The trust is irrevocable, meaning that the grantor forfeits all rights to the property contained in the trust. Its irrevocable nature is integral to accomplishing the ILIT’s objectives.

What Can an ILIT Accomplish?

The ILIT may be able to accomplish several estate objectives, including:

  1. Meeting liquidity needs;
  2. Managing estate taxation on the policy proceeds;
  3. Providing income to survivors.

How Does an ILIT Work?

When you die, the trust is designed to receive a payment equal to the policy coverage amount, e.g., $500,000. Since the trust’s ownership of the policy is irrevocable, the proceeds are not considered your property. Consequently, they do not fall into your estate, thus potentially avoiding estate taxation. (Remember, generally no income tax is due on such life insurance proceeds.)1

Keep in mind, this is a hypothetical example used for illustrative purposes only. It is not representative of any specific estate or estate strategy. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The trust provisions should be set up to provide direction about how and to whom payments may be made. You may direct that the trust pay out cash to cover certain expenses, e.g., funeral costs, probate, taxes, final medical expenses, and debts.

This may obviate the need to sell less liquid assets at an inopportune time to cover such costs.

The trust’s beneficiaries may receive the proceeds (after any payments are made to satisfy liquidity needs), creating an inheritance free of estate taxes.

Finally, creditors should not be able to attack these assets since they belong to the trust, not you.

Creating an ILIT should be done only with the assistance of a qualified estate planning attorney. It is a complicated exercise in which mistakes may result in losing the benefits ILITs offer.

1. Investopedia.com, January 5, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. CopyrightFMG Suite.
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