Life Insurance & It's Tax Benefit Implications

Most everyone believes that life insurance proceeds are tax free. This is true if there is advance planning in terms of how the policy is owned and paid for.
Many are not aware that while in most instances life insurance proceeds are not taxable as income those proceeds do not necessarily avoid estate taxes, and is a major failure in planning in many instances with very harsh if not rude awakening for the intended beneficiaries generally when they are in the most need of financial assistance when the main income provider of the family has passed away.

Life insurance should be a key element of a personal financial plan but part of the plan should be as to how that policy or policies are held. With some advance planning, the proceeds from a life insurance policy can be entirely free of taxes.

The main reason most people in the early part of family life have life insurance is to replace income for their young family that would be lost should they die prematurely. Life insurance death benefit payments can generally be received by policy beneficiaries free of any federal and state income taxes if the policies are purchased at the personal level as opposed to some corporate policy, which if properly planned for can also be excluded from income taxes. This is not to say that the proceeds escape estate taxes, they do not unless handled properly, and can be highly financially detrimental if the proceeds are in fact includable in the estate of the deceased.

For estate tax purposes life insurance is part of your personal estate if you are the owner of the policy on your own life. There is an exemption if the proceeds go to your surviving spouse, and he or she is a U.S. citizen. This is a key issue with the increase in foreign nationals now residing here in the U.S. and further planning in those instances is necessary.

When death benefits go directly to a non-spouse beneficiary, such as a child or sibling (even without passing through your estate), the proceeds are includable in your taxable estate.
Should your estate exceed $5 million (for 2011 or 2012) including life insurance coverage, property net of any debt, investments, cash, and any other assets net of any liabilities your heirs will stand second in line behind the Internal Revenue Service and possibly the state.

An overall plan should be in place should your estate exceed the exemption amount, and even estates of lesser value should in fact have an estate and trust in place coordinated with your life insurance to avoid other possible legal and tax problems. The issue is that once you have passed away you have no say so, nor can you assert your desires as to how your beneficiaries are to be taken care of financially without a plan in place before you pass on. Without a written plan many estate problems occur as there are many differing agendas in play by those that you leave behind.

One planning technique to avoid estate taxes is to have the life insurance policy placed in an irrevocable life insurance trust which is a separate entity all unto itself and outside your estate. The trust is required to pay the premiums, and the death benefits go to whomever you name as the trust's beneficiaries. By utilizing this technique the entire death benefit escapes the estate of the deceased and therefore avoids federal estate tax on the death benefits.

Setting up an estate plan is a fairly sophisticated legal procedure which requires the assistance of an experienced team of at the minimum an estate planning attorney, an accountant conversant in such matters, and your life insurance agent.

How To Price a Home For Sale

Your reasons for selling and how long you can wait will be an important part of your decisions on pricing your home. The value of your home is almost entirely dependent on what someone is willing to pay for it and how long you are willing to wait to find that person. Most sellers are not in the position to wait for the "ideal" buyer who will pay their "ideal" price. They want to find the optimum price at which their home will sell in a limited amount of time.

Typically, the most interest is generated in the first few weeks a home is listed. If you want to sell your home fast, you'll want to price it so that it stands out from your competition and comparable homes on the market. If you are willing to wait and to endure continuous showings, you can afford to price it above the competition. Sellers who try to hold out for the highest price, however, may find themselves reducing the price down the line. A house that has been on the market beyond the average marketing time generates little interest from buyers, even when the price is reduced dramatically. Most buyers will assume that the home has problems that they, understandably, want to avoid.

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What Makes A Great Agent?

Most agents say it’s experience. Some say it’s knowledge. Some say it's a great marketing plan. Some say its exellent negotiating skills and some say it's great closing and objection handling skills.

I say it’s a willingness to put your client's needs, wants, and desires ahead of your own. It doesn't matter if an agent is number one. The client should be number one. I say it's being honest and having integrity even when no one else knows the difference. I say it's caring about others. I say it's someone who listens more than they talk. I say it's someone who has no ego or try to show how much they know.

I believe a great agent is someone who treats real estate as a business, realizing they're handling their client's largest investment. I believe it shouldn't be treated as a job. There's simply too much at stake for the client.
A great agent is someone who is willing to continue learning, growing, and expanding. I believe it’s someone who studies the market inventory, statistics, and trends so they can properly educate their clients.

I strongly believe a great agent is someone who does not put his/her client as risk. I believe a great agent knows about mortgage as much as any loan officer. A great agent should never refer his/her client to a loan shark, who sells option ARMs, adjustable rate and interest only loans without fully educating the client.

I strongly believe a rgeat agent always consider the Debt-To-Income ratio of his client to avoid selling an unaffordable home to someone who will not be able to keep up with mortgage payments in the future.

I strongly believe a great agent should understand that real estate should be treated differently than before as future generations will be facing financial challenges that our parents and grand-parents did not face.

I believe a great agent should understand a home is not just a home with 4 walls and a roof, but an investment.

I strongly believe that a great agent should always show his/her clients that they should be buying low and selling high.

I strongly believe a great agent should educate his/her clients so they they understand that buying a home is one thing and another to keep it.

Now with the unprecedented real estate and financial crisis we're facing today you can determine if there are a lot of great agents or just a very tinty percentage.

Avoid Sellers' Worst Costly Mistakes

In a buyer’s market like today, home sellers have little room for error when putting their home on the market or they risk having their property stay on the market for so long that their only solution is to reduce their price. Sellers should take caution to avoid the following common traps.


1. Overpricing the home. Home values have dropped considerably since its peak in 2006, but sellers still are often tempted to list a home based on what they paid for it. Eventually they realize their error and have to reduce their price, sometimes several times. In the past month, 23% of homes listed for sale have reduced their price. There is a financing strategy seldom used by real estate agents that can considerably reduce the needed price reduction. For more information contact us at 1-877-APPLYFREE.


2. Relying too much on just comps. Size up your competition currently on the market, not just the homes that have already sold. Evaluate homes with a listing price similar to yours to see how well yours stacks up against the competitions and how you can differentiate. You must be better than your competition if you want to sell your home. For more information on how to set yourself apart from your competition, contact us at 1-877-APPLYFREE.

3. Failing to take into account the home’s web appeal. Photos are key when marketing a home online. 90% of buyers start their search on the Internet before they decide which ones to visit. If your photograps don't appeal to the public, you won't get any visitors. Be sure to include lots of high-resolution photos of the interior, including of the areas in a home that buyers most care about, such as kitchen, living spaces, and bathrooms.

4. Hovering during showings. Sellers certainly shouldn’t be home for showings, but as a seller’s agent, either should you. Lurking sellers or seller agents may make buyers nervous. Other real estate agents often want privacy with their buyers so they can gather true feedback about the house.

How To Build Wealth With Real Estate

For decades, homebuyers have viewed a home as more than just a place to live. It was a virtual piggybank that buyers could use to pay for college education, vacations and new cars. One way to keep your head above water is to resist the temptation to borrow against your home.

Conserve your equity. Your home is not an ATM Machine. Use your equity to build wealth to enjoy your retirement.

Keep Safety During Open House & Showings

While real estate professionals generally "do a good job" of relaying potential risks to their clients, "safety often takes a back seat" when the sales professionals are hurrying to prepare for a showing.
Homeowners should always be careful if they become suspicious of someone touring their home. They should not allow strangers to enter their home without an appointment, especially if they are alone. They should ask for a visitor's driver's license, address, phone number, and license plate number; take down a physical description; and provide the information via phone to someone as an extra safeguard.

Unknown agents should be told to enter using the lockbox, and all the lights should be turned on and the shades and curtains opened during a showing. Among other things, sellers should remove valuables from the home, allow prospects to enter a room first, refuse to answer any unusual and unnecessary questions, and plan an escape route just in case.

Do open houses sell houses?

I think many sellers see an open house as a sign that their real estate agent is making an effort to sell, and agents are sales agents are eager to show they are doing something to sell the home in a difficult market. So they want an open house. The irony is that many real estate agents say they mostly hold open houses to convince the seller that they are trying. It seems to be fairly common wisdom in the real estate industry that open houses don't sell houses.

The real fact: Serious shoppers make appointments. They are represented by an agent and have been qualified to buy a home for a certain price.

There's another thing sellers should know: Agents aren't just agreeing to hold open houses as a form of appeasement. An open house is a wonderful place to find new clients, people looking for a new home, and those thinking about selling.

This is not necessarily good for the home seller. Just think about a potential buyer who walks into your home. They want to buy a home, have not been pre-approved for a loan, but they're not sure this is the right one. 'No problem!' says the agent. 'I've got more homes similar to this one. Maybe you'll like one of those better.'

There are just two valid reasons for an agent to hold open houses and neither of them has much to do with selling the house being held open.

Reason 1: find motivated buyers (those that do not have an agent) and become their agent.
Reason 2: meet neighbors who will later want to sell their home.

For buyers, I think the advantage is it lets you see houses on your maybe list without having to make an appointment. Sometimes someone buys something. But very rarely.Chances are that it won't happen. Serious buyers went through the process of having been pre-qualified and they are represented by an agent. They have viewed property online, looked at pictures and they visit those properties they are interested in.