February is a month of celebrating our loved ones, not only through our words, but also through our actions. One way is through providing for the needs of our loved ones, both while we are here and after we are gone.
We would like to suggest an estate plan to help you in this important endeavor. If you haven't yet created one, or if you need to update it, consider using our Online Will Planner.
Online Will Planner
This resource is designed to help you gather the information your attorney will need to plan for your future. You will be guided through a series of questions that will help you identify your estate assets and financial goals.
Other Will Planning Resources
Free Wills Guide
Download our free wills guide to learn more about the detailed aspects of estate planning.
We appreciate your heart for ministry. Thank you for taking the time to consider planned giving to support the ministries of your choice.
Blessings,
Kenneth R. Roney, J.D.
President
P.S. For more information on how to use your resources to support the future of your favorite ministry, please reply to this email or contact us by phone at 913.577.2983.
Life Insurance - Costs and Benefits
Five Reasons Why You May Not Own Life Insurance
Let's look at the "top five" reasons people give for not owning life insurance.
1. Too Expensive. "I just cannot afford life insurance right now."
2. Confusing. "We looked at proposals from three companies—page after page of numbers. What does it all mean? I haven't the slightest idea!"
3. Too Many Types. "I checked into term insurance, whole life insurance, universal life, variable life, single premium, and survivorship insurance. But which one is right for me?"
4. No Trust. "Those big insurance companies claim to have billions of reserve funds. But one of the biggest insurance companies has been on the ropes for months. Who can you trust?"
5. Don't Plan to Die. "Someday when I plan to die, I will consider life insurance. But for now—don't worry, be happy!"
Five Reasons to Own Life Insurance
There are several reasons for you to purchase life insurance. If you were to pass away, the life insurance death benefits could provide resources that are quite important to your family. The various benefits include payment of your funeral and final expenses, paying off mortgages or other debts, living expenses or income for a surviving spouse, inheritance for children and payment of estate taxes.
1. Final Expenses and Funeral Costs. Usually there are medical expenses during the last weeks of life. These frequently will range from $5,000 to $10,000. Your memorial service preparation and costs can also easily exceed $10,000. Total final expenses can often be more than $20,000.
2. Pay Debts and Mortgages. The payment of debts or a mortgage is a one-time expense. Depending upon the amount of your mortgage, this could cost anywhere from a few thousand dollars to many hundreds of thousands of dollars.
3. Living Expenses for Spouse. The largest amount of insurance is typically purchased to provide both economic security and an investment that will add to the spouse's other annual income. A reasonable method is to estimate a 5% return on the investment. For example, if a spouse needed another $25,000 of income over and above the amount paid by retirement funds, Social Security and other earnings, then insurance equal to $500,000 invested at 5% would produce this amount.
4. Inheritance for Children. Permanent insurance is frequently used as a method of providing an inheritance for children. Many parents who make substantial gifts to charity plan to use life insurance as a means of providing additional inheritance for children or other family members.
5. Estate Taxes. If your estate is large, there may be a substantial payment of federal or state estate tax. If you own a family business or other assets that are intended to be transferred to family, then your estate could be subject to estate tax. Life insurance can be an excellent method to provide funds for payment of estate tax. Normally, for larger estates the life insurance is owned by an irrevocable life insurance trust so the insurance itself is not subject to estate tax.
Determining the Life Insurance Amount
A fairly simple way for you to determine the total amount of needed insurance is to add up your one-time expenses, then calculate the amount of insurance invested at 5% necessary to benefit a surviving spouse, children or other family members. For example, if your one-time expenses are $200,000 and your spouse desires additional income of $25,000, then the total insurance would be $700,000. This amount includes $200,000 for expenses and $500,000 invested at 5% to produce the annual income.
More sophisticated calculations are available online. Use your favorite search site to look for "life insurance needs calculator," and select from the available free public calculators.
How Life Insurance Works
Life insurance started because individuals were concerned that they might pass away and not provide sufficient resources for family. Because young families typically need a substantial fund and lack the ability to save enough in a short period of time, the concept of life insurance was created.
If many thousands of individuals pay premiums and those funds are invested, then a pool of funds will be available to compensate individuals. The life insurance company hires actuaries who determine the probable number of individuals who will pass away in a given year. Especially for younger persons, out of a pool of 100,000 only a few will pass away in a given year. As a result, the insurance company is able to receive all the premiums and invest them in the insurance reserve fund. The earnings and a portion of the funds are distributed each year to pay claims for those who pass away.
The insurance funds are primarily invested in bonds. The insurance company generally receives 1% to 1.2% to cover all of their overhead and costs. The balance is returned through insurance proceeds to beneficiaries.
Life Insurance Policy Categories
Insurance is generally divided into two categories—term insurance and permanent insurance.
Term Insurance
Term insurance is the least expensive type of insurance and is favored by younger people and many financial planners. The term insurance is available with an annual renewable term (ART) or with a fixed payment for five years, 10 years, 15 years or longer.
Because term insurance does not include any investment or cash value, it enables the largest potential policy to be purchased for the least cost. Due to intense competition within the insurance industry, prices on term policies and level-pay term policies have moved lower in recent years.
Some types of term policies also include the ability to convert to whole life or universal life at a future time. If the conversion is elected, then there will be a substantial increase in the premium.
Permanent Insurance
Permanent insurance includes several types. The traditional favorite is whole life insurance, but there are also universal life, variable life and survivorship life insurance.
Whole Life. The traditional whole life policy involves both insurance and a cash value. The premiums are substantially higher than term insurance because the policy will build a savings element or cash value. During the first year, much of the cash value may be used by the insurance company to cover the commission payment to the sales representative, but over time the cash value may increase. The owner of the policy has the right to borrow against the cash value at favorable rates.
Whole life is frequently fixed in terms of premiums paid and death benefit. The insurance company is determining the probable return of its reserve fund and, based on the age and health of the insured person, calculates and commits to a fixed benefit in exchange for a certain premium.
Universal Life. Universal life was created to provide an option for people who would consider purchasing term insurance and invest an additional amount in mutual funds. With universal life, the policy is invested and a cash reserve is built up. The insurance reserve growth covers the cost of the insurance policy. Universal life policies may include flexible options for increasing or decreasing premium payments. Of course, the cash value of the policy will change with a modification of the premium schedule.
Variable Universal Life. If the insured desires to own life insurance but also potentially gain from investments in stocks and bonds, a variable policy may be appropriate. With a variable policy the insured typically is permitted to invest in different mutual funds managed by the financial services company. If the mutual funds increase in value, the policy cash value will increase.
Survivorship Life. For a couple, an attractive option is to purchase a survivorship policy. This policy pays a death benefit after both husband and wife pass away. Because two persons are insured, it frequently is possible to obtain insurance even if one spouse is in poor health. Quite often, this insurance can be purchased at a more reasonable premium because two persons must pass away before the death benefit is paid. It is particularly useful for providing funds to pay for taxes if a business is to be transferred from parents to children after they both pass away.
Life Insurance Beneficiaries
In most estates, life insurance does not pass through the probate process. The insurance policy is a contract between the insured and the insurance company. The person who purchases the insurance has the right to name the beneficiaries. Normally, a primary and a secondary beneficiary are named. It's also possible to divide the insurance policy among several children or other beneficiaries.
A common beneficiary designation is for the spouse to be a primary beneficiary and the children to be the contingent beneficiaries with equal shares. If the spouse were to predecease the insured or they were to pass away in a common accident, then the children would receive the insurance proceeds.
Minor children should usually not be the beneficiaries of a policy. In many states, if a minor child receives a substantial inheritance, a conservator must be appointed to manage the assets. This is quite expensive and also has the disadvantage of transferring the assets to the minor child when he or she becomes an adult.
A much better arrangement is to transfer the policy to a living trust for the benefit of the minor children, or to create a trust and a will for the benefit of the minor children and transfer the policy to the estate to fund that trust.
Prudent Purchase of Insurance
Life insurance is an important decision, and it is helpful to learn about the different types of insurance. Most individuals will also visit with a chartered life underwriter (CLU) or other representative of a financial services company.
The representative can conduct an insurance needs analysis and suggest the appropriate type of insurance. It is helpful for you to do sufficient research to understand the reasons why many individuals choose term insurance or permanent insurance. In addition, the use of online calculators to determine insurance funding will also provide you with a better understanding of the appropriate amount of insurance. The amount of insurance recommended by online calculators can vary greatly, so understanding your probable needs is quite important.
Insurance Company Ratings
Insurance companies are rated by several sources. A.M. Best, Weiss, Moody's and other ratings services are available. You should be certain to ask for the ratings of any company if a representative suggests purchasing a policy from them. It is also easy to go online and do a search for "insurance company ratings" and obtain the actual ratings for most financial services companies.
SAVVY LIVINGHow to Keep Tabs On an Elderly Parent When You Can't Be There
Can you recommend any caregiving devices or technology products that help families keep an eye on an elderly parent that lives alone? Over the holidays, my sister and I noticed that my dad’s health has slipped. We would like to find something that helps us keep closer tabs on him when we’re not around.
There are many different assistive technology products available today that can help families keep an eye on an elderly loved one when they can’t be there. Depending on your dad’s needs and how much you’re willing to spend, here are some good options to consider.
Personal Emergency Response Systems
If you’re primarily worried about your dad falling and needing help, one of the most commonly used and affordable products for seniors living alone is a personal emergency response system (PERS) – also known as a medical alert device.
For about a dollar or two a day, these systems provide a wearable pendent button – typically in the form of a necklace pendent or wristband – and a base station that connects to the home phone line.
At the press of a button, your dad could call and talk to a trained operator through the system’s base station receiver that works like a powerful speakerphone. The operator will find out what’s wrong, and will notify family members, a neighbor, friend or emergency services as needed.
Some PERS today offer motion-sensitive pendants that can detect a fall and automatically call for help. Others offer GPS mobile-alert pendants that work anywhere. Some top companies that offer all levels of services include Philips Lifeline (lifelinesys.com, 800-380-3111), Medical Alert (medicalalert.com, 800-800-2537) and MobileHelp (mobilehelpnow.com, 800-992-0616).
Sensor Monitoring
If you want to keep closer tabs on your dad than what a PERS offers, consider a sensor monitoring system. These systems use small wireless sensors (not cameras) placed in key areas of your dad’s home that can detect changes in his activity patterns and will notify you via text message or email if something out of the ordinary is happening. For instance, if he went to the bathroom and didn’t leave, it could indicate a fall or other emergency.
You can also check up on his patterns anytime you want through the system’s website. For additional protection, most services also offer PERS call buttons that can be placed around the house or worn.
One good company that offers these services is GrandCare Systems (grandcare.com, 262-338-6147) that charges $300 for their activity sensors, plus a $50 monthly service fee. Another is BeClose (beclose.com, 866-574-1784) that runs $399 for three sensors and a $69 monthly service fee if paid a year in advance.
If you’re interested in a more budget-friendly option, consider Lively (mylively.com, 888-757-0711) that costs only $50 with a $35 monthly service fee. Lively uses small motion sensors that you attach to movable objects like a pillbox, refrigerator door, front door, etc. These sensors will track your dad’s movement/activity and let you know of any abnormalities in his routines. For example, if he didn’t pick up his pillbox to get his medicine or he didn’t open the front door to go out and retrieve his morning newspaper, you would be notified and could check on him. Lively also offers a PERS “safety watch” in case he falls or needs to call for help.
Another affordable option to check out is Evermind (evermind.us, 855-677-7625), which monitors your dad’s frequently used electrical appliances through small plug-in sensors. So, for example, if your dad doesn’t turn on the coffee maker in the morning, or if he’s not watching his favorite television program before bedtime, you would be notified. Evermind costs $199 for the three sensors, plus a $29 monthly service fee.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization’s official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.
YOUR PLANA God-Honoring Estate Plan
Like so many others, my wife and I found ourselves without a current and viable estate plan in place. Although we had drawn up a pair of wills years before, it was a shock to see how out-dated and inadequate they had become. Our circumstances, finances, and interests had changed; but our wills had not. A last will and testament is supposed to provide instructions to family and friends about who and what was important to the will-maker in life. With time, our estate plan no longer reflected those values. And to just discard our old wills would leave us without a viable estate plan, causing state laws to take over and leaving our assets to be distributed to distant or unintended relatives, or possibly to the state itself. Neither result was what we wanted to leave behind.
So began our journey to develop a God-honoring estate plan that would include our family and the local church, as well as national and international ministries, after we are gone.
In 1985, my wife and I purchased a small family business from my parents. Over the years, the Lord blessed our hard work and commitment to quality products and services. After operating the business for a number of years, we began to realize that we had many employees who depended on us as well as a great deal of corporate responsibilities. It became obvious we needed an estate plan that would deal with the business issues as well as our personal goals.
About that time, we were invited to our first World Challenge in Tacoma, Washington. The effectiveness of the JESUS Film was very impressive. We appreciated how the JESUS Film Harvest Partners teams work with indigenous peoples to identify pastoral and lay leadership, and how they help establish preaching points and organize local churches to disciple new believers. As a result of that invitation to the Tacoma World Challenge, we included the JESUS Film Harvest Partners ministry in our new estate plan.
Some time later, in a more recent World Challenge, my wife and I were struck with the urgency of getting JESUS Film teams and equipment out to the field. We realized we didn't want to wait until we were dead and gone to support this ministry in a more meaningful way. We wanted to be a part of the ministry during our lifetime. So, we decided to make an immediate and significant pledge.
In order to implement this pledge, we engaged the services of the Foundation. With their help, we were able to establish an endowment fund, which will be funded over a five-year period. Each year, 95 percent of the endowment earnings will go the JESUS Film Harvest Partners ministry and the remaining 5 percent will be plowed back into the endowment to help grow the fund.
After we are gone, our estate will be distributed to various ministries through the Foundation in a God-honoring way. We are so impressed with the Foundation and thankful that we can have the joy of giving now and seeing the results because of our endowments. We are confident the ministries that are important to us will keep on receiving income in perpetuity.
WASHINGTON NEWSSelecting Your Tax Preparer
The IRS published three letters this week that highlight some of the tax scams that are known as the “Dirty Dozen.” These three tax scams include the fuel tax credit, fake income credits and abusive tax shelters. As part of the letter on fake income credits, the IRS also offered helpful recommendations on selecting your tax preparer.
The fuel tax is primarily intended to pay for maintenance and construction on highways and bridges. There is a fuel tax credit that is available for farming or off-highway business use. The fuel tax credit is claimed on IRS Form 4136.
However, many individuals and some unscrupulous tax preparers have improperly claimed the fuel tax credit. IRS Commissioner John Koskinen stated, “We will do everything we can to stop erroneous claims for the fuel tax credit and catch scammers promoting them. The IRS is also concerned about identity thieves trying to use this credit to inflate their bogus claims for refunds.”
Abusive tax shelters continue to be a problem. The IRS Criminal Investigation Department has a program to review strategies. While many honest businesses make appropriate use of a limited liability company (LLC) or limited liability partnership (LLP), some individuals use these entities and foreign accounts to try to conceal and avoid tax on income. The IRS warns that some complex plans are “too good to be true” and could subject taxpayers to major penalties.
A third abuse is reporting fake income and then claiming a credit. Some taxpayers report improper income and then claim the earned income tax credit (EITC). There also are unscrupulous return preparers who assist individuals in this effort.
In order to assist you in selecting an appropriate tax preparer, the IRS offers several guidelines.
1. IRS Preparer Tax Identification Number (PTIN) – The preparer should provide you with his or her tax identification number. Many preparers also will have a professional credential as an enrolled agent, certified public accountant or attorney.
2. Preparation Fees – Most preparers will offer a flat or hourly fee. Preparers whose fee is a percentage of the refund are more likely to use aggressive or improper strategies.
3. Refund Deposits – The refund should be deposited in your bank account, not the preparer’s bank account.
4. IRS e-File – Preparers who prepare and file more than 10 returns generally are required to file electronically. It is the safest and most accurate filing method.
5. Records and Receipts – You should provide all of your records for income, deductions, tax credits and other items to the preparer. He or she should not claim deductions and credits without appropriate records from you.
6. Blank Returns – Do not sign a blank tax form if asked to do so by your preparer.
7. Review Your Return – Make sure you have looked at your return and signed it on the appropriate line. Ask questions if you have any uncertainty about the return.
8. Signed by Preparer – The preparer must sign and include a PTIN on the return. The preparer also must give you a copy of your return.
9. Reporting Abuse – The IRS makes available Form 14157, Complaint: Tax Return Preparer. The form is available on www.irs.gov. You can obtain the form on the website or request a form by mail at 800-829-3676.
FINANCES
Stocks - Disney Reports Record Revenue
The Walt Disney Company (DIS), reported its latest quarterly earnings on Tuesday, February 3. The company reported record revenue and announced another startup accelerator program.
The company reported revenue of $13.39 billion for the quarter. This represents an increase of 8.8% over the comparable period last year when Disney reported revenue of $12.31 billion.
“This was yet another incredibly strong quarter for our Company, with diluted EPS up 23% driven by record revenue as well as significant growth in segment operating income,” said Robert A. Iger, Chairman and CEO of The Walt Disney Company. “Our results once again reflect the strength of our brands and high quality content and demonstrate that our proven franchise strategy creates long-term value across all of our businesses.”
Disney reported quarterly net income of $2.18 billion. This represents an increase of 18.6% from the same period last year when the company reported net income of $1.84 billion. Earnings per share came in at $1.27 per share compared to $1.03 per share for the comparable quarter one year ago.
The Walt Disney Company is now accepting applications for its second Disney Accelerator program powered by Techstars. Ten applicants will be selected to begin a 3-month mentorship and investment program beginning in July and ending in October 2015. The companies in the accelerator program should be technology-based startups with a vision for making an impact on the media and entertainment industry.
The Walt Disney Company (DIS) shares ended the week at $102.02, up 11.7% for the week.
Lionsgate Misses Revenue Projections
Lionsgate Entertainment (LGF), a global content leader, released its latest quarterly earnings on Thursday, February 5. The company missed revenue projections, but reported increased net income on lower overall costs.
The company reported revenue of $751.3 million for the quarter. This represents a decrease of 10.6% from the same period last year when Lionsgate reported revenue of $839.9 million.
“Our strong financial results in the quarter were driven by growing margins across our businesses,” said Lionsgate CEO Jon Feltheimer. “Our television division had another stellar quarter as it continues to emerge as a leading supplier of premium scripted content, and our film business achieved strong profitability with a diverse portfolio of films. We’re also pleased to see our digital initiatives beginning to deliver incremental revenue and profits, and we expect their contributions to continue to grow.”
Lionsgate reported quarterly net income of $98.19 million. This represents an increase of 10.6% from the comparable period last year when the company reported net income of $88.8 million.
On February 6, Lionsgate and IMAX announced that The Hunger Games: Mockingjay – Part 2 would be released in IMAX 3D theaters in the U.S. on November 20, 2015. The first installment, The Hunger Games: Mockingjay – Part 1 was released in November 2014 and brought in $715 million at the international box office. So far the Hunger Games movies have reportedly made over $2.2 billion at the international box office.
Lionsgate Entertainment (LGF) shares ended the week at $29.10, up 1.4% for the week.
LinkedIn Reports Mixed Results
LinkedIn Corporation (LNKD), a digital professional network, reported its latest quarterly and annual results on Thursday, February 5. The company reported strong quarterly and annual revenue, but announced a net loss for the year.
The company reported quarterly revenue of $643.4 million and annual revenue of $2.2 billion. Both figures represent increases from the same periods last year when LinkedIn reported quarterly revenue of $447.2 million and annual revenue of $1.53 billion.
“The fourth quarter capped another successful year for LinkedIn, which was marked by steady member growth and strong financial results,” said Jeff Weiner, CEO of LinkedIn. “We continued to make significant progress against a number of multi-year, strategic initiatives including mobile, jobs, content and global expansion.”
LinkedIn reported net income of $3.0 million for the quarter and a net loss of $15.7 million for the year. Both figures represent decreases from the comparable periods during the previous year when the company reported quarterly net income of $3.8 million and annual net income of $26.8 million.
While investors were disappointed with LinkedIn’s significant net loss this year, most were encouraged that the company’s revenue exceeded the industry standard by almost 10%. Also, LinkedIn has no debt and a fairly solid financial position. As a result, the company’s stock rose in the hours after its earnings announcement.
LinkedIn Corporation (LNKD) shares ended the week at $263.40, up 16.8% for the week.
The Dow started the week of 2/2 at 17,170 and closed at 17,824 on 2/6. The S&P 500 started the week at 1,997 and closed at 2,055. The NASDAQ started the week at 4,651 and closed at 4,744.
Bonds - Jobs Report Shows Encouraging Trend
The U.S. Department of Labor released the jobs report for January late on Thursday, February 5. The report showed an encouraging trend in the labor market during the past three months.
The report showed that the U.S. economy added 257,000 jobs in January. This was above expectations that 230,000 jobs would be added. Also, the report revised upward the number of jobs added in both November and December to 329,000 and 423,000 jobs, respectively.
In total, the number of jobs added during the past three months is more than any three-month period since 1997. In addition, average hourly earnings increased 0.5% during January. This is the largest increase in hourly earnings since 2008.
Finally, the unemployment rate increased from 5.6% to 5.7%. However, this increase is due to an increase in the number of unemployed people looking for work. The participation rate increased from 62.7% to 62.9%. The participation rate was 66% before the recession in 2008.
The positive jobs report caused some investors to speculate that the Federal Reserve may be close to raising borrowing rates. “The market likes this report,” said John Brady, Managing Director for global futures and options at RJ O’Brien & Associates LLC. “It puts the Fed back in play in June.”
As a result, after the report was released Treasury prices fell and yields rose. The 10-year Treasury yield rose 12 basis points to 1.94% during late Thursday trading.
The 10-year Treasury note yield finished the week of 2/2 at 1.94% while the 30-year Treasury note yield finished the week at 2.52%.
CDs and Mortgages - Interest Rates Decline
Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 5. The survey showed average mortgage rates declining after an uptick last week.
The 30-year fixed rate mortgage averaged 3.59% this week. This represents a decrease from last week when it averaged 3.66%. One year ago at this time, the 30-year fixed rate mortgage averaged 4.32%.
The 15-year fixed rate mortgage averaged 2.92% this week. This represents a decrease from last week when it averaged 2.98%. Last year at this time, the 15-year fixed rate mortgage averaged 3.4%.
“Mortgage rates fell this week following the release of weaker than expected pending home sales, which fell 3.7% in December,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Moreover, real GDP growth for the fourth quarter was 2.6% and the Institute for Supply Management reported slower growth in manufacturing last month, both missing market consensus forecasts.”
The money market fund finished the week of 2/2 at 0.4%. The 1-year CD finished at 0.7%.
____________________________Are you a Nazarene Legacy Partner (NLP)? The answer is “YES” if you have designated any gift to a Nazarene ministry in your will, bequest, or estate plan. This could be a tithe on your estate, an insurance beneficiary designation to your local church, college, global mission, or any other Nazarene ministry you support.
Send us your name and contact information by reply email and indicate “I am a Nazarene Legacy Partner” and we will add your name to our NLP honor roll. To model generosity inspires others to do the same. Thank you for your interest in gift planning. To access any of this updated financial and gift planning information, please select our website.
Global Church of the Nazarene Foundation
17001 Prairie Star Parkway, Suite 200
Lenexa, Kansas 66220 United States
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