How Has COVID-19

How Has COVID-19 Changed Life Insurance?

Gregory L. Hoernschemeyer, CLU, Senior Vice President, Registered Representative

The pandemic caused people to reassess their priorities and has raised awareness about the important role life insurance plays in families’ financial security. Research shows 42% of Americans would face financial hardship within six months if the primary wage earner were to die unexpectedly. Adequate life insurance coverage is the foundation for a secure financial future.

Many current life insurance products offer features that provide living benefits for chronic and terminal conditions. These features provide access to a portion of your death benefit if you are diagnosed with a qualifying illness. Living benefits may be the most important aspect of modern life insurance because a serious illness can affect anyone and place additional strain on your family’s finances.

Many Americans rely solely on life insurance offered through their employer to protect their family. Unfortunately, losing your job also means the loss of benefits, including group life insurance. Group life insurance is usually not portable; if it is, it may be cost prohibitive. More than 33% of Americans plan to purchase life insurance each year but assume it is too expensive. Most individuals overestimate the cost by three times or more.

How Much Do You Need?

When you consider your current expenses, evaluate how your income would be replaced if you were unable to provide it for your family and how long your family could continue its current standard of living without your income. It is important to replace this income to pay expenses, meet debt obligations and save for the future. Below are estimated benefits required to replace an annual income stream of a deceased wage earner.

The Process

Another misconception about life insurance is that it’s difficult to obtain. In actuality, life insurance companies pivoted in response to the pandemic to help consumers expedite the buying process online with accelerated underwriting. Accelerated underwriting uses available data to assess your health rather than relying primarily on medical exams and lab results. Please note that not everyone will be eligible for accelerated underwriting based on their health and other factors. If you think accelerated underwriting is the right fit for you, you can initiate the process without a medical exam or lab work.

Purchasing a life insurance policy to replace your income is one of the most meaningful things you can leave behind for your family.

To begin the process, contact me: Gregory L. Hoernschemeyer 800.544.8306 GregH@horanassoc.com

Net Monthly Income

(Money that hits the bank account)

Approximate Death Benefit Needed to Replicate Monthly Cash Flows

Monthly Annually 10 years 20 years 30 years

$2,500

$5,000

$10,000

$15,000

$20,000 $30,000

$60,000

$120,000

$180,000

$240,000 $286,000 $545,000 $779,000

$572,000 $1,089,000 $1,557,000

$1,143,000 $2,177,000 $3,113,000

$1,715,000 $3,265,000 $4,670,000

$2,286,000 $4,354,000 $6,225,000

Six High Net Worth Planning Techniques to Increase Plan Flexibility in 2021

Insights for Estate & Tax Planning Attorneys

Andrea D. Costa, Esq., Vice President, Financial Planning

Estate planners across the country are attempting to read the tea leaves of the current political climate. While no one is quite certain what to expect, the consensus is grim for the ultra high estate tax exemption that is currently in place.

Even if Democratic politicians are unable to pass tax reform, the prevailing estate tax thresholds are scheduled to sunset in 2026. However, many believe the political climate indicates that estate tax exemption is likely to fall well in advance of 2026.

Many estate planners remain concerned that legislation to change the estate and gift tax thresholds could be made retroactive to January 1, 2021. This could leave clients seeking to maximize available exemption through large 2021 gifts open to significant gift tax liability.

The following six planning techniques may allow for more flexibility in 2021 estate planning. These techniques, alongside all high-net-worth estate planning, should be implemented in consultation with an experienced estate planning attorney. These techniques are complex and may ultimately be challenged by the IRS.

SIX PLANNING TECHNIQUES MAY ALLOW FOR MORE FLEXIBILITY IN 2021 ESTATE PLANNING: 1. Leverage the Power of a Disclaimer.

A qualified disclaimer can be made within nine months of any gift made in 2021. Clients may decide to wait to make large gifts to trust until spring of 2021 so that the gift can be disclaimed by December 31, 2021. Such a trust should provide that the disclaiming beneficiary is empowered to disclaim for all beneficiaries of the trust. This is an unusual application of the concept of a qualified disclaimer, so it is unlikely that form disclaimer language will achieve the desired result. Thoughtful drafting is critical.

2. Establish a Spousal Lifetime Access Trust.

Perhaps the most popular strategy of 2020 and 2021, the spousal lifetime access trust removes assets from the grantor spouse’s estate while continuing to provide access to the beneficiary spouse. An inexpensive term life insurance policy may protect against the risk of the beneficiary spouse’s untimely passing. A significant risk to this strategy lies with the reciprocal trust doctrine.

This doctrine pulls assets back into the estate when spouses seek to remove assets from the joint estate if it results in approximately the same economic position and beneficial enjoyment of the estate. In many instances, it will make more sense to pair a Spousal Lifetime Access Trust (SLAT) with the purchase of a substantial life insurance policy within an irrevocable life insurance trust (ILIT) rather than execute two SLAT strategies.

3. Make Spousal Trusts QTIP-able.

Make a gift to a trust with income paid out to a spouse and permit the Qualified Terminable Interest Property (QTIP) election to be made under the trust terms. The election is made on the 2021 gift tax return, which would be timely filed in 2022.

4. Use a Carefully Crafted Formula to Determine the Value of a 2021 Gift.

For difficult-to-value assets, it may make sense to use a formula gift such that the numerator of the formula is the available exemption in 2021 and the denominator is the value of the gift as finally determined for gift tax purposes. Practitioners using this technique should refresh their understanding of this area of gift tax law to determine whether a particular strategy is likely to succeed.

5. Forgive a Portion of a Bona Fide Loan.

In specific circumstances, a client with existing and bona fide intra-family loans in place could choose to forgive such a loan to the extent of the client’s available gift tax exemption in 2021 as finally determined for gift tax purposes. Clients considering this strategy could also simply want to wait to forgive the note until 2021 estate tax reform comes into sharper focus.

6. Installment Sale of Assets.

Building on the concept of loan forgiveness above, a client could sell assets to an irrevocable trust in exchange for a down payment and a promissory note. Treating the transaction as an installment sale could allow the grantor to forgive all but the amount of principal in excess of the 2021 gift tax exemption.

The content of this blog is offered by HORAN Wealth Management, an SEC registered investment advisor. Ms. Costa is an employee of HORAN and a recognized expert in estate planning but does not manage investment advisory solutions. This information is not intended as legal advice or as a substitute for the particularized advice of your own counsel and should not be relied upon as such, as the advice appropriate for you will be dependent upon the particular facts and circumstances of your situation. The transmission or receipt of this information does not create an attorneyclient relationship. We provide links to other sites that we believe may be useful or informative. These links to third party sites or information are not intended as and should not be interpreted by you as constituting or implying our endorsement, sponsorship, or recommendation of the third-party information, products, or services found there. Neither the information nor any opinion expressed constitutes a solicitation to use our services, or to purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HORAN and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Looking for more insights?

Check out Andrea's Estate & Tax Planning blog "Legacy in Focus" by visiting www.horanassoc.com/insights

Estate Planning Considerations for All Individuals

DO YOU HAVE AN UPDATED WILL?

67% of U.S. adults do not have a will and those ages 18-34 are 16% more likely to have a will than adults ages 3554.* If you die without a will, your estate will be probated which can be timely, expensive and public.

HAVE YOU REVIEWED YOUR BENEFICIARY DESIGNATIONS?

Some common assets, including life insurance and annuities, transfer to the specific individual(s) identified in the contract (the beneficiary). Beneficiaries of other assets, such as retirement plans and brokerage accounts, are identified through other processes. They all generally supersede what your will may say, making it critical that they are reviewed regularly and updated as needed.

DO YOU HAVE ALL OF YOUR RELEVANT DOCUMENTS PROPERLY STORED IN ONE SAFE PLACE?

These include wills, deeds, birth and marriage certificates, banking and investment account numbers, and contact information for your financial advisor, attorney and accountant. They should be secured and shared with a person that you trust.

A Benefits Checklist to Prepare You for Life's Biggest Milestones

If you’ve ever experienced a big life event (marriage, career change, etc.) you know the documentation updates associated can be a huge headache. It’s honestly enough of a hassle to put off the paperwork for months and months. Whenever you experience a “qualifying event”, if your employer offers health insurance, you are able to enroll or update your enrollment elections—even if the official open enrollment period has ended.

We know navigating the benefit changes associated with life changing events can also be difficult to navigate. But we can help! Earlier this year the "Benefits: What, Like It’s Hard" podcast hosted a series to provide actionable steps to help eliminate some of the challenges that come with life changing events. Below are tips on how to navigate some of life's milestones.

Turning 26 Getting Married

As a result of the Affordable Care Act, individuals can stay on their parent’s employer-provided health plan until their 26th birthday. For individuals nearing 26 and still on their parent’s plan, here are a few things to consider:

Check with your parent’s health insurance provider to learn exactly when your coverage ends. Give yourself plenty of time (at least 30 days before your birthday) to understand all the options available. Ask your employer what documentation you need and what the enrollment process looks like. Listen to "Benefits: What, Like It’s Hard" to educate yourself on benefits basics! Walking down the aisle is certainly one of the most exciting days of your life, but it also leads to a big benefits decision. Do you and your partner both stay on your own employer’s plan? Or does it make sense for one of you to switch plans?

It’s helpful to do a side-by-side comparison of your options. Make sure to compare not only medical plan options but also other lines of coverage such as dental and vision. Here are a few things to consider: how will your monthly premiums change? What will happen to your deductible and out-of-pockets costs? Most health insurance plans require you to make any changes 60 days after your wedding date. If you miss that deadline you will have to wait until the next open enrollment period to make any updates. Review and/or update your beneficiary(ies) on all your accounts. Now is also a good time to evaluate your life insurance coverage and your spouse's.

SM

"Benefits: What, Like It’s Hard" is the number two health insurance podcast in the country.

With a library of almost 150 episodes and a five-star rating, you are sure to find some helpful benefits tips.

Subscribe to the podcast using your favorite listening app today!

New Baby Changing Jobs

Expecting moms and dads-to-be know there is a long list of to-dos to check off your list when preparing for your new bundle of joy! Make sure to add signing up your new baby for health insurance to that list.

Do a side-by-side comparison of your options. Make sure to compare not only medical plan options but also other benefits such as dental and vision. Make sure to have all the documentation available— you will most likely need the baby’s birth certificate and Social Security number. Review and/or update your beneficiary(ies) on all your accounts. Consider enrolling in a Dependent Care Flexible Spending Account if available. Evaluate your life insurance needs—most individuals need coverage beyond what is offered to them by their employer. Even if you’re not yet expecting but plan to grow your family soon, consider enrolling in your employer’s short-term disability plan. It’s never too early to think about college. Consider opening a 529 plan and start investing toward your baby’s future! Starting a new job is an exciting time, but it can also be overwhelming. Not only do you have to learn about your new role, you also have to learn about the new benefits being offered to you and how to enroll.

Most employers have a waiting period before new employees can qualify for health insurance coverage. During that time, individuals can choose between COBRA insurance or a short-term health insurance policy to help fill the gap in coverage. When the time does come to enroll in benefits, give yourself time to evaluate all plan offerings and consider factors like premiums, deductibles and out-of-pocket expenses. Review your new employer’s retirement plan offerings including any matching contributions and investment opportunities. Consider consolidating your “old” 401(k) with your “new” 401(k) by rolling over the balance. Or, moving those assets to an IRA may be a better option. Review your new employer’s group life insurance and if it’s not enough, perhaps supplement with individual life insurance. If you change careers often, individual life insurance stays with you regardless of your employer.

Get Outdoors! SEVEN Great Spots to Visit this Summer

After a year spent safely inside, let’s get outdoors and enjoy the summer. While these are just a few options for your family to enjoy, the activities our region has to offer are endless!

Dayton Art Institute

One of our favorite spring traditions at HORAN is visiting the Dayton Art Institute to view the iconic blossoming cherry trees. HORAN donated and planted 20 trees at the museum as a part of the Operation 2000 Cherry Tree Project in the fall of 2016.

www.operation2000cherrytrees.com

Photo Credit: Eric Brockman

Cincinnati Art Museum

Located in Eden Park, the Cincinnati Art Museum features a diverse, encyclopedic art collection of more than 67,000 works spanning 6,000 years. In addition to displaying its own broad collection, the museum hosts several local, national and international traveling exhibitions each year. Currently, their signature steps feature pieces from the Pyramid Hill Sculpture Park and Museum. www.cincinnatiartmuseum.org

Photo Credit: Pyramid Hill Museum & Sculpture Park

ArtWorks

The City of Cincinnati is an awe-inspiring colorful art gallery with aesthetic delights for residents and visitors around every corner. Take a walking tour to explore the City’s collection of murals. The tour guides will share the origin stories of different pieces and educate you on the rich arts and cultural scene of Cincinnati. www.artworkscincinnati.org/muraltours/

Levitt Pavilion Dayton

The Levitt Pavilion Dayton is in the heart of downtown Dayton located just blocks from both RiverScape MetroPark and the Oregon District. This outdoor live music venue offers 50 free, familyfriendly concerts each summer. The venue announced their summer concert schedule on May 20. www.levittdayton.org

Cincinnati Nature Center

Located on a nature preserve in the heart of Clermont County, the Cincinnati Nature Center features award-winning trails that wind through the region’s natural habitats of Eastern deciduous forest, fields, streams and ponds. Rowe Woods spans more than 1,000 miles and offers 16 miles of hiking trails. www.cincynature.org

Fleet Feet Running Clubs

The Fleet Feet running clubs are professionally coached to help you reach your personal training goals. Train with a like-minded group for the Flying Pig Half & Full Marathons or workout with a group designed for beginners to help make crossing the finish line a fun achievement. www.fleetfeet.com/s/cincy/training

Cincinnati Zoo & Botanical Garden

As the Greenest Zoo in America® and the second oldest zoo in the country, the Cincinnati Zoo & Botanical Garden is an international leader in the protection of endangered animals and plants. The Zoo recently achieved Platinum LEED certification for its new Roo Valley habitat, an exhibit featuring kangaroos and little blue penguins that opened in 2020. www.cincinnatizoo.org

Photo Credit: Lisa Hubbard

Pack a Picnic & Head to the Park

Devou Park

This hilltop park in Covington, Kentucky, provides scenic panoramic views of the Cincinnati skyline and Ohio River valley. Lower amongst the hills, visit the Behringer-Crawford Museum to learn about the heritage of Northern Kentucky.

Summit Park

Located in Blue Ash, Ohio, Summit Park features a weekly farmers market on summer Wednesdays and an observation tower with a deck as high as 126 feet where you can see the Kings Island Eiffel Tower. Additionally, the Cincinnati Opera will be holding its 2021 Summer Festival at the park from July 11-31.

Bellbrock Park

Bellbrock Park is the center of the local historical heritage in Bellbrook, Ohio. Across the street from the Bellbrook Museum, the park holds many community events such as Music Nights in the Old Village each Friday through September.

Warren County ArmCo Park

Nestled in the rolling hills of Warren County, Armco Park is on historical property and features a golf course, access to a lake for fishing and boating and a plethora of sports activities.

Aldersgate Park

Aldersgate Park in Marysville, Ohio, features a walking path around a pond and a picturesque gazebo that is perfect for a family picnic.

Parky’s Farm at Winton Woods

Parky’s Farm is an educational farm located within Winton Woods. A perfect location for a family outing that includes indoor and outdoor playgrounds, picnic shelters, gardens and animals.