Jeff’s Top Ten Lists – Life Insurance Mistakes

Here is a list of the top ten mistakes people make with regard to their life insurance policies:

1. The Insured’s Estate Has Been Named Beneficiary.  This would require a probate proceeding, when one of the goals of life insurance is to avoid the hassle of probate.  With named beneficiaries (i.e., not the estate of the insured), the life insurance proceeds pass outside probate.
2. The Policy Has No Named Contingent Beneficiaries.  If the primary beneficiary predeceases the insured, the next default beneficiary is usually the estate – and that means probate is necessary.
3. Minors Or Other Impaired Persons Have Been Named Beneficiaries.  If young children are in line for life insurance money, it usually means a court has to supervise the process and administration of the funds.  That can be avoided with proper planning.  If someone is receiving Social Security Supplemental Income benefits (SSI), the benefits will cease if life insurance proceeds are payable directly to him or her.  Proper planning can avoid such an unfortunate result.
4. The Beneficiary Language Is Wrong Or Unclear.  Estate planning attorneys run into circumstances all the time where the beneficiary designation does not match the insured’s intentions.
5. Family Needs Are Not Adequately Addressed.  It used to be that a million dollar insurance policy felt like it was enough to take care of family needs in the event of the breadwinner’s death.  For many, that is not nearly enough anymore.
6. The Wrong Ownership Was Chosen For The Problem To Be Solved.  Most people choose to own their life insurance policies personally.  That can be a mistake in certain business situations, or where there are family estate tax issues.
7. The Ownership Chosen Creates An Income Tax Problem. Sometimes having a policy owned by a third party can create an unintended income tax problem.
8. Section 101(J) Requirements Have Been Neglected For A Business Policy.  In 2006, Congress created new rules for business-related life policies.  Careful guidance is needed to be sure business policies are structured properly.
9. Buy-Sell Funding Policies Have Not Been Properly Reviewed.  Business owners sometimes use life insurance to help make sure the business will continue after an owner’s death.  Even where a plan has been put in place, failure to update it can have disastrous consequences for the owners and their families.
10. Policies Have Not Been Reviewed After Divorce (Or Other Life Event).  People sometimes forget to remove an ex-spouse as beneficiary under a life insurance policy.  They also sometimes forget that their divorce papers require them to use existing life insurance policies in certain ways.

If you have not done so recently, we strongly recommend that you review your existing life insurance policies with your insurance representative, and/or call our office at (813) 265-0004 and we will be happy to set up an appointment to review your policies for one or more of these mistakes.  For more information, visit our website:  www.amanlawfirm.com

New Florida Power of Attorney Law

Effective October 1st, 2011, there is a new Power of Attorney statute in Florida.  There are significant and important changes.  The “durable family power of attorney” is a vital part of your estate planning arsenal, so be sure you consult with an attorney who is aware of these changes in the law.  The new law is summarized below.

The new law conforms Florida’s power of attorney law under Chapter 709, Florida Statutes, to the Uniform Power of Attorney Act adopted by the National Conference of Commissioners on Uniform State Laws, with some modifications to achieve greater consistency among state laws.

The revised power of attorney law applies only to powers of attorney created by an individual. Powers of attorney validly executed under Florida law before October 1, 2011 will remain valid. If the power of attorney is durable (a power of attorney that is not terminated by the principal’s incapacity) or springing (a power of attorney that does not take effect until the principal loses capacity), it will remain durable or springing under the new law. To be effective in Florida, powers created on or after October 1, 2011 must be exercisable as of the time they are executed. The meaning and effectiveness of a power of attorney are governed by ch. 709, part II, F.S. A power of attorney executed in another state that does not comply with the execution requirement of this part (ch. 709, part II, F.S.) is valid in Florida only if the execution of the power of attorney complied with the law of the state of execution.

Powers of attorney that are executed after October 1, 2011 may not create springing powers, with an exception for military powers. Qualified agents as defined in the bill are entitled to reasonable compensation. The revised power of attorney law provides requirements for written notice with special notice for financial institutions, and special rules for banking and investment transactions; provides default duties for the agent; creates co-agents and successor agents; prohibits blanket or default powers granted to an agent; prescribes requirements for the rejection by a third person of a power of attorney; prescribes requirements for an agent’s liability under a power of attorney; and provides grounds for judicial relief and dealing with conflicts of interest.

Let us know if we can help with your estate plan or planning for your parent(s) or loved one.