Remember the tragic case of Terri Schiavo, who collapsed at 26 years old and became incapacitated? Her loved ones engaged in a seven year court battle regarding whether or not she should be kept alive via artificial means while in a persistent vegetative state.

This could have been avoided if Terri’s wishes had been made clear by completing simple documents called Advance Health Care Directives.

There are two distinct elements to advance health care directives, though some states combine them into a single document.

First is a “living will,” “health care declaration,” or “directive to physicians,” which is a signed document directed towards health care professionals specifying the kind of care you wish to receive in the event you become incapacitated and cannot communicate on your own behalf.

Second is a “medical power of attorney” or “durable power of attorney for health care,” which is a signed document where you appoint a trusted person (called your health care “agent” or “proxy” or “attorney in fact”) to make medical decisions for you in the event you become incapacitated and cannot communicate on your own behalf.

One other related element is a “durable power of attorney for finances” where a financial agent or proxy is authorized to pay your bills, file insurance claims and conduct other elements of your financial life.

A good resource to learn more and access free advance health care directive forms for each state is 501(c)(3) non-profit NHPCO’s website.

Mark Gavagan is the author of two books that help families organize and plan their personal & financial affairs: “The It’s All Right Here Life & Affairs Organizer” and “12 Critical Things Your Family Needs to Know”.

When your loved one dies, you’ll be faced with making many decisions. If they owned a term life insurance policy and named you as their beneficiary, you’ll have to file a death claim with the life insurance company. At that time, you’ll be asked to determine how you’d like to receive the death benefit payout.

There are really two main options you can choose. They are both relatively easy to understand, but nonetheless it’s important that you review your options when making a death claim.

Lump Sum Option

Most policies provide a lump sum payout option, which simply means that as the beneficiary, you would receive the total death benefit of the life insurance policy in full. This payout option is beneficial if there are pressing debts or if there is an immediate need for a large sum of money.

Annuity Payment Option

If you choose the annuity payment option, you’ll have to decide how you want the money distributed. There are several different ways you can receive the money. These include:

• Income for life – You would receive guaranteed payments for life.
• Income for a specified amount of time – You would receive guaranteed payments for a specified amount of time.
• Last survivor life income – If there is more than one beneficiary, the last living beneficiary would receive guaranteed payments for life.
• Specified income – You choose how much and for how long to receive guaranteed payments until the entire death benefit is paid out.
• Interest income – You receive guaranteed payments on the interest paid on the death benefit only.

Before choosing a payout option, consider your financial needs to determine which option is best for you.

If you don’t have a life insurance policy, but are thinking of getting one, you can receive term life insurance quotes online. Be sure to ask what types of death benefit payout options are available to you.

President Barack Obama has proposed raising money to pay for his health-care overhaul by imposing $58 billion in new taxes on securities dealers, life insurance policies and Americans with valuable estates.

Basically the provisions would modify the tax rules when policyholders sell their coverage in a life settlement or viatical, and would reduce a deduction that life insurers claim when they manage assets in separate accounts. Another provision would further restrict tax benefits associated with corporate-owned life insurance.

What are your thoughts on this?  Do you think these provisions Obama has proposed are fair?

According to a newly-released Russell Research study almost 90 percent of Americans are concerned about one or more personal matters from a legal standpoint. The study reports nearly 70 percent have experienced at least one legal event in the past year and the vast majority – about 75 percent – don’t have a plan to deal with legal issues that can occur.

At AccuQuote, we’re not just working hard to provide you with affordable life insurance, but also save you money in all areas of your life, not just with your life insurance. This is a great time to remind you that our partnership with LegalZoom allows us to provide you with a $10 discount on any product including ones that can help you create your will, living trust and power of attorney documents. Experts suggest that spring is a great time to review your current documents.  Click here to take advantage of this offer.

According to the Consumerist, a recent lawsuit was filed against Settlers Life Insurance. Curtis McCraw held a life insurance policy with Settlers Life Insurance at the time of his murder in April 2008. When his wife Stephanie McCraw attempted to claim the Accidental Death Benefit, Settlers denied her claim because her husband had “a pre-existing liver condition.”  This just goes to show why you should NEVER lie on your life insurance application about pre-existing conditions. Even though the claim says that being shot in the back by unknown assailants, the life insurance company found out that he had Hepatitis C and has every right to refuse paying out the term life insurance death benefit.

Tax season is almost over but according to the experts at Mint.com there’s still time to maximize the tax benefits of your 401k(s) and IRA(s).  Here’s a story by Mint.com author GE Miller:

Before you can begin reaping the potential benefits however, you’ll need to ask yourself a few questions relating to your current station in life and where you’d like to be come retirement age.

1. Do you plan on working to the age when you can withdraw retirement funds penalty free or retire early?
2. Do you need the benefit of tax deductions right now due to a tough financial situation?
3. Are you in a higher tax bracket right now than you think you will be in retirement?
4. Do you think your lifestyle will be less or more expensive in retirement?

Without an answer to these tough questions, it is very challenging to know whether to invest your retirement savings through the traditional or Roth options available to you. And what about an SEP IRA? When can that come into play?

When it comes to choosing the retirement account that makes the most sense for you, there are some general tips you can follow. Your answers to the previous four questions will only enhance your ability to get the most out of these tips.

1. Get Free Money First
Before considering an IRA, you should first make sure that you are getting the maximum benefit out of your employer’s 401k plan. What this means is that before contributing funds to any IRA, you should get the maximum match from your employer in your 401k. If you’re not sure what that amount is, you have some homework to do. Once this maximum match has been achieved, you can move over to IRA’s.

2. Know Your Limits
They can change annually so it’s worth checking. For 2009, the IRS maximum allowed contribution per individual for 401k’s is $16,500, with an additional catch-up contribution for those 50 and older. For both IRA’s, it is $5,000 (combined per individual), with a catch-up contribution of an additional $1,000. In 2010 and beyond, limits are indexed to inflation.

3. Understand What a Tax Deduction is
Every dollar you contribute to a traditional 401K or IRA is a dollar taken off the top of your taxable income for the present year. For instance, if I earned $40,000 this year and maxed my traditional IRA and 401k contributions, my taxable income would be $18,500 versus $40,000 ($40,000-$16,500-$5,000 =$18,500). If I’m in the 15% tax bracket, this would shave $3,225 off of my $6,000 tax obligation for the year.

4. Understand the Term ‘After-Tax’
Both the Roth 401k and IRA options are ‘after-tax’. This means that your contributions are after taxes have already been subtracted. You are getting taxed today, for the benefit of not being taxed when you start getting distributions later on. With the traditional options, you are getting the benefit of not being taxed today, but you will be taxed on your distributions later on.

5. Understand the Trade-offs
If you plan on retiring early, opting for the traditional options versus the Roth can allow you to save your tax cuts towards this goal, if you are disciplined enough to do so. But there is always a catch, right? You will have less money in retirement because you are taxed on your distributions through the traditional.

6. Know Yourself
If you plan on traveling the world and living lavishly in retirement, it makes sense to take the tax hit now with the Roth options so that you have more money in retirement. If you plan on living humbly in retirement (after all, any mortgages should be paid off by then), then you may want to take the tax hit down the road.

7. Understand Your Current Situation
If you are making a fair wage but are drowning in debt and will be in the red for the year, then it would rarely make sense to opt for the Roth options when you could be getting the tax benefits of the traditional options today, which could be a life saver for you.

For more of GE Miller’s writing, visit 20somethingfinance.

The American Recovery and Reinvestment Act of 2009, which President Obama recently signed, includes a number of incentives for consumers and taxpayers. Some of these breaks-like an $8,000 credit for first-time homebuyers-won’t benefit taxpayers until they file next year. Others could come much more quickly, such as a reduction in paycheck withholding.

According to Consumer Reports, here are some details, as explained by the tax experts at CCH, a publisher of tax information and software:

1. Making Work Pay Credit: This tax credit amounts to 6.2 percent of a taxpayer’s earned income or $400, whichever is larger (joint filers can get as much as $800). It runs retroactively from Jan. 1 of this year through year-end 2010. According to CCH, you’ll get that credit either through this year’s paychecks-by opting to reduce withholding-or by filing for the full amount next tax season. Self-employed folks also can get the credit. As with all these tax breaks, they’re not geared to higher earners; the phase-out begins when a single earner’s modified adjusted gross income exceeds $75,000 and joint filers’ MAGI exceeds $150,000.
2. $250 for seniors. Individiuals on fixed incomes, including retired vets and recipients of Social Security and railroad retirement benefits, will get a one-time, $250 payment. This payment would offset by $250 any Making Work Pay Credit for which you were eligible. The bill language suggests that this payment would be distributed through the same channels as those that deliver Social Security and similar benefits, not through the IRS.
3. First-time homebuyer credit. An $8,000 tax credit will be available for new home buyers who make their purchase in 2009. This is essentially an extension-and $500 increase-of a similar credit made available last year. Unlike the old bill, however, you don’t have to pay the credit back after 3 years. Interestingly, the Feds consider a first-time homebuyer someone who hasn’t owned a home in 3 years, not someone who has never owned a home. (CCH notes that the purchase date for this credit is when the title closes, not when the contract is signed.)
4. Car-buyers credit. Buyers of autos on or after enactment of the new law would get an above-the-line federal deduction for state and local sales taxes or excise taxes paid on the first $49,500 of a car’s value. (Above-the-line deductions reduce your total income that’s subject to tax.) Motor homes also would be included, though sales through leases would not get the same tax benefit. Assuming your sales tax was 4 percent, you’d get a $1,600 deduction on the purchase of a $40,000 car. This credit gets phased out when adjusted gross income reaches $125,000.
5. Help for students and their parents. The HOPE tax credit has been renamed the American Opportunity Tax Credit. It temporarily expands the previous tax credit against education expenses to up to $2,500 a year, from a maximum, $1,800 a year. It been extended to cover not only tuition, but also educational materials, and can be used for the first 4 years of college. Tax-free withdrawals from 529 college savings plans now can be used toward purchases of computers and computer technology, including internet service.
6. Exclusion of unemployment benefits. You’ll be able to exclude up to $2,400 in unemployment benefits from your gross income when figuring your 2009 taxes.
7. More help for lower-income taxpayers. Families with as little as $3,000 in earned income are now eligible for the Child Tax Credit, a refundable credit of $1,000 per child for kids up to age 17; the change is good through 2010. The Earned Income Tax Credit, another refundable credit for low-wage earners, also has been adjusted to refund up to 45 percent of the first $12,570 earned by a worker with two qualifying children.
8. And help for AMT victims, too. Congress did in February what it normally does each fall: Invoke the “AMT patch” on the alternative minimum tax, which penalizes taxpayers who take big deductions for state/local income and real estate taxes, and for big families. The tax was meant to penalize very high earners trying to weasel out of paying tax, but over time has come to affect folks making as little as $75,000, which in some areas of the country is strictly middle class. While I haven’t seen the projections for this bill, in recent years, the patches have effectively limited the number of affected taxpayers to about 4 million. Without the patch, some 26 million more taxpayers would feel the pinch. -Tobie Stanger

This was a good article that I’d like to share with you from the Wall Street Journal.

It discusses how both candidates agree on changing the law to make the federal estate-tax (death tax) exemption “portable.” This issue is known as portability because the exemption per person — $2 million this year and $3.5 million next year — would become transferable from one spouse to the other, in effect doubling the surviving spouse’s exemption. In essence, that means that spouses would be able to use each other’s estate-tax exemption without first having to set up complex and costly trusts and take other steps that many people now feel obliged to do.

I thought this would be a good time to remind you that there are different types of life insurance policies that can help you with your estate planning needs. While estate taxes may be inevitable, there are ways to conserve – or at least replace – a portion of your estate. One effective tool to help protect your net worth is a survivorship life insurance policy.

If your estate exceeds the exclusion amount, you may have an estate tax liability. This is where you can use a survivorship life insurance policy, also known as second-to-die insurance.  This coverage can insure both you and your spouse under one policy, with the proceeds payable after the second death.

Here are some bullet points from an article in Kiplinger’s Personal Finance, which does a great job summing up why you shouldn’t be afraid of buying or keeping an AIG life insurance policy.

• AIG’s insurance subsidiaries do have assets available to pay claims, and there are several layers of protection for policyholders.
• The state insurance departments set strict capital requirements to make sure insurers can pay claims. As a result, those subsidiaries are not suffering from the same financial troubles as other parts of the company.
• The insurance subsidiaries are solvent and able to pay their obligations
• it will likely be the insurance subsidiaries —or their valuable blocks of business and high-quality assets — that will be sold in an attempt to return the AIG parent to a more stable financial position.  If this happens, then the insurance benefits should continue to be paid by the new insurer without any disruption.
• If the insurance subsidiaries did end up having financial troubles, which is VERY unlikely to happen, then the insurance department in the company’s home state (New York for many of AIG’s insurance subsidiaries) would try to rehabilitate the company. If that didn’t work and the company became insolvent, then the state guaranty associations would protect policyholders by continuing the insurance policies and paying claims, up to certain limits.
• The maximum limits on protection vary based on the policyholder’s state, but every guaranty association must provide coverage for at least $300,000 in life insurance death benefits (per insured life), $100,000 in cash surrender or withdrawal value for life insurance.
• If a financially strong insurer ends up buying AIG’s insurance subsidiaries, your claims could be paid seamlessly.

If you’re still thinking about switching to another company that isn’t in financial trouble, be careful: If you’ve held a life insurance policy with AIG for several years, buying new coverage now could be a lot more expensive because you’re older.

If you hold a life insurance policy or are considering purchasing one from American General Life or US Life of NY (both AIG subsidiaries), you probably have some questions or concerns about your existing or pending AIG life insurance policy since the Federal Reserve announced it is taking over AIG in an $85 billion rescue plan.  Here are several really great articles that do a fine job assessing the situation and what it means for policyholders.

• SmartMoney.com – AIG’s Fallout – What Policyholders Can Expect
• Reuters – Factbox – Potential Outcomes for AIG Policyholders
• Bankrate – Got an AIG policy? Don’t worry!

Also, here is a video that gives some advice to AIG policy holders

Advice to AIG Policy Holders