How are Bequests handled
I ran a test profile to see how a bequest is handled & it left me confused. My partner & I have no debt and own our home outright. We're retired with no dependents. When I run this case, no life insurance is recommended. However when run it with my bequest equal to 1/2 the value of our home the program recommends life insurance that's up to 75% of the value of the bequest. Furthermore, the amount of life insurance starts high in 2007 then slowly drops to 1/3 of the initial amount in 2023. Then when I'm 84 it starts increasing back to an amount greater than the initial 2007 amount ending in 2029 when I'm 90. It then goes to zero until my death in 2033. Is the program calculating the amount of insurance each year to maintain the survivor's standard of living assuming I die that year? I can't think of any other reason the insurance would change each year. Any thoughts that would help me understand on what ESPlanner is telling me would be appreciated.
Thanks
James
RSS
james300 at pacbell.net wrote:Is the program calculating the amount of insurance each year to maintain the survivor's standard of living assuming I die that year?
This is exactly what ESPlanner does.
Best,
Dick Munroe
Dick,
Ok I understand the life insurance but why is a sizable bequest not showing up in any report? What is suppose to be displayed in the column labeled "Excess Funerals and Bequests" in "Total Spending" in the "Main" report?
Thanks,
James
James,
When I run a report with a 500k bequest for both the husband and wife it shows up in the last year of life. Lets take this off-line since you may have a bug. Can you send email to eval(unescape('%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%69%6e%66%6f%40%65%73%70%6c%61%6e%6e%65%72%2e%63%6f%6d%22%3e%69%6e%66%6f%40%65%73%70%6c%61%6e%6e%65%72%2e%63%6f%6d%3c%2f%61%3e%27%29%3b')) describing your problem in more detail so we can try to reproduce it?
Thanks in advance,
Dick Munroe
Hi Jim,
The program uses life insurance, not your specified bequests, to ensure that your partner has the same living standard. The bequests, for all the program knows, made be intended for your 5th cousin. If the program recommends zero life insurance, it means your partner will have a higher living standard were you to die and you should make sure his gun isn't loaded. When you specify a bequest, the program now has to make sure that your life insurance is high enough to cover the needs of your partner as a survivor as well as cover the bequest. We do report bequests in the estate reports. If they aren't showing up there, we have a bug. I'll double check.
best, Larry
Hi Larry,
The bequest is showing up in the "Detail Report" in the "Husband's Estate" worksheet. The same amount is listed for every year. I assume this is because the program is calculating the financial impact assuming I die each year. The recommending life insurance would be used to maintain my
partner's standard of living and offset the loss in assets resulting from the bequest funds "leaving" the family. Is my understanding correct?
Thanks
James
james300 at pacbell.net wrote:Hi Larry,
The bequest is showing up in the "Detail Report" in the "Husband's Estate" worksheet. The same amount is listed for every year. I assume this is because the program is calculating the financial impact assuming I die each year. The recommending life insurance would be used to maintain my
partner's standard of living and offset the loss in assets resulting from the bequest funds "leaving" the family. Is my understanding correct?
Thanks
James
What you've said is correct.
I would like to be able to tell the program to take my bequest from my IRA account leaving the rest of the IRA to my partner. The ESPlanner Guide says I can do this "(You can tell ESPlanner to preserve...a portion of a clients retirement accounts as a special tax-favored bequest in the Retirement Accounts Input Folder.)"
I can't find how to do this. Please help.
Thanks
James
Take a look at the withdrawals screen in the retirement accounts folder. Item 4 lets you specify how much of your non-annuitized assets (annuitized assets went to your insurance company when you bought the annuity) are to be spent.
Best,
Dick Munroe
Dick,
There is no annuity involved. My IRA is invested in stocks & bonds. Item 4 shows 100% of non-annuitized assets are to be spent. Please be more specific about What the inputs in item 3 & 4 should be to accomplish my goal.
Thanks
James
That's correct, there is no annuity involved. The question refers to amount of the assets that you have not annuitized that are to be spent. If you want to leave 20% of your retirement assets in your estate, enter 80% in the field and 20% of your retirement assets will be left in your estate at the end of the plan. Don't do anything else with your special bequests since everything left in your estate is assumed to be a bequest and passed to your partner.
Best,
Dick Munroe