by on April 13, 2012 Leave a Comment

Estate Planning Team

Individuals from more than one professional discipline are qualified to assist clients in estate planning. The best results usually are obtained from enlisting a variety of advisors to assist in total financial planning, including estate planning. The estate planning team has traditionally consisted of an attorney, an insurance specialist, a bank trust officer, an accountant, and an investment counselor. A financial planner also often is involved. Most financial planners had specialized in one of the disciplines noted previously but have now chosen to take a more holistic approach to advising. Frequently, the financial planner or the insurance specialist makes the first contact with the client, sensitizes him or her to the need for estate planning, and motivates him or her to become involved in the process. This person often acts as coordinator for the entire plan, although any capable member of the team might fill this role.

The accountant is the advisor most likely to have annual contact with the client through preparation of the client’s tax returns. This gives him or her opportunity to be familiar with the size, amount, and nature of the individual’s estate. The accountant may be the person who can most easily provide a valuation for any asset in the estate when it is not easily ascertainable. Valuation is particularly crucial if the estate plan includes a buy-sell agreement to provide for a transfer of the business interest upon death or disability .The accountant also may help prepare the estate tax return.

The trust officer may be the person to whom the individual initially turned for information and for estate planning services if professional management was desired in the administration of trusts. A competent trust officer will be familiar with estate planning and the various estate planning tools. The long-term nature of the relationship between the trustee and the beneficiaries argues for great care to be exercised in trustee selection. Bank trust departments are often trustees. The life insurance specialist plays an important role on the estate planning team because he or she can provide products that will supply the estate with the necessary cash to pay the estate tax and other liabilities as well as to fund income needs of surviving family members. Life insurance is the primary asset of many estates, and, consequently, a major source of family income after an estate owner dies.

The attorney is a crucial member because plans usually cannot be executed properly without knowledge of the law. Furthermore, only attorneys may practice law. The attorney is responsible for legal advice and for preparing documents assuring that the individual’s intentions are expressed in legally enforceable language that serves as the basis for carrying out the plan. These documents virtually always include wills, and many include trusts, buy-sell agreements, and other documents if a sophisticated estate plan is necessary.
Estate planning has become vastly more complicated and challenging as a field of practice. The effective estate planner is familiar with applicable local and federal law and has a good working knowledge of matters pertaining to property, probate, wills and trusts, taxation, corporations, partnerships, business, insurance, and divorce. An estate planner must be able to explain relevant portions of these subjects in plain language.

Filed Under: Insurance Tagged With: , , , , ,
by on April 13, 2012 2 Comments

Employing Professional Services for Buying House

Estate agents
Estate agents act for the seller, who pays the agent according to the terms of the contract between them. Questions such as fees, written contract, and sole or multiple agencies are all dealt. Generally, the seller pays the agent only after he or she introduces someone who completes the purchase of the property. Estate agents also advise the seller on the likely price which he or she can expect on the sale of their house. If you want a valuation from a surveyor, that would have to be separately arranged. Once you instruct an agent to act for you, you become responsible for supplying the estate agent with accurate information about your property. Estate agents rely on this information which the seller provides to them for making up their particulars of sale. They are not expected to establish the accuracy of the information which they receive from the seller, unless there is something which would put the agents on the alert and raise a query in their minds. Estate agents also usually print a disclaimer on the property’s particulars which they distribute. The disclaimer could absolve the agent for misrepresentation but would not protect a seller who provided misleading information in the first instance.

Conveyancers
Your instructions will differ only in certain regards depending on whether you buy or sell. (Quite often, of course, people conclude both deals simultaneously by selling their own house and buying another.)
(1) You must ensure that all the persons with an interest in the property are parties to a contract of sale, and inform your conveyancer of any such interest.
(2) You will have to instruct your conveyancer whether you intend to pay the estate agent’s commission from the sale proceeds or in some other way.
(3) You must instruct your conveyancer to prepare a draft contract of sale once you have accepted an offer.
(4) Your conveyancer will receive the 10 per cent deposit for you after exchange of contracts.
(5) In general a seller is entitled to the deposit if a buyer fails to complete after contracts have been exchanged. There are also other legal remedies available to compensate for failure to complete in certain instances.
(6) In all cases, do try to establish, in advance, the costs involved in the conveyancing. These are generally slightly lower for selling a house than the fees involved in a house purchase.
(7) You will have to make all proper arrangements in advance to pay off your existing mortgage on the property, if any. Your conveyancer will have to obtain the title deeds from the lender in order to have them re-registered in the name of the purchaser.
(8) Although the buyer becomes liable for insuring the property once contracts have been exchanged, you are not advised to cancel your existing policy until completion has actually taken place. You should, however, inform your insurers of the current position. The Association of British Insurers issues helpful leaflets on all aspects of house insurance.

Surfing the Web
A growing number of sellers are deciding to cut out the middleman and sell their property on the Internet. There are many and varied sites, from which you can sell, buy or rent your home, including, for example, www.upmystreet.com; www.easier.co.uk; and many more. Trying to sell without using an estate agent can be full of pitfalls. As in any other area, the D1Y approach will involve extra work and possibly a degree of risk. Prospective buyers will not have been vetted by an estate agent before you see them so be sure to take a telephone number and call them to confirm appointments.
Remember:
• when you arrange a viewing make sure there is someone else in the house with you
• ask whether the buyer is in a chain or has sold his/her property
• do not exaggerate or mislead when describing the property
• be realistic about the price you want
• retain a good solicitor.

Filed Under: Real Estate Tagged With: , , , , , , , ,
by on April 13, 2012 Leave a Comment

Development of Managed Care

As health care costs have escalated and cost containment efforts have been emphasized, benefit redesign, alternative delivery systems, self-insurance, and other developments have led to the emergence of the concept of managed care with a profound impact on health insurance. During the early 1990s, the health care delivery and financing system has evolved at a pace few anticipated, largely responding to the acute concern about the ever-rising cost of care. The most visible change has been explosive development of managed care delivery systems of which health maintenance organizations (HMO’s), preferred provider organizations (PPOs), exclusive provider organizations (EPOs), and various forms of provider-sponsored organizations (PSOs) are the best-known examples.
Characteristics of Managed Care
The concept of managed care embodies a direct relationship and interdependence between the provision of and payment for health care. Managed care involves a population orientation and the organization of care-providing groups or networks that accept responsibility and usually share financial risk with the insurer for a population’s medical care and health maintenance. The provider network is the single most important feature distinguishing a managed care plan from an indemnity (fee-for-service) plan. This feature is key to enabling the insurer to exert influence over the delivery, use, and costs of services.

Linking the insurance of and delivery of services, managed care in effect reverses the financial incentives of providers that are prevalent in the traditional indemnity (fee- for-service) plan. In essence, fee-for-service is essentially piecework, pay-as-you-go system in which the care provider is financially rewarded for high utilization. Managed care, however, uses the concept of prepayment in which care providers are paid in advance a preset amount for all the services their insured population is projected to need in a given time period. Capitation, a method by which providers are paid for services on a per member, per month basis, is a common form of prepayment. The provider (e.g., a physician) receives payment whether or not services are used, assuming a share of the financial risk involved in delivering services. Fee-for-service plans may withhold a portion of the customary fee (usually 15 to 20 percent), which may be returned based on the services provided to a defined population, relative to a targeted amount of resources, established in advance on an annual basis. The impact of these methods reverses the financial incentives, controlling rather than promoting utilization. Such payment systems can be used with all types of individual and institutional providers.

The use of financial incentives to control utilization is not without problems. The arrangements have altered both the fundamental way physicians are compensated and how health care services are delivered to, and paid for, by the consumer. Under some payment agreements, physicians may be penalized financially if they order a hospital stay, give a referral to a specialist, or order expensive tests. Managed care can place physicians in an adversarial relationship with their patients. The physician—patient relationship, which has been sacred to the medical community, has been significantly altered, perhaps forever. This is a serious problem that will have to be resolved as the delivery of health care continues to evolve.

Although managed care arrangements continue to evolve, several key factors are common to all arrangements. These include:
• management of both the financing and delivery of health care
• institution of cost control techniques
• some sharing of financial risk between providers and payers
• management of the utilization of services

There is a continuum of managed care models that moves from the least control by the managed care organization to the most control. The least controlled programs, such as traditional indemnity insurance with managed care features, allow unlimited access to providers but at higher cost to the payer and the enrollee. Programs with the most control, such as the staff model HMO; strictly limit access to system providers but at a lower cost to payers and enrollees.

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by on April 13, 2012 1 Comment

US Post Retirement Welfare Costs

After a long study, the Financial Accounting Standards Board (FASB) issued FAS 106. This standard effectively ended the pay-as-you-go accounting for non-pension benefits retirees. This rule does not change the actual cost of providing welfare benefits for retirees. At the same time, it has had a significant adverse effect on earnings for many companies. Employers must calculate the cost of providing coverage to all active and retired employees as a current lump-sum value and begin expensive a designated portion of that amount over employees’ working years. Although the financial impact varies from company to company (depending on factors such as employee demographics and benefit plan provisions), many employers have seen as much as a tenfold increase in current accounting expense for medical benefits. This change in accounting treatment has forced employers to recognize that retiree medical coverage is an expensive benefit.

FAS 106 rules have resulted in two major changes by employers. First, many employers have lowered or eliminated retiree health care benefits or are considering such a change. Due to legal uncertainty as to the ability to eliminate or reduce benefits that have been promised to retirees, most employers are making changes in benefits available to future retirees only. Second, employers have increasingly explored methods to prefund retiree medical benefits. The change in accounting treatment does not directly affect funding decisions. There is, as yet, no legal requirement or fully tax-qualified vehicle available to prefund retiree welfare plans. Employers have generally chosen to maintain pay-as-you-go financing while moving ahead to accrual-based accounting. Assuming the employer wishes to consider advance funding, a number of vehicles are available. In selecting one of them, employers must consider three key questions:
• Can employers take a tax deduction on contributions to the plan?
• Does the income from plan investments accumulate tax free?
• Are plan participants taxed on their benefits when received?

Using these criteria, none of the available funding vehicles meets all of an employer’s needs. The available funding vehicles include (1) 501(c)(9) Voluntary Employees Beneficiary Association (VEBA) (a trust established to provide sickness and accident benefits to employees); (2) 401(k) Pension Plan Trust (a special account established within a company’s defined benefit pension plan to pay for medical and life insurance benefits); and (3) corporate-owned life insurance. Although all three may be tax effective to an extent under current law, recent tax rule changes have significantly limited their attractiveness. HIPAA placed new, significant restrictions on the deductibility of interest paid with respect to loans against corporate-owned, leveraged life insurance (COLI) policies.

A leveraged COLI program, usually adopted by a large public corporation, involves the purchase of life insurance on the lives of a large number of employees (e.g., all employees over 55) as a corporate investment or as a means to finance indirectly the employer’s obligation to provide post-employment life or health insurance benefits. The arrangement represents a major expansion of the concept of key person life insurance. Although effectively eliminating the ability to deduct policy loan interest under leveraged programs, key person life insurance policies and life insurance policies used to fund the buy-and-sell agreements of smaller businesses are largely unaffected by the changes.

Filed Under: Business and Finance Tagged With: , , , , , ,
by on April 13, 2012 3 Comments

State of the U.S Health Care System

Despite devoting a larger share of its GDP to health care than any other nation, the United States is one of the few developed countries that do not provide universal coverage to its citizens. The U.S. health care system is characterized by increasing costs in a competition-based market, questions about quality of care, and lack of access to health care by millions of U.S. citizens.

Competition in health care has become widespread since the mid-1980s. In the last few years, all of the stakeholders in health care have been scrambling to find the right approach, in terms of size and service, to remain competitive in the rapidly changing health care marketplace. The pervasive influence of managed care, the reductions in state and federal financial support and the ever-increasing sophistication of health care technology have combined to offer remarkable opportunities to break away from outdated traditions and take venturesome risks. The result has been better monitoring and control of costs, but legislators seem far more concerned with quality of care in managed care plans than they do in the cost of plans or access to care for the 40 million uninsured Americans.

The most significant issue facing the U.S. health care system is lack of health insurance and, as a result, access to health care. Estimated at some 40 million, the uninsured are among the country’s most economically and politically vulnerable citizens. Most are poor; two-thirds are in families with incomes less than twice the federal poverty level. Three-fourths of the uninsured are workers and their dependents. Many uninsured workers are employed only part-time, a growing segment of U.S. employment. These groups generally are in poorer health than those persons with health insurance. Health care resources are scarce relative to needs. The appetite for health care is virtually infinitely expandable. Furthermore, even if the United States increased the total resources devoted to health care (at the state or national level); there is a point at which other societal goals would force a limit to the allocation. In this context of scarcity, fair access must mean universal access to a basic level of health care or a basic benefits plan. There is a growing consensus that this question of access to health care services by all must be resolved.

In sum, the public and the other stakeholders in the health care system have a general dissatisfaction with the manner in which health care has been delivered the inexplicable variation in how patients are treated, the resultant costs, and the increasing number of people without access to at least a minimum level of basic care. Similar dissatisfaction exists among health care providers but for quite different reasons. Although the causes of the problems are easily identifiable, they do not lend themselves to simple, uncomplicated solutions. The vested interests in the traditional modes of health care delivery have repeatedly demonstrated their ability to generate political opposition to serious legislative challenges to the health care status quot. However, these same interests, including health care political lobbies, seem ineffectual in the face of overwhelming market forces. Rather than change occurring as a result of carefully crafted public policy, economic forces are driving a health care system reformation that is altering the roles of many traditional health care institutions. That some aspects of market-driven reform are painful and unpopular is simply a consequence of shifting the power from providers to purchasers and limiting consumer options. The end result, however, is expected to be a more comprehensive, coordinated, and cost-efficient system.

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