rospective insurance buyers areoften confused about disabilityincome insurance because the fea-

tures and benefits can vary widely fromone policy to another. Essentially, thereare a few key elements that could make abig difference when you make yourchoice. If you are in the market for dis-ability income insurance, here are some ofthe things you might want to consider:

Definition of “Total Disability.”Does the policy define total disability asa condition during which you cannot

state planning is not solely a matterof saving dollars and minimizingtaxes. The process of planning

your estate inevitably also raises somedifficult emotional and personal issues.For starters, it forces you to face the un-pleasant fact of your own mortality; youare trying to plan for a time when youwon’t be around to make decisions.Others, particularly those you love,will be affected by the plans you makenow and will be expected to exercisetheir own judgment once you are gone.For many people, the most difficult stepin the estate planning process is decidingwho gets what and when.

P

PlanningSTRATEGIC

Volume VI • Number IV

PREPARED FOR MEMBERS OF THE FINANCIAL PLANNING ASSOCIATION

Copyright 2008 LibertyPublishing, Inc., BeverlyMA. The opinions and rec-ommendations expressedherein are solely those of Lib-erty Publishing, Inc., and inno way represent advice, opin-ions, or recommendations ofthe Financial PlanningAssociation, its affiliates ormembers. CFP™ and CER-TIFIED FINANCIALPLANNER™ are feder-ally registered service marksof the Certified FinancialPlanner Board of Stan-dards (CFP Board). Thissummary does not constitutelegal and/or tax advice andshould only be relied uponwhen coordinated with aqualified legal and/or taxadvisor. October, 2008.

The Fee Based Financial, Investment, & Tax Report

Estate Planning Basics

E

Disability Income Insurance: Some Features Say It All(continued from page one)

(continued on page three)

(continued on page four)

Disability Income Insurance:Some Features Say It All

To whom you leave your money andproperty is obviously a very personaldecision. Most people naturally think ofplanning for spouses, children, and rela-tives first. After the family is considered,perhaps a favorite charity, such as analma mater or research foundation,might be included as a beneficiary.

Remember, however, that what youleave and to whom you leave it are dictatedby your financial profile. What is theright approach for you when it comesto your estate and your children? It isdifficult to give standard answers for allcases, but here are some possible sug-gestions for consideration:

perform the duties of your “own occupa-tion” or “any occupation”? A policy thatrefers to your “own occupation” gener-ally pays benefits if you cannot return towork in your own field, or if you returnto work in a lower-paying job or a job inanother occupation. A policy that refersto “any occupation” generally would paybenefits only if you were unable to per-form any job: your own job, a lower-paying job, or a job in a new occupation.

Duration of Benefits.Even if you have to choosea smaller benefit amount tokeep the premiums afford-able, look for coverage thatprotects you until age 65.Note: There are policies avail-able that offer benefits onlyfor a limited period (such asa maximum of two or fiveyears), and the nature ofyour occupation may affectthe duration of coverage.

Amount of Coverage.Most plans set a limit on thepercentage of income youcan insure—usually 50% to60% of your total grossearnings. If you have anemployer-provided plan thatoffers only limited groupcoverage, you may considerbuying supplemental individualdisability income coverage.

Elimination Period. Thewaiting or “elimination”period is the amount of timeyou must wait before dis-ability benefits will start.

Remember, shorter waitingperiods involve higher pre-miums, and vice versa. Thewaiting period is determinedwhen a policy is issued, notwhen you have a disability.

Taxation of Benefits.Benefits are tax freeif you pay the premiumsusing after-tax dollars. Incontrast, benefits undermost employer-providedplans are taxable becausethey are usually paid withpre-tax dollars. Consultyour tax professional forspecific guidance.

Partial or “Residual”Coverage. After a seriousdisability, many people areable to return to work onlyon a part-time basis. Partialor “residual” benefits allowyou to receive partial dis-ability benefits, as well asyour part-time income, untilyou fully recover. Withoutthis feature, your benefits

may stop as soon as youreturn to work.

Portable Coverage.Policies that allow you tocarry your coverage fromone job to another have anobvious advantage. Cover-age from a professionalassociation could be onesuch example of portablecoverage that is not tied toyour place of employment,not to mention any indi-vidual disability incomeinsurance policy that youmight buy on your own.

Of course, before shop-ping for a policy that bestsuits you, it is important todetermine the amount ofcoverage you need in lightof the insurance youalready have. Therefore,make it a point to reviewyour insurance coverage andneeds on a regular basis inorder to ensure that you areadequately protected. $

because their “hunger”drives them forward.

7. Will your family besupportive? A newbusiness can consume alot of your time, mentalenergy, and sometimes,capital. Make sure totell your family whatthey can realisticallyexpect, and gain theirsupport and trust.

There are many advan-tages to self-employment.The chance to be your ownboss, experience the payoffof your own hard work,and harness the limitlessfinancial and growth po-tential, all combine tomake entrepreneurship anexciting and educationaladventure. Interestingly, alack of experience often

Entrepreneurship and the New Retiree(continued from page two)

The information contained in this newsletter is not intended as tax, legal, or financial advice,and it may not be relied on for the purpose of avoiding any federal tax penalties. You are en-couraged to seek such advice from your professional advisors. The content is derived fromsources believed to be accurate. Neither the information presented nor any opinion expressedconstitutes a solicitation for the purchase or sale of any security. This newsletter is written andpublished by Liberty Publishing, Inc., Beverly, MA. Copyright 2008. Liberty Publishing, Inc.

accounts for many smallbusiness failures. Therefore,a lifetime of knowledge canput you far ahead of thegame before it even begins,and many of today’s retireeswelcome the challenge. $*Employee Benefit Re-search Institute, The 2008Retirement Confidence Survey,April 2008.

Pinnacle Financial Services, Inc.201 Hazel AveWestfield NJ 07090Tel: 908-654-8370Toll-free: 800-250-9942Fax: 908-654-8369Web: pinnaclefinancialservice.comEmail: pinnaclefinancial@verizon.net

Helen Murphy, CLU, ChFC

22 33

Entrepreneurship and the New Retiree

F

(continued on page four)

Estate Planning Basics(continued from page one)

Take your children intoyour confidence. Whenyour children are matureenough to discuss financialmatters, let them know, ingeneral terms, the size ofyour anticipated estate andtalk over with them yourplans for it. If they are oldenough, you should givethem the opportunity tomake their preferencesknown. Are they interestedin running the family busi-ness? Do they have a choiceabout how their inheritancesor trusts might be structured?

Tie up money as longas necessary. In most states,18 or 21 years is the legaladult age. However, even a21-year-old may not bemature enough to handlethe responsibilities of asudden windfall. Evaluatethe age at which your chil-dren might be capable ofmeeting this challenge, andconsider strategies that canhelp you plan for that time.

Keep it all in the family.As it has often been said,two things in life are certain:death and taxes. Estateplanning is the art ofensuring that one doesn’tcause the other. You mayalready know that someestates—those with a totalvalue of $2,000,000 or lessin 2008—escape federalestate tax altogether.People often seriously un-derestimate the size of theirestates and end up with anunanticipated estate tax bill.

If you are a businessowner or professional, forinstance, there is a goodchance that the value ofyour estate already tops$2,000,000, or will soon.

Even if you don’t have sub-stantial personal wealth,hidden assets such aspension or profit-sharingplan benefits, as well as lifeinsurance, may cause yourtaxable estate to exceed the$2,000,000 threshold.(Under current tax law,the threshold increases to$3.5 million in 2009. UnlessCongress takes furtherlegislative action, estatetaxes will be repealed in2010 and then reinstated at$1 million in 2011.)

Add it up, add it all up.At death, the federal estatetax applies to asset trans-fers to beneficiaries otherthan a spouse for estatesvalued in excess of theapplicable exclusionamount ($2 million in2008). One of the mostimportant elements in es-tate planning is calculating

the value of your estate.The following steps canhelp you estimate yourestate’s worth.

Prepare a net worthfinancial statement listingall of your assets and anyinterests of ownership re-duced by any and all liabili-ties. The total is your networth. Be certain that you

do not overlook hiddenassets. Also, when subtract-ing your liabilities, includeestimated funeral and burialexpenses (generally upwardsof $4,000) and the estimatedcosts of administering yourestate (generally 2% to 5%of the gross value of theestate is average). Nowsubtract your charitable andspousal bequests and themarital deduction. Yourentire estate, no matter itssize, can pass to your spouseestate tax free. This deduc-tion, however, does noteliminate the possibility thatestate taxes may be due onassets transferred by yoursurviving spouse upon hisor her death. For this rea-son, both you and yourspouse must establish estateplans that will maximizeasset transfers to your heirsand minimize estate taxation.

While there may besome very helpful tax provi-sions in the Internal RevenueCode (IRC), you must stilltake the time to plan yourestate carefully and wiselyto minimize taxes. The bet-ter you plan now, the betteryou will be able to providefor your family’s future. $

or more and more retir-ees, retirement signalsnot the end of a career,

but rather the beginning ofa new phase—entrepreneur-ship. Many baby boomersview retirement as an oppor-tunity to start a new chapterin life, and they hope to usetheir hard-earned skills andknowledge to create theirown independent businesses.

With increased longev-ity, retirement often ac-counts for 25%–30% of aperson’s life. According tothe 2008 Retirement ConfidenceSurvey conducted by theEmployee Benefit ResearchInstitute (EBRI),* aroundtwo-thirds of workers sur-veyed (63%) plan to work inretirement. Financial rea-sons, such as earningmoney to pay bills andkeeping health insurance orother benefits, are primaryconsiderations, but largemajorities also report theyintend to continue workingto stay active and involved(87%) or for the enjoymentwork brings (79%).

Regardless of personalmotivation, there are manyadvantages that thoseage 50 and older possesswhen starting their ownbusiness ventures. By retire-ment, mortgages have oftenbeen paid and childrenhave graduated from col-

lege. With fewer financialobligations—and perhaps acushion from a lifetime ofsaving—the retiree mayhave the opportunity totake his or her time in de-veloping a strong businessplan and concept. Retireesalso have the ability to uti-lize the many business con-tacts and skills garneredover their working years tofurther product develop-ment, marketing, and sales.This can prove extremelyuseful for those who wishto use their experiences in aparticular field to strike outon their own.

Many retirees find theopportunities of their dreamsduring their golden years.For example, prior to retire-ment, Bill and Helen Dawson(a hypothetical case) hadthriving careers in account-ing and travel services,respectively. After retiring,Bill and Helen quicklydiscovered they were notcontent to stay at home andfelt that combining theirskills would serve themwell in their own businessendeavor. Drawing uponHelen’s years of customerservice and Bill’s bookkeep-ing finesse, the coupleopened a bed and breakfast,which has allowed them touse their pre-existing expe-rience in a new and chal-lenging way. If you want touse your years of wisdomto build your own company,here are some questions toconsider:1. Are you personally

motivated? Building abusiness requires intensededication. You will needto develop your ownideas, set your own

schedule, and manage avariety of responsibilities.

2. Are you a “people”person? Running yourown business will likelyinvolve a great deal ofinteraction with variousprofessionals and per-sonality types. If youcan harness the peopleskills you gained fromfour decades in theworking world, you willbe better prepared tohandle difficult clientsor professionals.

3. Do you have the abil-ity to think quickly?Representing your owncompany can mean thatyou will have to provideanswers and decisionsquickly, and sometimesunder pressure.

4. Do you have passionand stamina? It is oftensaid that you must lovewhat you do. Realize atthe start of the enter-prise that a good dealof time and effort maybe required, but alsoknow that the rewardscan make your laborsworthwhile.

5. Are you organized?Thorough organizationand planning can leadto continued businesssuccess. Finances, in-voices, and schedulesare just a few of thetasks at which you mustbe or become proficient.

6. Is your motivationlevel high? A businessrequires a lot of work,and it can be physicallyand emotionally stress-ful. Those who arehighly motivated oftendo well under stress

22 33

Entrepreneurship and the New Retiree

F

(continued on page four)

Estate Planning Basics(continued from page one)

Take your children intoyour confidence. Whenyour children are matureenough to discuss financialmatters, let them know, ingeneral terms, the size ofyour anticipated estate andtalk over with them yourplans for it. If they are oldenough, you should givethem the opportunity tomake their preferencesknown. Are they interestedin running the family busi-ness? Do they have a choiceabout how their inheritancesor trusts might be structured?

Tie up money as longas necessary. In most states,18 or 21 years is the legaladult age. However, even a21-year-old may not bemature enough to handlethe responsibilities of asudden windfall. Evaluatethe age at which your chil-dren might be capable ofmeeting this challenge, andconsider strategies that canhelp you plan for that time.

Keep it all in the family.As it has often been said,two things in life are certain:death and taxes. Estateplanning is the art ofensuring that one doesn’tcause the other. You mayalready know that someestates—those with a totalvalue of $2,000,000 or lessin 2008—escape federalestate tax altogether.People often seriously un-derestimate the size of theirestates and end up with anunanticipated estate tax bill.

If you are a businessowner or professional, forinstance, there is a goodchance that the value ofyour estate already tops$2,000,000, or will soon.

Even if you don’t have sub-stantial personal wealth,hidden assets such aspension or profit-sharingplan benefits, as well as lifeinsurance, may cause yourtaxable estate to exceed the$2,000,000 threshold.(Under current tax law,the threshold increases to$3.5 million in 2009. UnlessCongress takes furtherlegislative action, estatetaxes will be repealed in2010 and then reinstated at$1 million in 2011.)

Add it up, add it all up.At death, the federal estatetax applies to asset trans-fers to beneficiaries otherthan a spouse for estatesvalued in excess of theapplicable exclusionamount ($2 million in2008). One of the mostimportant elements in es-tate planning is calculating

the value of your estate.The following steps canhelp you estimate yourestate’s worth.

Prepare a net worthfinancial statement listingall of your assets and anyinterests of ownership re-duced by any and all liabili-ties. The total is your networth. Be certain that you

do not overlook hiddenassets. Also, when subtract-ing your liabilities, includeestimated funeral and burialexpenses (generally upwardsof $4,000) and the estimatedcosts of administering yourestate (generally 2% to 5%of the gross value of theestate is average). Nowsubtract your charitable andspousal bequests and themarital deduction. Yourentire estate, no matter itssize, can pass to your spouseestate tax free. This deduc-tion, however, does noteliminate the possibility thatestate taxes may be due onassets transferred by yoursurviving spouse upon hisor her death. For this rea-son, both you and yourspouse must establish estateplans that will maximizeasset transfers to your heirsand minimize estate taxation.

While there may besome very helpful tax provi-sions in the Internal RevenueCode (IRC), you must stilltake the time to plan yourestate carefully and wiselyto minimize taxes. The bet-ter you plan now, the betteryou will be able to providefor your family’s future. $

or more and more retir-ees, retirement signalsnot the end of a career,

but rather the beginning ofa new phase—entrepreneur-ship. Many baby boomersview retirement as an oppor-tunity to start a new chapterin life, and they hope to usetheir hard-earned skills andknowledge to create theirown independent businesses.

With increased longev-ity, retirement often ac-counts for 25%–30% of aperson’s life. According tothe 2008 Retirement ConfidenceSurvey conducted by theEmployee Benefit ResearchInstitute (EBRI),* aroundtwo-thirds of workers sur-veyed (63%) plan to work inretirement. Financial rea-sons, such as earningmoney to pay bills andkeeping health insurance orother benefits, are primaryconsiderations, but largemajorities also report theyintend to continue workingto stay active and involved(87%) or for the enjoymentwork brings (79%).

Regardless of personalmotivation, there are manyadvantages that thoseage 50 and older possesswhen starting their ownbusiness ventures. By retire-ment, mortgages have oftenbeen paid and childrenhave graduated from col-

lege. With fewer financialobligations—and perhaps acushion from a lifetime ofsaving—the retiree mayhave the opportunity totake his or her time in de-veloping a strong businessplan and concept. Retireesalso have the ability to uti-lize the many business con-tacts and skills garneredover their working years tofurther product develop-ment, marketing, and sales.This can prove extremelyuseful for those who wishto use their experiences in aparticular field to strike outon their own.

Many retirees find theopportunities of their dreamsduring their golden years.For example, prior to retire-ment, Bill and Helen Dawson(a hypothetical case) hadthriving careers in account-ing and travel services,respectively. After retiring,Bill and Helen quicklydiscovered they were notcontent to stay at home andfelt that combining theirskills would serve themwell in their own businessendeavor. Drawing uponHelen’s years of customerservice and Bill’s bookkeep-ing finesse, the coupleopened a bed and breakfast,which has allowed them touse their pre-existing expe-rience in a new and chal-lenging way. If you want touse your years of wisdomto build your own company,here are some questions toconsider:1. Are you personally

motivated? Building abusiness requires intensededication. You will needto develop your ownideas, set your own

schedule, and manage avariety of responsibilities.

2. Are you a “people”person? Running yourown business will likelyinvolve a great deal ofinteraction with variousprofessionals and per-sonality types. If youcan harness the peopleskills you gained fromfour decades in theworking world, you willbe better prepared tohandle difficult clientsor professionals.

3. Do you have the abil-ity to think quickly?Representing your owncompany can mean thatyou will have to provideanswers and decisionsquickly, and sometimesunder pressure.

4. Do you have passionand stamina? It is oftensaid that you must lovewhat you do. Realize atthe start of the enter-prise that a good dealof time and effort maybe required, but alsoknow that the rewardscan make your laborsworthwhile.

5. Are you organized?Thorough organizationand planning can leadto continued businesssuccess. Finances, in-voices, and schedulesare just a few of thetasks at which you mustbe or become proficient.

6. Is your motivationlevel high? A businessrequires a lot of work,and it can be physicallyand emotionally stress-ful. Those who arehighly motivated oftendo well under stress

rospective insurance buyers areoften confused about disabilityincome insurance because the fea-

tures and benefits can vary widely fromone policy to another. Essentially, thereare a few key elements that could make abig difference when you make yourchoice. If you are in the market for dis-ability income insurance, here are some ofthe things you might want to consider:

Definition of “Total Disability.”Does the policy define total disability asa condition during which you cannot

state planning is not solely a matterof saving dollars and minimizingtaxes. The process of planning

your estate inevitably also raises somedifficult emotional and personal issues.For starters, it forces you to face the un-pleasant fact of your own mortality; youare trying to plan for a time when youwon’t be around to make decisions.Others, particularly those you love,will be affected by the plans you makenow and will be expected to exercisetheir own judgment once you are gone.For many people, the most difficult stepin the estate planning process is decidingwho gets what and when.

P

PlanningSTRATEGIC

Volume VI • Number IV

PREPARED FOR MEMBERS OF THE FINANCIAL PLANNING ASSOCIATION

Copyright 2008 LibertyPublishing, Inc., BeverlyMA. The opinions and rec-ommendations expressedherein are solely those of Lib-erty Publishing, Inc., and inno way represent advice, opin-ions, or recommendations ofthe Financial PlanningAssociation, its affiliates ormembers. CFP™ and CER-TIFIED FINANCIALPLANNER™ are feder-ally registered service marksof the Certified FinancialPlanner Board of Stan-dards (CFP Board). Thissummary does not constitutelegal and/or tax advice andshould only be relied uponwhen coordinated with aqualified legal and/or taxadvisor. October, 2008.

The Fee Based Financial, Investment, & Tax Report

Estate Planning Basics

E

Disability Income Insurance: Some Features Say It All(continued from page one)

(continued on page three)

(continued on page four)

Disability Income Insurance:Some Features Say It All

To whom you leave your money andproperty is obviously a very personaldecision. Most people naturally think ofplanning for spouses, children, and rela-tives first. After the family is considered,perhaps a favorite charity, such as analma mater or research foundation,might be included as a beneficiary.

Remember, however, that what youleave and to whom you leave it are dictatedby your financial profile. What is theright approach for you when it comesto your estate and your children? It isdifficult to give standard answers for allcases, but here are some possible sug-gestions for consideration:

perform the duties of your “own occupa-tion” or “any occupation”? A policy thatrefers to your “own occupation” gener-ally pays benefits if you cannot return towork in your own field, or if you returnto work in a lower-paying job or a job inanother occupation. A policy that refersto “any occupation” generally would paybenefits only if you were unable to per-form any job: your own job, a lower-paying job, or a job in a new occupation.

Duration of Benefits.Even if you have to choosea smaller benefit amount tokeep the premiums afford-able, look for coverage thatprotects you until age 65.Note: There are policies avail-able that offer benefits onlyfor a limited period (such asa maximum of two or fiveyears), and the nature ofyour occupation may affectthe duration of coverage.

Amount of Coverage.Most plans set a limit on thepercentage of income youcan insure—usually 50% to60% of your total grossearnings. If you have anemployer-provided plan thatoffers only limited groupcoverage, you may considerbuying supplemental individualdisability income coverage.

Elimination Period. Thewaiting or “elimination”period is the amount of timeyou must wait before dis-ability benefits will start.

Remember, shorter waitingperiods involve higher pre-miums, and vice versa. Thewaiting period is determinedwhen a policy is issued, notwhen you have a disability.

Taxation of Benefits.Benefits are tax freeif you pay the premiumsusing after-tax dollars. Incontrast, benefits undermost employer-providedplans are taxable becausethey are usually paid withpre-tax dollars. Consultyour tax professional forspecific guidance.

Partial or “Residual”Coverage. After a seriousdisability, many people areable to return to work onlyon a part-time basis. Partialor “residual” benefits allowyou to receive partial dis-ability benefits, as well asyour part-time income, untilyou fully recover. Withoutthis feature, your benefits

may stop as soon as youreturn to work.

Portable Coverage.Policies that allow you tocarry your coverage fromone job to another have anobvious advantage. Cover-age from a professionalassociation could be onesuch example of portablecoverage that is not tied toyour place of employment,not to mention any indi-vidual disability incomeinsurance policy that youmight buy on your own.

Of course, before shop-ping for a policy that bestsuits you, it is important todetermine the amount ofcoverage you need in lightof the insurance youalready have. Therefore,make it a point to reviewyour insurance coverage andneeds on a regular basis inorder to ensure that you areadequately protected. $

because their “hunger”drives them forward.

7. Will your family besupportive? A newbusiness can consume alot of your time, mentalenergy, and sometimes,capital. Make sure totell your family whatthey can realisticallyexpect, and gain theirsupport and trust.

There are many advan-tages to self-employment.The chance to be your ownboss, experience the payoffof your own hard work,and harness the limitlessfinancial and growth po-tential, all combine tomake entrepreneurship anexciting and educationaladventure. Interestingly, alack of experience often

Entrepreneurship and the New Retiree(continued from page two)

The information contained in this newsletter is not intended as tax, legal, or financial advice,and it may not be relied on for the purpose of avoiding any federal tax penalties. You are en-couraged to seek such advice from your professional advisors. The content is derived fromsources believed to be accurate. Neither the information presented nor any opinion expressedconstitutes a solicitation for the purchase or sale of any security. This newsletter is written andpublished by Liberty Publishing, Inc., Beverly, MA. Copyright 2008. Liberty Publishing, Inc.

accounts for many smallbusiness failures. Therefore,a lifetime of knowledge canput you far ahead of thegame before it even begins,and many of today’s retireeswelcome the challenge. $*Employee Benefit Re-search Institute, The 2008Retirement Confidence Survey,April 2008.

Pinnacle Financial Services, Inc.201 Hazel AveWestfield NJ 07090Tel: 908-654-8370Toll-free: 800-250-9942Fax: 908-654-8369Web: pinnaclefinancialservice.comEmail: pinnaclefinancial@verizon.net

Helen Murphy, CLU, ChFC