Planning on retiring in the next few years? You better check out your company's policy on maintaining retiree health benefits for you during your retirement years.

Just as companies cut back on defined benefit pensions, they are leery of guaranteeing the future health care liabilities of retirees. Cutting health care benefits for future retirees can protect companies from crippling future costs to them.

One possibility to minimize a company's exposure to future health care liabilities is to set up and fund special trusts to manage employees' health costs. Such trusts can be put under the control and responsibility of a workers' union. That way investment gains and workers' own cost containment will determine whether money will be there to meet retirees' health benefits.

Telephone and utility workers could be the next wave to follow a similar approach to shore up their health care benefits in retirement. Whether such approaches will be successful is still in question, but at least the overseers needn't worry about quarterly share prices and can concentrate fully on maximizing the long-term financial health of the retiree health benefit funds.

We mentioned before that projections for retiree health costs - for a couple aged 65 - are somewhat over $215,000. Reduction of retiree health care benefits will aggravate these costs.

What can you do?

Most importantly, it is to put as much of your senior health service options in your own control.

• Delay retirement until 65 to qualify for Medicare benefits.
• Learn which Medicare and insurance choices best fit your needs.
• Take better care of your health.
• If you plan to work in retirement, look for a company that offers health benefits now and for retirees
• if you can opt out of employer plan and use the funds to have an individual plan, do so

As you plan out your retirement expenses, allocate $850 to $1,000 a month on Medicare premiums, Medigap premiums, co-pays and out-of-pocket expenses. See if this alters your retirement date.

As you make your way through retirement in fairly good health, you may consider the wisdom of maintaining your long-term care policy, especially if your savings are running low. Will you really need the policy?

It's understandable why you'd want to drop a long-term care policy you don't think you'll use, but before doing so, there are a few things you may want to consider.

You're healthy now-but that could change. If you live alone and away from family, you may need a home health aide, and that typically costs more than insurance premiums: For in-home assistance from Medicare Certified Home Health Aide, the national average cost is $46.22 per hour, or $46,220 per year for just 20 hours of assistance a week.

Medicaid may not help you. Medicaid could cover some of your long-term-care costs, should you need it. But it has some drawbacks. For example, few Medicaid programs pay for assisted living or home health care, which many people prefer to nursing homes. And to qualify, you generally must use up all but a few thousand dollars in your savings.

It will be hard and expensive to change your mind. If you drop your policy and later change your mind, you will have to pay more for a new policy that is comparable (if you qualify). The higher premium may be due to your health changing or at minimum, simply because you will be older.

A better option may be a reverse mortgage, which lets homeowners who are 62 or older borrow against their home equity. You could use the proceeds to keep paying your insurance premiums, or to create a nest egg to pay for home health care. A couple of caveats, however: First, the closing costs on reverse mortgages can be expensive. And second, if there's a chance you might move to an assisted living facility (as opposed to staying in your own home), you may want to stay with long-term care insurance-because if you live away from home for 12 months in a row, you have to repay the reverse mortgage, which probably means selling your house.

Estate tax laws are once again up for debate in Washington D.C. But no matter what the outcome of the negotiations will be - whether estate taxes will be repealed or reinstated after the year 2012 -estate planning should not be placed on hold. Your benefits will likely never be better than they are now. Currently, federal estate taxes are incurred on estates that are in excess of $5.12 million ($10.24 million if married) and these figures will fall to $1 million and $2 million in 2013. Preparing today for the efficient transfer of your wealth is a move that could pay off in the long run.

One tax-efficient way to pass along your wealth to heirs, with greatly reduced estate tax liability, is an irrevocable life insurance trust (or ILIT). ILIT's were created to shelter life insurance benefits paid to beneficiaries from estate taxes. Although life insurance benefits are not subject to federal income tax, they can be included in an estate upon the death of the policy owner and subject to federal estate taxes.

Here's how it works: as the estate owner, you create an ILIT and name a trustee to administer it. You cannot be named as the trustee, so it is sometimes advisable to name an attorney, CPA, trust company, or financial institution as the trustee for the ILIT. Also, at the time you create the ILIT, you name the beneficiaries and direct how the trust funds will be distributed upon your death. Then, you deposit money into the ILIT and you have the irrevocable life insurance trust purchase a life insurance policy, naming the trust as the beneficiary. Note that because of the high estate exemption in 2012, your tax-free (i.e. free of gift tax) transfers to the trust can be much larger than next year.

Upon your death, the proceeds from the life insurance policy will be paid to the ILIT, which will then distribute the funds as you directed in the trust documents. For example, you could state that one-half of the life insurance proceeds be paid to your beneficiaries at the time of your death, with the remainder paid out at a later date.

Your beneficiaries could also use the proceeds to pay the federal estate taxes or even the state inheritance taxes due on other assets they receive from your estate. This may be an ideal strategy for you if some of the assets in your estate are illiquid (e.g., real estate.)
The effectiveness of an irrevocable life insurance trust as an estate-planning tool is dependent on your insurability. If you cannot obtain a life insurance policy for health reasons, or if the policy is too cost-prohibitive, using an ILIT may not be available to you. Please also note that fees and other expenses will apply with the purchase of life insurance, and surrender charges may be applicable on money withdrawn or benefits reduced after the policy is purchased. Insurance benefits and premiums also vary from company to company. Insurance guarantees are subject to the claims-paying ability of the issuing company.
In conclusion, the irrevocable life insurance trust could prove to be an effective wealth-transfer strategy.

While you are in retirement, be sure to get one issue resolved - and the sooner the better: discussing with your children how your affairs should be handled and by whom when your disability and death occurs. Of course, these discussions of inheritance planning have little legal bearing as you need to put your wishes on paper - in a trust or will.

Although you may have your "active" retirement life planned out, you need to bring your children on board about finances, long-term care, insurance, and perhaps housing when attending to yourself becomes a problem. How can you approach this?

You do not have to make everything known in terms of your exact finances if you do not want to. But you do have to groom your children - or at least one of them - for stepping in when you are not able to take care for yourself well, make competent decisions, or die.

You can begin by discussing your intentions or just an opinion about how you would like long-term care handled for you at various levels of mental and physical disability. Speaking with them may bring out their concerns for you and other options they may have for you.

You may list out your sources of income - Social Security, pension, or one or several IRAs - that you rely on. Again, you do not need to discuss just how much you have, but they should know where your living expenses are coming from, how you hold your wealth, and how to take charge of them when the time comes.

Let them know what important documents you have and where they are located. These may include your will, house papers, trusts, insurance policies, investment papers, etc. Make sure they have access to them when they need to. You legacy to them may be diminished by what they cannot find!

You may suggest how assets would be divided and according to what type of device - a will or trust. Attempting this may cause you to update and create documents that are more appropriate.

If you feel that discussing some of these matters are not appropriate until your death, you can talk to a financial expert, lawyer, or trusted friend, or sibling in whom you can confide. That way he or she may best explain the situation to your children when you cannot or after you die.

Lastly, do not wait until it is too late to get these things aired. Too often we procrastinate on things that really matter. Do it now while you are in good health and are well in control of your finances and "doings". Just breaking the ice on these matters may often present options you were not aware of.

It's rare, but occasionally one spouse cannot qualify for long term care insurance because of poor health, such as hypertension, Alzheimer's, arthritis, diabetes, or frailty. Does this mean that the healthy spouse should forgo the coverage as well?

As you get older, the chances of needing long term care increases. Forty-three percent of individual's age 65 and older will spend time in a nursing home.

And once they reach age 75, the likelihood rises to 60 percent. Suppose you are healthy and your spouse is not. As long as you can maintain your good health, you will be able to care for him or her. But what will happen if you need care?

Both of you could end up in a nursing home and may even be split up.

A long term care insurance policy could pay for the care that you need and also provide for a homemaker to help with your spouse. To finance this, you could possibly double your policy's daily benefit above the average per day cost in your area. The surplus income would then be available to help offset your spouse's care giving expenses while you recover.

Another idea is a life income annuity that could pay nursing home expenses for your spouse when long term care insurance is not available. You could invest a lump sum with an annuity company that would pay your spouse a set amount for his or her lifetime. Generally, normal life expectancies determine annuity payouts. This means that the longer the life expectancy, the small the payout.

For someone who is ill, however, his or her life expectancy may not be normal. To accommodate these special situations, some companies offer medically underwritten annuities that factor the annuitant's illness into the life expectancy calculations and may provide higher than normal payouts. The payout numbers can help determine how much you would need to invest cover your spouse's long term care expenses.

There are strategies available when you cannot qualify for long term care coverage and an experienced retirement advisor or long term care specialist should be consulted.

A revocable living trust can be a useful tool to help you reduce estate settlement costs and to retain control over your assets while you are living. However, the benefits of a living will vary from person to person based on their circumstances. In other words, living trusts are not equally beneficial to everyone.

A revocable trust allows you to transfer your property to a trustee with instructions to hold the assets as specified within the trust for the benefit of the beneficiaries. The trust agreement often covers three important time periods.

The first part covers the time that you are alive and competent. In most cases, you would be the sole beneficiary and sole trustee. You'd have complete control over the property, including the authority to remove all of the trust's assets and the ability to revoke the trust at any time, for any reason.

Part two stipulates that if you become incapacitated, a successor trustee that you have named in the trust will take over to manage the assets for you. You will, however, remain the sole beneficiary. This section will eliminate the need for your family to go to court to seek guardianship over your finances in the event you are unable to manage those funds on your own.

Finally, the third part directs the disposition of the trust's assets after you die.
A revocable living trust in itself, will not eliminate estate taxes for taxpayers with estates in excess of $1 million (the exemption amount in 2013, currently $5.12 million). Yet it can help you to reduce these taxes by allowing you to make the most of estate tax exclusions, generation-skipping tax exemptions, and marital deductions. Of course, these tax-savings techniques are also available through a well-designed will.

Assets in a revocable trust also avoid probate, thereby reducing transfer costs for your heirs. An living trust can also keep your affairs private since they are not a matter of public record. As probate costs can often reduce an estate by as much as 4-10%, significant costs can sometimes be saved using a revocable trust. However, if the trust is un-funded, your assets will still go through probate.

There are also other ways to avoid probate. Joint ownership property can avoid probate as well as any accounts where you have named a beneficiary, such as IRAs, life insurance policies, and annuities.

As previously mentioned, a living trust will not help you save on probate expenses if the trust is not funded. Bank accounts and funds held with your brokerage firm must be transferred by signing forms at your bank, and by providing them with a copy of the trust agreement. With real estate, you will often have to file new deeds with the government's land records.

Living trusts have helped many seniors and their families better manage their finances, but not everyone needs it. So before you spend the money, make sure you know what you hope to accomplish.

Do you own a life insurance policy that you no longer can afford or want? Perhaps you're tempted to sell it to an investor who has offered you a way to get money from this relatively illiquid asset. However, before you cash in life insurance, be sure to get all the facts. You just might be better off keeping the life insurance or surrendering it.

Life settlements are frequently directed towards people over age 65 who own life insurance policies with at least a $100,000 face value, have some health problems, have a life expectancy of 2 to 15 years and desire cash now. When you sell a life insurance policy to a third party, you will no longer be responsible for the premiums. The investor will make all future payments to the insurance company and collect the death benefit after you die.

This concept could be attractive if you think you don't need the coverage, your beneficiaries have died, or you want the money for other things, such as long-term care insurance. But what are the negative aspects to cash in life insurance?

These transactions can possibly have high commissions and tax implications to sellers. A study by Deloitte Consulting and the University of Connecticut found that life-settlement companies, on average, paid only 20% of the face value of the policies to the sellers. Whereas the estimated future returns to investors were 64% of the face amount. Therefore, if you want to pass on the maximum amount to your heirs or a charity, you might be better off keeping the policy.

But suppose you need the money? Instead of selling the policy, a better choice could possibly be selling other assets, such as securities. Or you could take a loan from the policy. Another idea is to have your beneficiaries assume the premium payments?after all they're the ones who will eventually benefit the most.

So how can you determine if a life settlement company is offering a fair price?

Compare it to your other options, such as the policy's surrender value. Think about this: You most likely bought the life insurance policy when you were healthy. And the insurance company based the future surrender values on your health at that time. These values do not change, regardless of declining health status. Conversely, the life settlement company will use your present medical condition to come up with their offer. Therefore, as the level of your impairment increases, so should the amount of the offer.

Of course don't forget about the income-tax free death benefit your beneficiaries won't receive if you get rid of the policy. And in case you're still not sure what to do, remember that a seasoned, institutional investor wants to buy your policy. Consequently, it must have a significant value. I always advise clients to consult with their own qualified tax and financial advisor prior to making any investment decisions.

Do you own a cash-value life insurance policy? Do you have intentions to make charitable gifts either now or at death?  Then combine the two for the most powerful donation you can make.

Life insurance can be a great charitable gift because you may no longer need the death benefit of the policy and the value of the policy (i.e. the cash value) will balloon for the charity when you die.

Specifically, what might be worth $80,000 today (the current cash value) could be worth $400,000 (the death benefit) to the charity in 10 years.

There are two ways to give life insurance to charity - you could gift the policy outright, making the charity the owner and beneficiary, or you could name the charity as the beneficiary when you die.

Which choice makes more sense? It really depends on a number of factors, including:

• What the charity wants and when it needs the money
• Whether you need a current tax deduction (and are willing to give up control)
• Whether you still want to keep some or most of the benefits of the insurance policy.

If you want or need the federal income-tax deduction, you should make sure that the non-profit is actually a 501(c)(3) charity. And  make sure they use their funds wisely. Ask the executive director for the organization's tax status and get them to send you written proof (you can also look this up online). Then make sure that they want the life insurance policy. In some cases, the organization might simply accept the policy and immediately surrender it to get the cash. In such cases, the charitable gift could end up being much less than what you intended.

Keep in mind you can only take the federal income-tax deduction if you give up all interest in the life insurance policy. In other words, you can't own it or be the beneficiary in any way. If you continue to retain ownership rights to the policy, you should also know that § 2036 of the federal tax code will place the policy in your gross estate for federal estate tax purposes (although your estate could still obtain an offsetting charitable tax deduction as long as the charity is a qualifying organization).

On the other hand, if you choose to remain as the policy owner and leave a bequest rather than a current gift, you will not get a current tax deduction, but you do retain control of the policy. This allows you the flexibility to change beneficiaries if you change your mind about the charity. This also allows you to retain the economic benefits associated with the policy cash value (e.g., policy loans). In summary, giving the policy to a charity through a bequest in your will (e.g., your college, a research foundation, or other group) could be a beneficial way for you to create a lasting memory and to also retain the various ownership benefits of the policy during your lifetime.

As federal tax laws are subject to frequent changes, you should consult your CPA or tax professional before making a decision based on the consequences of taxation.

Some life insurance companies will try to sell you policies for your children and grandchildren, arguing that if you love the child, you'll protect him or her with a policy- especially given how inexpensive the rates are. But is life insurance for a dependent really necessary?

We say, no. The main purpose of life insurance is to replace an income that is lost when someone dies. So unless the child for whom you are considering purchasing a policy has an income (for example, if he or she is a child television celebrity) life insurance isn't necessary.

An insurance agent may argue that children's life insurance is inexpensive compared to adult life insurance, and that may be true - because children rarely die, so children's policies are generally more profitable for life insurance companies. As of 2003, the mortality for children ages one through four was is 32 per 100,000; for children ages five through 14, 17 per 100,000; and for children ages 15 through 19, 66 per 100,000.

So, while the numbers that a life insurance sales agent puts together may make children's life insurance sound like a great deal, it is a great deal - for the agent and the insurance company.

If you want to do something for your child or grandchild, a better option may be putting what you would have spent on life insurance premiums in an UGMA/UTMA account. These accounts allow individuals like parents, grandparents, other relatives, and even friends to set up a custodial account for the benefit of a minor. Think it won't pay off? When it comes to investing, an early start can make a big difference.

For example, let's assume you invest just $100 per month, or $1,200 per year, on behalf of your 10-year-old grandson. Assuming a hypothetical average annual return of 8%, your grandson will have $13,386 in his account when he reaches age 18. If he earns his own college money or gets a scholarship, and the UGMA/UTMA account is left untouched until he reaches age 65, he will have $492,393 in his account (assuming the investment continues to grow at 8% each year for 47 years). This, of course, does not take into account any fees, charges or taxes, which would reduce the amounts shown.

The above example is hypothetical and for illustrative purposes only. It is not meant to represent the performance of any particular investment product.

If the insurance agent pitches life insurance on children or pitches life insurance as an investment, find a new agent as reputable agents won't bother recommending what they know is nonsense.

Everyone is conscious concerning the high cost of healthcare. The good news is that some  tax breaks can help you decrease taxes to offset these significant expenses. Listed here are some useful tax breaks recommendations.

Benefit from tax breaks for medical costs
The federal government permits taxpayers to write off any medical expenses that exceed 7.5 % of their adjusted gross income (AGI). That could appear like quite a lot, however the EBRI forecasts that a 65-year-old couple who leave the workplace with out employer-sponsored health insurance would require $216,000 to cover out-of-pocket medical costs if they live to age 80.2 That is $14,400 per couple annually. In the event you and your spouse have an AGI of $75,000 annually in retirement, 7.5 % of the AGI is $5,625. You?d nonetheless be able to deduct $8,775.

Most people do not understand this but costs for your long-term-care insurance qualify as a medical expense. Therefore, correct tax breaks will have you considered these expenses in the above permitted deductions for the medical expenses. The permitted breaks for 2012 are as follows:

2012 Long-term Care Insurance coverage Federal Tax Deductible Restrictions

Based on the above table, a married couple both age sixty five may buy long-term care insurance coverage and deduct as much as $7000 in their premium expenses like a health-related expense. This kind of tax planning takes advantage of the government subsidizing your long-term-care expenses as if you're in the 30% tax bracket, it's as if the government is paying 30% of your expenses.

Use a high Deductible Health Savings Account

Until you sign-up for Medicare you are able to have a high-deductible health savings account (HSA). This kind of account provides significant tax breaks opportunities.

If your employer provides a high-deductible medical insurance plan, you might be able to make pretax contributions, like you would with a flexible-spending account. In the event you open the HSA on your own, your contributions will be deductible when you file your taxes, even though you do not itemize.

The tax deductible contribution restrictions for 2012 are $3100 for an and the limit for families increased is $6,250. The catch-up provision (extra contribution) for those age 55+ stays at $1000. If you don?t use these funds for qualified health care expenses, you can deal with the unused funds just like you would an IRA for retirement savings.

There you've two great tax breaks suggestions to help subsidize your medical care expenses.