By Hook Law Center
A worker nearing retirement with an employer pension plan will usually need to decide between a single-life plan and a joint-and-survivor plan. The single-life plan terminates when the worker dies, and the joint-and-survivor plan continues for as long as either the worker or his or her spouse survives. Not surprisingly, the joint plan offers a lower monthly payment, because it has a longer expected payment period.
If the employee is likely to die first, a joint pension is usually the prudent choice. But some professionals will advocate a strategy known as “pension maximization,” or “pension max.” The strategy involves taking the higher single-life payout and using part or all of the extra income to purchase life insurance. If the employee dies first, the spouse gets a death benefit that, assuming proper planning, is large enough to generate the same income as a joint-and-survivor plan. If the spouse dies first, the worker cancels the life insurance and enjoys the higher income.
Pension max strategies often involve a combination of term and whole life insurance. If only term life were purchased, and both spouses survived beyond the term, additional life insurance would have to be purchased at that time, at an advanced age that would make the insurance quite expensive. On the other hand, it is also expensive to purchase whole life insurance on its own in quantities sufficient to afford the same quality of life as a pension.
In certain cases, a pension max strategy may make sense, but properly weighing the alternatives entails crunching a lot of numbers. When deciding what type of pension plan will work best for you, speak with an experienced estate planning attorney.
By Hook Law Center
A private initiative to build a housing development for people with mental disabilities right here in Virginia Beach has stirred some controversy.
Debra Dear, 52, and her husband care for their 31-year-old daughter Lindsey, who has a chromosomal disorder, at their home in the Sandbridge area. Dear looked into housing options for Lindsey in anticipation of the day when she and her husband could no longer look after Lindsey. Finding the existing options lacking, she started a nonprofit organization in 2010 to build a development that met her vision of a safe and enabling environment for her daughter and others like her.
The initiative has received some $3 million in donations and secured a 75-acre plot of land near the intersection of Princess Anne and Sandbridge roads for the housing development, to be called Vanguard Landing. Later, in September, 2013, the city of Virginia Beach reached an informal agreement with the nonprofit to provide a $2.9 million loan at a favorable interest rate.
That agreement set off the controversy, because federal law requires publicly-funded programs for the disabled to provide their services in an integrated community setting whenever possible. Dear says the project, estimated to cost $32 to $40 million to build, will be privately funded and self-sustaining.
Virginia is in the midst of executing a settlement with the Justice Department requiring the state to close four of its five “training centers” – institutions for the developmentally and intellectually disabled – and move the residents to smaller facilities or regular homes. Some parents oppose the settlement, favoring the supervision and oversight of government-run facilities. Others argue that segregated and secluded settings offer less safety and opportunities for rehabilitation.