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February 21, 2010

“Real Info” for “Real Folks”

Filed under: Uncategorized — Tags: , , — admin @ 8:27 pm

Here’s three words that the majority of us probably think “don’t apply to me”—charitable wealth transfer. After all, you may reason, I consider myself middle income—I do ok, I’m comfortable, but I don’t have to concern myself with passing along a big estate. I’ll just give everything along to my spouse and kids.

You might be surprised to learn, however, that charitable wealth transfers can be for smaller amounts too—and that they don’t have to involve trusts. There are a number of benefits involved in putting together a charitable wealth transfer—of course, first and foremost, a charity that you care about benefits. And a fact you might not even have considered…said charity can benefit within your lifetime! So if there is a group or an organization that you truly believe in, and especially if you’ve been actively involved…you can put some money to work for them, and see the benefits of that donation while you are still alive to enjoy the feeling that generosity can bring.

You’ll need to talk with a financial advisor, and review your portfolio and overall financial picture. What you may find as a result of that conversation is that passing along a piece of your “estate”—even a reasonable or modest amount—can have a big impact on the charity you choose and have tax benefits for you, that are not inconsequential. Here is a simple example that illustrates the case of an investor that has $20,000 in savings, in excess of what he and his advisor have determined to be a “safety fund”.

1) Start with $20,000.
2) Put $11,800 into transfer plan. This amount will be worth same $20,000 at death.
3) Take the balance of $8,200, and gift it to a charity today…this donation is tax deductible.
4) The investor still has a $20,000 death benefit to give to charity or will to a beneficiary of his choosing.

As you can see, charitable wealth transfers aren’t just for those “mega-rich” investors with millions to pass along to worthy causes. Quality, well-run charitable organizations know how to put even modest donations to work for a good cause, and with the added benefit of a tax deduction from your overall estate, it is a win-win situation for all.

It’s important to consult with a financial advisor or with an accountant to work through the particulars, but a plan such as we’ve outlined above is fairly simple to put into place and is not expensive to structure. Consider how it would benefit your financial picture and how a favorite organization might be positively impacted, and then ask your financial advisor about charitable wealth transfers.

February 16, 2010

Charitable Giving as Part of an Estate Plan, Part 2

Filed under: Uncategorized — admin @ 8:26 pm

As discussed in the previous article, there are several different ways that you can make charitable giving a part of your estate planning strategy, so that your favorite organizations can continue the good work they do. Perhaps you have been an active supporter or donor during your lifetime, or have volunteered your time, and want to ensure that the work you’ve done continues after you are gone. Or perhaps there is an organization you believe in, and feel that part of what you’ve earned would be well-spent, after you have passed, in helping them reach their goals.

In the last article, we discussed charitable bequests and donor-advised funds; one option very simple and straightforward, the other a bit more complex. There are two other common ways that people allocate a portion of their estate to a charity:

Charitable Remainder Trusts are a bit more complicated—this is something you may wish to speak to your financial advisor about. In a Charitable Remainder Trust (or CRT), you donate cash or other investable assets to an irrevocable trust, in a charity’s name. Over a set period of years, the charity then makes payments to you; at the end of that period of years, the charity owns the trust (and the underlying assets) outright. While there may be fees such as trustee management fees, investment management fees, or others, the tax benefits may outweigh such fees—talk to your financial advisor if you think this is a good option for your estate.

Like Charitable Remainder Trusts, Charitable Lead Trusts allow you to donate cash or other assets to a charitable organization. That organization then pays you a set fee over a set period of years. However, CLT’s are sort of the opposite of CRT’s; at the end of the agreed upon term, the assets, cash, or property revert back to your ownership. One of the benefits is that throughout the term of the agreement, the donated items held in trust are often not a part of your taxable estate; you may, however, be responsible for trust or management fees.

Both of these options are more complex then simple bequests, and merit a conversation with your advisor or tax attorney. There are benefits including control of assets involved in each option, so discuss what makes the most sense for your own personal situation.

Regardless of the method of making a charitable contribution, almost any organization will be most grateful for a gift of any size. Do your homework on the receiving organization, and then relax knowing that you have made an impact that outlasts your life.

Batteries and the Tax Man

Filed under: Uncategorized — Tags: , — admin @ 8:23 pm

Do those seem like two topics that don’t go together? Well, in the same way that Daylight Savings Time is supposed to be a good reminder for us all to check and switch our smoke-alarm batteries to stay safe, April 15—tax day—might be a good time to make sure your “financial life” is safe. As you gather together receipts and statements to prepare your own taxes or to deliver to an accountant, you should take a few minutes to review the “big picture”—oftentimes, an advisor can help with some simple guidance, next steps, or simply an objective outside viewpoint.

Things you’ll want to take stock of, at least annually:

1. Do you have a current life insurance policy, and is it enough to meet your family’s needs in the event of your passing? Review what a year’s spending looks like, and be sure that the beneficiaries of your policy will be taken care of for several years, if possible. Also take into account any major expenses on the horizon (such as college) and work with your advisor to make a plan to handle those expenses.
2. Ensure that the beneficiaries of your policies know where important data is kept—that is, that they know where you keep your important documents, have access to account information, have the right numbers of contacts to call (an attorney, financial advisor, etc). Many of these may be a “given” but it’s worth spending five minutes to be sure all of your contact information is up to date.
3. Be sure your policies are keeping up with the times—has your financial, employment, or life situation changed in any way? You may be well-served to review other policy options, such as term life vs. whole life…this is something you should discuss with a financial advisor, to be sure that your overall portfolio makes sense and is in-line.
4. Are there beneficiaries you’d like to add to your policy—new grandchildren, a favorite charity? Work with your advisor to be sure the relevant people are on your policy or mentioned in a will or trust document.
5. Are your investment decisions in line with best practices for tax efficiency? Depending on your income needs and your stage of life, a conversation with your accountant or financial advisor may yield suggestions to help save on taxes while planning for the future.

Most people don’t look forward to April 15, but careful planning can make sure that the taxes you pay are planned for, and futher planning can keep the rest of your “financial life” orderly as well.

January 11, 2010

Charitable Giving as Part of an Estate Plan

Filed under: Uncategorized — admin @ 4:35 pm

People have a variety of motivations involved in leaving part of their estate (either cash, stocks/investments, or other assets) to a charity—perhaps the charity is close to their heart, ie a foundation set up to research a disease that has personally affected the donor, or an organization providing services of interest to the donor—an animal shelter, or a mentoring program. Certainly, making a donation to an animal shelter in honor of a beloved pet makes far more sense then leaving money to the pet itself!

Others may just wish do “do good” in some way…while still others are looking for a way to minimize taxes in their lifetime, and beyond, through careful estate planning. Regardless of the reason, virtually any charity will be extremely grateful for a donation of any size. And regardless of your motivation, you often WILL receive tax benefits on your donation.

There are several ways to make a contribution to a charity. Over this article, and the next post, we’ll discuss the four most common ways to include charities or other organizations as beneficiaries in your estate plan; you will benefit from tax relief, and they will put your gift to good use. The first two options to discuss are:

A charitable bequest is a simple, fairly straightforward provision made in your will that allocates cash or other valuables to a charity upon your death. Perhaps you are donating a car to the Red Cross, or a lump sum of $10,000 to the local animal shelter. These can be spelled out in your will (with the help of your attorney) or trust documents. There are no limits or maximums to the amount that can be donated, and the donations do serve to reduce the size of your estate, limiting the tax liability. You can make the gift an “absolute”—such as, “I would like to donate $10,000 to the American Cancer Society”, or a percentage of your estate: “I would like to donate 10% of my total estate to the Humane Society”.

Donor-advised funds are another option; here, you make an initial contribution (typically at least $10,000-25,000) to a fund, and then can control how the money is allocated through grants or contributions to charities or organizations of your choice. Again, there are management fees involved, but the tax benefits may outweigh those fees. A number of the larger fund companies have options for such donor-advised funds, and if this of interest to you, consult your advisor.

Prior to making a contribution to any charity, it is a good idea to investigate their efficiency and expense ratios; your advisor can help you with that, or there are several good websites that rate how effectively groups of any size spend their money.

Charitable giving as part of an estate plan is a nice thing to do—oftentimes, with a silver lining of tax benefits. Consult your advisor for more information.

January 6, 2010

Taking Stock in the New Year

Filed under: Uncategorized — Tags: , , — admin @ 4:34 pm

2010 is here and if you ask around, many say it’s come none to soon! 2009 was a difficult year for a lot of folks, in Missouri and across the US, with a troublesome economy, and lots of questions about where our country was headed.

So more than ever as we look ahead to the new year it is time for resolutions and making sure you are organized and ready to face the months and the year ahead—in your house, within your family, and always important: your finances.

As you set resolutions for the new year, think about your financial picture. If you have an advisor that you work with, schedule a meeting with him just to check in and make sure your investments are still tracking your goals. If you don’t have an estate plan established, with a will and documents covering powers of attorney, you should do so. Maybe you have a resolution to be a better saver; see if you can set up some automatic withdrawal plans so that a portion of your paycheck goes into a savings account, or into a investment fund or an IRA, automatically.

It’s a great time to review levels of coverage, as well, for your life insurance policies—whether they are term life, variable life, or if you have several policies (as part of an employer’s benefit package and on your own, for example). Discuss with your advisor what your needs are, for your life insurance policy (an investment vehicle, to cover your spouse and/or children in the event of your passing, etc)—and be sure that together you agree that your children or spouse are covered at the appropriate level; an advisor can help you run scenarios on what college expenses or the like might be. Be sure that you are not “over-covered”—this is less common than being “under-covered”, but if you have too much life insurance, together you and your advisor may determine that your money could be better invested (tax wise and “potential for growth” wise) elsewhere.

And, it may be a wise time to ask your insurance provider if there is anything you can do to make your policy more cost-effective (changing deductibles, etc) for a homeowner’s or a health insurance policy.

The big picture: as you set resolutions and make a plan for goals for the year, don’t neglect your financial picture. A conversation with your advisor or some simple steps put in place now can have an impact on your entire year, so don’t delay!

December 1, 2009

Options for Missouri Life Insurance: Term?

Filed under: Uncategorized — Tags: , — admin @ 4:37 pm

Are you trying to decide on options for life insurance? There are a number of different choices out there, from universal life to variable life, term insurance to fixed insurance. In Missouri, all of these types of insurance are available from a number of different well-known and well-secured companies. How can you chose the right company and the right policy?

Part of the decision depends on what you are using life insurance for. If it is part of a wealth transfer plan, or used as an investment, you may wish to investigate some of the types of variable life insurance—depending on your risk tolerance (that is, how aggressively you want to invest your money based on returns vs. safety of the money), your investment horizon (that is, how long you have before you really need the money), your health situation (variable life policies can differ in rates/cost depending on the results of certain risk factors such as if you are a smoker, results of a physical, etc), and the amount of money you have to invest (some variable policies can be pricey, and sometimes you are paying for some of the guarantees that are a part of those policies).

If, however, you are seeking to purchase life insurance as a hedge against future emergencies—that is, to be able to provide a source of funding for a spouse or for children in the case of your death—you may wish to investigate term life insurance.

Term life insurance can be the most cost-effective method of purchasing some measure of insurance for your family. What you need to consider in determining the amount of insurance is what the policy will be used for—will a spouse have to pay off a mortgage after your death? Do you have children for whom you’d like to provide a college education? Some experts recommend a policy that covers up to ten times your income, but that is not realistic for every family. After all, you must meet the premiums monthly to pay for this term insurance, so you do not want to pay for too MUCH coverage.

Often, a financial advisor can help you to determine the right amount of coverage. Every family situation is different, so your advisor can take into account your priorities and the near-term and long-term needs for the proceeds of a policy. That advisor can also help you plan out what expenses may arise.

Life insurance, regardless of the type you choose, is important to your heirs who are often bereft at a loss. Any help you can give to ease the burden, financially, for them is important. Talk to an advisor to figure out how to cost-effectively include life insurance as a part of your financial plan.