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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.