Successful Estate Plan Must-Haves
How would your current estate plan hold up in an unfortunate turn of events? Would your family members have access to your assets? Do you have a designated guardian for your children?
This article highlights several factors that go into creating a successful estate plan that won’t leave things up to chance. Here are some key points:
- A will or trust should be a main component of your estate plan, but isn’t enough on its own.
You will need a will or trust to ensure your property is distributed according to your wishes or to help limit estate taxes. While a will or trust is essential, it is only the beginning. It’s important to take further steps to create a solid estate plan.
- Draft a Durable Power of Attorney.
Without a power of attorney, the fate of your assets could be left up to a court. This document can give your agent the power to make legal and financial decisions on your behalf.
- If you have minor children, designate a guardian and a backup guardian.
If you have children or are considering having children in the future, picking a guardian is a very important piece of your estate plan. Without a chosen designation, your children could end up living with a family you would not have selected, or in an extreme case, become wards of the state.
How do you give to charity?
Do you sign up for direct debits, or give cash when asked? Maybe you open up your checkbook a few times a year to give generously to causes close to your heart.
If you give to charity on a regular basis, you might be surprised to learn that your giving could be more effective. A change in the delivery of your donation could send your contributions soaring. You might even continue earning money from your assets and save on taxes at the same time.
Charitable trusts aren’t just for multi-millionaires and billionaires. Planned giving vehicles give anyone with a philanthropic heart, opportunities to make a real difference.
Think your donations wouldn’t be better served by a charitable trust? Think again. Keep reading to see if one of these different types of charitable trusts can maximize your donation.
Charitable Remainder Trust (CRT)
A charitable remainder trust (CRT) provides a mechanism for donors to leave more money to charity and spend less on estate taxes.
CRTs are particularly popular among those who would otherwise face a high capital gains tax bill for a highly appreciated asset.
A CRT allows you to place the asset in the trust. Over the life of the trust, you continue to receive income from it either through annuity payments or percentage payments.
When the trust reaches the end of the term, the asset belongs to the charity named when you set up the vehicle.
In sum, the benefits of a CRT include:
- Continued income from an asset
- Lower estate taxes
- Significantly reduced or eliminated capital gains taxes
- Final donation to charity at the end of the trust
Overall, the tax incentives are the biggest attraction of a CRT, so you’ll want to enlist the help of a tax attorney to set it up.
Charitable Lead Trust (CLT)
Charitable lead trusts (CLTs) allows a person or family to donate assets into the trust before sending the funds on to one or more organizations listed by the donor. Think of them as the opposite of a charitable remainder trust (CRT).
In most cases, a CLT serves as a vehicle to provide donations but to also leave tax-free gifts to the family of the donor. When money goes unallocated at the end of a specified period, the CLT passes on the remaining gift to the donor’s family. Families do not need to pay taxes on the funds, and they do not qualify for annual gift exclusion rates.
Unlike other vehicles, you can’t write donations to the trust off from your taxes unless you own the trust and are the donor. If you meet these requirements, you qualify for one deduction to use only in the year of the creation of the CLT.
Be sure to ask your tax attorney about deductions if they are your primary motivation.
The benefits of a CLT include:
- A reliable stream of income for a charity
- Left-over assets remain tax-free
- Removal of limits on annual gift exclusion
Overall, the most significant benefit of a CLT is reducing the estate taxes dramatically.
Private foundations are the most recognizable vehicle for charitable donations. A private foundation offers the most control over the assets donated and the most flexibility in the assets donated. It can also exist in perpetuity rather than coming to an end after a set term or the death of the donor.
Private foundations work well for those who wish to direct their wealth and hold specific ideas about where and how the asset should be disbursed. A private trust can offer activities like:
- Direct charitable activities
- International grants and donations
- Charitable programs
Donors find that private foundations provide the most flexibility and opportunity, but they also cost the most to run.
The benefits of setting up a private foundation compared to a CLT or CRT include:
- Double capital gains tax benefits
- Sheltered income
- Expanded giving opportunities
- Direct philanthropy
However, there are also disadvantages to this vehicle. These include:
- Regulatory requirements
- Recordkeeping requirements
- Excise tax
- Ongoing legal and accounting fees
- Lower deductibility
- Less favorability on some capital gains
Still, if you amassed significant wealth early in life and intend to leave a legacy that outlives you, there’s almost no better means than a private foundation.
Pooled Income Trust
A pooled income trust is for those who intend to leave behind an estate but one that’s of lower net worth.
In a pooled income trust, you’ll create a “pool” with several donors and donations to generate a single large trust. Named charities then invest the money and pay out to the donors according to the amount each contributed to the trust.
Most pooled income trusts accept only liquid assets including stocks, mutual funds, and cash. Rarely do trusts of this type take assets like life insurance, fine art, real estate, or restricted securities. However, enough hunting may bear some fruit.
The benefits of a pooled trust include:
- Immediate income-tax deductions
- Limitation of federal estate taxes
- Avoiding probate on the remaining balance of the estate.
These trusts also exist for those who want to extend their retirement income while remaining at home. These pooled trusts pay for necessary monthly bills, and the balance remains with the nonprofit running the trust (or to Medicaid) after the donor passes away.
Finding the Right Types of Charitable Trusts
Charitable giving can benefit your community, country, and even the world – and it can benefit you.
Before cutting a big check or drawing up a will, consider beginning your philanthropic journey today. With different types of charitable trusts available, you’re bound to find one that meets your unique financial situation, your family’s needs and your desire to give back.
Do you want to include charitable planning in your estate planning? Get in touch with charitable giving experts today.
Estate planning is not just for retirees and the elderly – it is important for people of all ages. This is especially the case if you are married, have children, buy a house, or get an inheritance.
Making sure there is a plan in place for your children and your estate in the case of unforeseen circumstances provides the ultimate peace of mind.
This article explains the importance of creating a will and estate plan if you have young children. If you and your spouse die while your children are still minors, there are two fundamental approaches to solve the issue of the estate.
Firstly, with a will, you can leave your estates to your children in a custodianship. The custodian can be allowed to remain in charge of the children’s inheritance until they turn a certain, responsible age of your choosing.
Secondly, your wills can leave your estates to your children in something called a testamentary trust. With this, you can name a trustee to manage the trust and disburse the inheritance under conditions which you specify.
Another thing to consider is appointing a guardian and an alternative guardian for your minor children. This person will act as a surrogate parent, in that they will be in charge of setting the children’s residence, overseeing healthcare and education, and managing their funds that they may acquire while still minors.
Don’t wait another day – let us at Rhodes Law Firm help you make a plan for your estate today.
Avoid Common Estate Planning Mistakes
All too often, people make the mistake of not planning their estate properly and when they pass, their family is left to sort out the puzzle. This can frequently result in drawn-out, expensive court processes or even family feuds.
This article by Larry Light highlights three common estate planning mistakes and provides valuable information on how to avoid making them.
According to light, these three snares commonly trip up an estate plan:
• Lack of information
• Beneficiary designations done wrong
• Outdated plans
Consider all of the assets you will accumulate in your lifetime – bank accounts, fund holdings, etc. all are protected by user names, passwords, and security questions. The most important thing you can do is create a master roster that contains all of your user names, passwords, and accounts.
When bequeathing your assets, use common sense. According to the article, if you list someone in your will as the heir to your mutual funds, you must also file the person as the heir with the mutual funds company. “Your will won’t override what the designation is on your retirement account: Different people may be in the will and on the account,” writes Light.
Make sure to keep your will up to date, especially if you experience any major life changes such as divorce.
If you’re ready to start planning your estate, or if you have questions regarding estate planning, give Rhodes Law Firm a call today!
A special needs trust means that you can have valuable peace of mind that your child will be taken care of after you’re gone. It’s not an easy thing to think about, we know, but it is vital.
We would like to reassure you that setting this up now is a proactive, positive step. It is undeniably an emotional task to undertake, but you may find that it actually eases your concerns about your child’s future.
Setting up a special needs trust is a wonderful way to look after the wellbeing and happiness of your child in the future. Don’t be like the 6 out of 10 Americans who lack a will or estate planning. Read on for how to set up a special needs trust that can support your loved one in the future.
What is a Special Needs Trust?
A special needs trust (or supplemental trust) is a specific type of estate planning. It gives your child with special needs adequate financial provision for the rest of their life. It is particularly important for children who claim government aid or may do so in the future.
The Supplemental Security Income (SSI) and access to Medicaid are needs-based support. If someone owns or has access to assets of $2000 or more, they would become ineligible to receive that support. So if your child were to inherit your property or money upon your death, he or she could lose eligibility.
If you set funds aside with a special needs trust, they can keep their needs-based government support. This means they can maintain access to healthcare via Medicaid — often a significant concern.
Plus they can use the trust money for any extras that they need. This might include:
- Dental or vision care,
- Equipment such as wheelchairs, computers, cellphones
- Additional care or therapies
- Furniture and furnishings
- Recreational and fun activities
The goal of the trust is to enhance the life of the beneficiary, so that will guide how they use the money.
However, they cannot use the trust money for housing or food because that would also make them ineligible for the government programs.
How To Set Up a Special Needs Trust?
Setting up a special needs trust can be a complicated matter, so it is worth seeking professional advice. Specific wording is required to comply with ever-changing government regulations in this area.
If written incorrectly, your provisions could make your child ineligible for other vital financial aid that he or she needs (or might need in the future). So it is important to have this done by a qualified and experienced attorney.
Choosing Your Trustee(s)
A vital part of the process of creating a special needs trust is deciding who should be a trustee. This is the person (or people) who will administer the trust on behalf of your child. It is not the same as someone being the guardian of your child; it relates solely to the administration of the trust.
They play a key role in terms of the financial decisions that affect your child. So you want to choose someone whose judgment you trust. Your trustee’s role is to spend money to enhance your child’s life, whilst also making the trust funds last as long as they can.
It’s important that the trustees keep up to date on SSI and Medicaid law changes, to maintain eligibility. They also need to maintain records and file taxes on behalf of the trust and may need to invest trust funds as well.
Whilst you probably want a family member or friend who your child knows to be a trustee, it’s also worth considering a co-trustee from your law firm. That way you can be confident that your child’s eligibility for government aid is maintained and all legal aspects are taken care of.
Helping the Trustee to Help Your Child
The trustee(s) will work with your child’s guardian in your absence to make the best decisions for your child. You can set up the trust to come into effect after you pass, or you can set it up to operate now. In that case, you would be the current trustee and would name your successor trustee(s) to manage it when you’re gone.
Often people write a letter on behalf of the beneficiary of the trust (your child) to help future trustees understand their needs and preferences. This is especially important if your child is unable to communicate this clearly themselves.
This letter would include their personal, educational and medical history, their living situation, social life, religious beliefs and any other factors that you want the trustee to know. Understanding these factors will help the trustee to make decisions in your child’s best interests.
Interesting Financial Aspects
The trustee cannot give money directly to your child from the trust, but they can purchase items on behalf of your child using trust funds. So if your child needs new hearing aids, the trustee can buy these for them using money from the trust.
Another interesting fact about special needs trusts that you may not know is that anyone can contribute. Trusts are usually set up by parents for children, but actually, other family members or friends can contribute. Indeed, anybody may contribute.
Anything Else I Need to Know?
There are many interesting aspects to this area of the law, making it imperative to get proper advice. For example, did you know that when your child turns 18, you lose the natural right to be their guardian?
That means you wouldn’t be able to make healthcare or life decisions on their behalf after they turn 18!
You can avoid this startling situation by getting guardianship in place via the probate court. A qualified attorney such as ourselves can help you with this – ideally at least 6 months before your child’s 18th birthday.
We would be delighted to speak with you about getting your child safely set up for the future with a special needs trust. Please contact us at (706) 724-0405 for a confidential discussion.
Alternatively, we have several excellent workshops available online that you might find helpful. We invite you to watch them here.
When you’re grieving the unexpected loss of a loved one, expensive last-minute airfare costs
should be the last thing on your mind. But for many, this can mean having to decide between
financial strain and being near loved ones during a difficult time.
Million Mile Secrets has put together some useful tips and guidelines so you can be better
prepared should a difficult situation arise. These tips, such as taking advantage of bereavement
fares from certain airlines, accruing miles and points with credit cards, and booking last-minute
deals, can save you time and money during a difficult time.
Unfortunately, most major airlines no longer offer bereavement fares. Delta and Alaska Airlines
are the only two airlines that offer discounted ticket prices – usually around 10% – for those
who are traveling due to the loss of an immediate family member. To get this rate, you must
call the airline to book your flight. Each airline has its own limitations as to who is considered an
immediate family member, so make sure to check their website for a list before you reserve
Another great way to save yourself money and unnecessary stress is by taking advantage of
your credit card travel rewards. These are points or miles that can accrue each time you use
your credit card, which you can cash in for plane tickets, rental cars, hotel stays, and more.
Having some rewards saved up can help get you on a flight without you having to dip into your
hard-earned savings. There are a lot of credit cards and reward options out there, so it’s best to
do some research to decide which one best suites your needs.
Read the full travel guide here.
So, you’ve established an estate plan. You may think you’re all set – that you have everything settled and prepared and you don’t have to worry about it anymore – but you would be wrong. According to this article by Forbes, a recent study shows that traditional estate planning will result in a 70% chance that your wealth will be lost by the second generation. If this reality concerns you, you should consider turning your estate plan into a legacy plan.
Legacy planning involves working with a team of advisors who will help propel you towards your goal of leaving a legacy behind for multiple generations. Unlike estate plans, legacy planning is more of a proactive process. While having a traditional estate plan is a good start, it should merely be used as the framework through which your legacy can evolve. Your legacy plan should be one that grows and progresses in sync with your life. Read more about the benefits of creating a legacy plan here.
Contact Rhodes Law Firm today to discuss your planning options.
Ask yourself this question: “How much is enough?”
You take care of your family, build a home, somehow amass a small (or large) stack of assets. What do you do with them when you die?
For many families, sharing their time, talents and resources with others is a way of life. If your children are adults and successful on their own, do you plan to provide adequate support for your children and continue giving to your causes?
An emotional connection to a charity that has touched your life in a meaningful way, loyalty to a school that guided on the path to success, or simply a worthy organization are all excellent reasons to give.
Passing on your assets after death requires some advance planning. You don’t need to be a multimillionaire to make an impact. You have many choices to give within your estate plan. Some options for charitable giving have favorable tax advantages now and in the future.
Read on to learn more.
Make the Most of Your Legacy
Although death is something no one wants to think about, failure to put your estate in order can cause unnecessary costs. Preserve the maximum value of your estate by making a charitable gift at death through a will or trust.
This reduces the amount of the taxable estate, and thus any estate taxes that your children need to worry about.
Preplanning also reduces unnecessary drama and squabbles, the expenses of probate and uncertainty. If you own a business, estate planning affects not just your family, but the families of all of your employees and customers.
Use Life Insurance or a Charitable Gift Annuity
Integrated into your estate plan, a structured life insurance policy can equalize benefits to your heirs, pay for funeral or other expenses so that your estate assets pass as you see fit, or offer tax benefits in the present.
A Charitable Gift Annuity is a lump sum gift to a charity, with the gift being used to purchase an annuity. The annuity pays the donor a percentage of the gift during the donor’s lifetime and the charity gets the remainder after the donor’s death.
This way the donor has an income stream while living and a charitable gift is made after death.
An experienced estate planner can guide you on the proper way to designate insurance beneficiaries or structure an annuity to meet your needs.
Designate an Outright Gift
You can make charities your heirs. You can bequest a certain amount, designate a percentage of your estate or name a contingent beneficiary. You can update your will throughout your life whenever your family needs, priorities, and wishes change.
If you have no will to specify your instructions, state laws dictate where your property passes. In most cases, this would be first to a surviving spouse, then to your children, and then any other family in accordance with state law.
If you don’t leave a will and don’t have any living relatives, your estate could belong to the state.
Create a Charitable Remainder Trust
A charitable remainder trust allows you to give to the trust and get a partial tax deduction. You or someone you name have an income stream for up to 20 years or for the life of one or more non-charitable beneficiaries. At the close of the trust, one or more of your named charities receive the remainder of the donated assets.
A charitable remainder trust is an irrevocable transfer of cash or property. It is required to distribute a portion of income or principal. At the end of the specified lifetime, the remaining assets must be distributed to the designated beneficiaries.
Use a Community Foundation for Your Charitable Giving
A community foundation allows you to set up your own charitable fund, giving any amount you want, to almost anyone you want, for whatever time period you want. Community foundations are usually geographically bound and allow big and small donors to structure their gifts for maximum impact and tax benefits.
A gift to a community foundation fulfills certain tax objectives. You get a charitable income tax deduction in the year you make the gift AND your gross estate is reduced for estate planning purposes. In addition, you can eliminate capital gains taxes when you give appreciated property.
Create Your Own Family Foundation
Form your own foundation to support a charitable mission during life or at death. For certain families or purposes, a community foundation can be too confining. A private family foundation is a vehicle for assets while you are living and endures as long as your family needs it to.
Family members can participate in charitable grantmaking and governance. There are no specific legal requirements for private family foundations. A family foundation is simply a type of private foundation governed by IRS guidelines.
The IRS estimates that 50% of private foundations are family foundations.
Family foundation assets are public and the setup and maintenance can be complex. However, for high net worth individuals, the benefits may be worth the trouble.
How Do You Want to Be Remembered?
Taking care of your family is the usual first priority for estate planning. After that, people want to think about the things that are important in their lives. Dedicating a portion of your remaining wealth to charitable giving is one of the ways to continue what is important to you, even after death.
Whether dedicated to researching a medical cure for a rare disease or to helping the homeless or your local teachers, you can leave a legacy of generosity. You can make a bequest, designate a beneficiary or enter into more complex plans.
An attorney and qualified estate planner can ensure that your intentions are satisfied. Contact us today to make an appointment.
Losing a loved one is always painful, but it’s something for which we all must prepare. One thing everyone could do to make their own passing a little less difficult on their family is to have a properly planned estate.
When the beloved Queen of Soul Aretha Franklin passed away last week, she did not have a last will or a trust set up to assist her loved ones. Now, her finances and assets will become public in Oakland County Probate Court, according to this article by CNN.
Her attorney Don Wilson says he was after her for a number of years to do a trust but she never got around to it, leaving her family to pick up the pieces.
“It would have expedited things and kept them out of probate and kept things private,” he told CNN.
Wilson’s biggest concern is that things will become heated within the family, as this typically becomes the case when there is no estate plan.
“I just hope (Franklin’s estate) doesn’t end up getting so hotly contested,” Wilson said. “Any time they don’t leave a trust or a will, there always ends up being a fight.”
By creating an estate plan, you can help shield your family from unnecessary difficulties during an already difficult time. If you’re ready to make a plan for your estate, give us a call today. We can guide you through the entire process and give you and your family peace of mind.
More people are looking for ways to donate, and are seeing great benefits when they do.
Charitable planning is a way to support charities and non-profits that are near and dear to you while receiving tax. You can contribute annually, or periodically over a lifetime.
Take a few minutes to learn how to develop your charitable planning strategies.
Choose a charity
You may donate to a public charity–501c (3)–or a private foundation. If you have an organization in mind already, you should find out about its tax-exempt status.
If it’s a non-profit organization, it will likely be tax-exempt. If it’s a private foundation it might be subject to charitable trust taxation.
There are a few charity types you can donate to and your deductions may differ by the type of organization. Human rights, animals, education, and the environment are just a few types of charities out there.
If you’re unsure of what charity you’d like to give to, there are a few websites available to help you find and research a reputable and deserving organization.
What You Can Donate
You can donate time and things you don’t use anymore.
You might want to consider charitable planning within your estate planning. What items that are usually subject to estate tax could receive further deductions.
When you donate appreciated stock, receive a tax incentive and avoid capital gains tax. You’d pay capital gains tax on the stock if you sold it and donated the proceeds.
You can donate shares or the entire stock holding.
Mutual fund shares
If you’ve held the mutual fund for less than a year, you would be able to deduct your original investment amount. Any appreciated value can’t be deducted.
For mutual funds held for longer than a year, you might be able to deduct the full market value from your income taxes.
Short-term mutual finds have a cap of 50% deduction on your adjusted gross income, while long-term mutual funds have a cap of 30%.
However, you can carry any amount that you couldn’t for the current year to the next year for up to five years.
If you’d like to donate your life insurance to charity, you do it in one of two ways. You can make the receiving organization the beneficiary. It will receive the insurance payout after your death.
You wouldn’t receive a tax deduction for the donation, however, since the contribution wouldn’t happen until after you die.
The second way to donate is to make the charity the policyholder when you’re alive. You could receive up to 50% of your adjusted gross income on the value of your donation and any cash donations to give the charity can be deducted to pay the policy premiums.
Making the charity the policyholder is irrevocable, so you should be sure you won’t want to change your mind later.
Donating real estate can lend benefits to all parties involved. A needy family might get a home or the charity might get a new location. You can donate land (developed and undeveloped) and structures.
When you gift real estate, you avoid capital gains tax and receive immediate tax incentives up to 50% of your adjusted gross income. You can also carry any remaining deductions for five years.
When donating artwork, there are a few things to consider.
You should consider the type of organization, the type of property the artwork is (capital gain property or ordinary income property), will the artwork be used in the manner in which it’s gifted, and has it been properly appraised.
Donor-advised funds allow you to donate to a public charity and get an immediate tax deduction. These types of funds can be used like a charitable savings account, where you open a donor-advised fund account and deposit money then recommend grants to charities.
Highly appreciated stocks, bonds, and mutual funds. The full market value of the appreciated stock or mutual fund shares is deducted but you avoid tax on the appreciated gain.
Tax-free from your IRA. When you donate to a non-profit from your IRA, the donation is untaxed.
You can establish a public charitable trust to donate. Charitable trust tax deductions may be spread over five years. The initial donation amount can’t be deducted dollar for dollar.
The federal government offers tax incentives to encourage giving to charity. Not only does it benefit the charitable organizations but it benefits the donors as well.
Make the most of your taxable income with charitable planning. You may designate an allotted amount of your taxable income to go to the charity or foundation of your choice.
This can reduce the amount of income tax you will pay during tax season.
Items you donate to non-profit organizations aren’t considered taxable and are excluded from estate tax.
You can donate as much or a little as you want to charity, so if you wanted to donate your entire estate, you’d pay no estate tax.
Through a charitable remainder trust or a charitable remainder unitrust, you can earn a residual income via charitable planning.
With charitable remainder annuity trusts, you’d receive a fixed annuity amount every year. You can’t make additional contributions to these types of trusts.
Charitable remainder unitrusts pay the donor a fixed percentage based on the balance of the trust assets which are revalued every year. You can make additional contributions to this type of trust.
At the end of the designated lifetime or term, any trust assets that are left go to a charitable remainder beneficiary.
It Feels Good to Give
Studies show that people who are generous are happier and live longer. Not to mention the satisfaction of knowing you’re doing good for someone or something else.
The studies also show that it doesn’t matter the amount you’ve given, the intention and the act produce the same result.
Get Help With Charitable Planning
Planning future donations can be tricky, especially when you’re new to charitable giving.
Visit our blog to learn more about estate planning and charitable planning.