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Charitable Lead Trusts PDF Print
Friday, 20 November 2015

How they work, how they may help you reduce taxes.

(Photo: Creative Commons Family by Keoni Cabral is licensed under CC BY 2.0)

 

Charitalbe Lead Trusts SmallAre you concerned about the inheritance taxes your heirs may have to pay? Then you may want to consider creating a charitable lead trust.

 

A charitable lead trust is the inverse of a charitable remainder trust. While a CRT is structured to provide income to the trust beneficiaries and an eventual charitable donation, a CLT provides a charitable gift at its implementation plus the possibility of eventual income to your heirs.1

 

A CLT may provide an estate tax solution for a highly appreciated asset. As a hypothetical example, a multi-millionaire named Scott owns $1 million of greatly appreciated blue-chip stock. He wants to reduce the value of his taxable estate; he does not want to burden his heirs with death taxes. He would also like to make a major gift to a local charity. So Scott collaborates with an estate planning attorney to draw up and implement a CLT.

 

By gifting the highly appreciated stock to the charity using a CLT with a term of 20 years, Scott creates an income stream for the charity with significant tax benefits as a byproduct. Income payments to the charity will be made in 20yearly installments of $50,000 from the trust principal. After either 20 years or Scott's death, his heirs will receive the interest off of the initial CLT principal (i.e., the appreciation on those shares across 20 years) while the actual shares will go to the charity.1

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Can an IRA Be a College Savings Vehicle? PDF Print
Tuesday, 10 November 2015

You might be surprised at its potential.

(Photo: Creative Commons Trinity College by Fred is licensed under CC BY 2.0)

 

College Savings MediumAn IRA is a retirement savings account, right? Indeed it is. IRA stands for Individual Retirement Arrangement. Even with that definition, however, there is no prohibition on using an IRA to save for other purposes, such as funding a college education.

 

Why would anyone choose an IRA as a college savings vehicle? At first glance it may seem strange, since there are a couple of types of investment accounts dedicated to that goal in the first place. On closer inspection, IRAs – especially Roth IRAs – present some features that may be quite attractive to the parent or grandparent seeking ways to build education savings.

 

Flexibility. Parents are urged to save for their children's college educations as soon as possible ... but what if their children end up spending little or no time in college? Some young adults do start careers or businesses without any college education. Some simply have no interest in going to school any longer. Another, more pleasant circumstance worth mentioning: what if a child ends up getting a significant college scholarship, even a full ride?

 

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Your Annual Financial To-Do List PDF Print
Tuesday, 03 November 2015

Things you can do before & for 2016.

 

Annual Financial To-Do ListWhat financial, business or life priorities do you need to address for 2016? Now is a good time to think about the investing, saving or budgeting methods you could employ toward specific objectives. Some year-end financial moves may help you pursue those goals as well.

 

What can you do to lower your 2016 taxes? Before the year fades away, you have plenty of options. Here are a few that may prove convenient:

 

*Make a charitable gift before New Year's Day. You can claim the deduction on your tax return, provided you itemize your 2015 tax year deductions with Schedule A. The paper trail is important here.1

 

If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity in December but only end up gifting $500 before 2015 ends, you can only deduct $500.1

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Estate Planning After a Second Marriage PDF Print
Monday, 19 October 2015

Special considerations for a complex situation.

(Photo: Creative Commons 10070039 by moodboard is licensed under CC BY 2.0)

 

Oct 19 15 Estate Planning after a Second MarriageMarrying again makes estate planning more involved. How do you provide for everyone you love? Should you provide for everyone you love? How do you arrange to transfer wealth in a way that won't hurt the feelings of certain heirs?

 

If you have not planned your estate yet, take inventory. Spend a half-hour and jot down the assets you own, major and minor. Who should own these assets after you die? Your spouse should do this, too – and you should talk about your preferences. It may not turn out to be the easiest conversation, but agreement now may preclude family squabbles and legal challenges down the line. (If you have a prenuptial agreement in place, you may have already discussed some of these matters.) You should also consider two scenarios – what happens if you die first, and what happens if your spouse dies before you do.

 

If you and/or your spouse have children from prior marriages, there may be some dilemmas for each of you. If you die, there is a real possibility that your current husband or wife will not elect to provide for your children from past marriages. So what might you do to prepare for that possibility? You might make a child the primary beneficiary of a life insurance policy, or set up a trust for your kid(s), or place certain real property under joint ownership with a child.

 

If you have already written a will, it will probably need revisions. They could be considerable. You want to be extremely specific about which heir gets what; you need to state bequests convincingly, because the more convincing your bequest, the less ambiguity.

 

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Teaching Your Heirs to Value Your Wealth PDF Print
Tuesday, 22 September 2015

Values can help determine goals & a clear purpose.

 

(Photo: Creative Commons "Milkweed Seed Collection" by USFWSmidwest is licensed under CC BY 2.0)

 

Teaching Your Heirs to Value Your WealthSome millionaires are reluctant to talk to their kids about family wealth. Perhaps they are afraid what their heirs may do with it.

 

In a 2015 CNBC Millionaire Survey, 44% of families having at least $1 million in investable assets said that they had not yet told their children about their future inheritance. Another 27% said they had refrained from mentioning it until their children were 30 or older.1

 

It can be awkward to talk about such matters, but these parents likely postponed discussing this topic for another reason: they wanted their kids to grow up with a strong work ethic instead of a "wealth ethic."

 

If a child comes from money and grows up knowing he or she can expect a sizable inheritance, that child may look at family wealth like water from a free-flowing spigot with no drought in sight. It may be relied upon if nothing works out; it may be tapped to further whims born of boredom. The perception that family wealth is a fallback rather than a responsibility can contribute to the erosion of family assets. Factor in a parental reluctance to say "no" often enough, throw in an addiction or a penchant for racking up debt, and the stage is set for wealth to dissipate.

 

How might a family plan to prevent this? It starts with values. From those values, goals, and purpose may be defined.

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