Can Your Estate Solve These Challenges?

Careful estate and financial planning can help you successfully manage seemingly larger-than-life challenges. And you can do it in a way that benefits you, your family and maybe even the world around you.

Challenge #1: Care for Your Aging Parents

• Make sure your parents have a current will. This point cannot be overstressed. A properly drafted will avoids family squabbles, hurt feelings and confusion. You must make sure, however, that the will reflects your parents' current situation and wishes. An outdated will can cause as much trouble as not having a will. Now is a good time to encourage them to grant a power of attorney to someone who will handle their finances if they become unable to do so.
• Improve their cash flow. Urge your parents to review assets and finances with their professional advisors to make sure they will have adequate income. Certain assets present a dilemma for many seniors. Highly appreciated stock typically provides very little dividend income but triggers capital gains if sold. There are ways to make sure that stocks provide a larger income stream while minimizing capital gains taxes and helping a charitable organization, like your favorite charitable organizations. For example, with a charitable remainder trust, you fund a trust using your stock. In return, receive a fixed or variable income for your lifetime or a term up to 20 years. At the end of the trust, the remainder goes to charitable nonprofits. In addition, you escape the up-front capital gain on your stocks and receive a current income tax charitable deduction. The remaining taxable capital gain will be spread over many years.

Challenge #2: Secure Your Financial Future

• Increase future income.Earlier we discussed a special type of charitable trust that provides income for life, produces a tax deduction and makes a generous gift to a charitable organization like charitable nonprofits after your death. This trust, called a charitable remainder trust with make-up provisions, is a very flexible planning instrument that can be designed to provide little or no income now and then later when you need the income, it can be "turned on" to provide for your retirement. If this type of arrangement interests you, be sure to ask your professional advisor to explore the many planning options provided by charitable trusts.

Challenge #3: Help Your Grandchildren

• Give cash. Many people do not know that you can give up to $12,000 per year ($24,000 if you are married) to as many individuals as you want without incurring any gift taxes. If you are looking for a way to help your grandchildren, this is a simple, but often overlooked, method. Remember that you can make such gifts annually and you can make them to anyone, not just grandchildren or relatives.
• Pay for school or health care. Perhaps you have a grandchild with medical expenses or one who is entering college (or even preschool!). You can pay tuition or medical expenses in an unlimited amount for the benefit of grandchildren without incurring gift-tax liability.
• Make charitable gifts pull double duty. If you do not need the income for yourself, you can use a charitable remainder trust to provide an income stream to your grandchildren and then help your favorite charitable organizations. After paying income for a specified time period you choose, which can be up to 20 years, the assets remaining in the trust go to charitable nonprofits. You will qualify for a substantial income tax deduction when you set up this arrangement and you have removed the trust assets from your estate, which will lower your estate taxes.

Please contact Mary Ludwig, Development Director at 712-732-5127, for more information.

The information on this site is not intended as legal, tax or investment advice. For such advice, please consult an attorney, tax professional or investment professional.

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