It Pays to Plan Ahead

Believe it or not, Americans who lived and worked in the United States before 1913 didn't have to think about income tax. That's because it didn't even begin until 1913. Before that, if they made a dollar, they kept a dollar. They didn't have to think about estate tax, either, until 1915. They could "leave it all" to their children or grandchildren. And gift tax didn't rear its head until 1932. Until that time, they could make lifetime gifts of any amount to anyone. Not anymore!

Today we have these three taxes, plus several others. Yet many people tend to focus only on reducing their income tax burden.

Estate Taxes Are Also Avoidable
A little planning on your part now could save your heirs a lot of money later. Having an "estate plan" in place means that you have considered all the assets you've accumulated over your lifetime, decided how you want them distributed after your death and utilized appropriate strategies for making sure Uncle Sam takes as small a share of them as possible.

How do you begin? First, make a list of everything you own and assign a dollar value to each item. (This isn't easy, as you might imagine!) Don't forget to include:

• your portion of jointly held property,
• life insurance benefits,
• retirement plans,
• stocks and bonds and
• real estate.

This inventory of your assets will be useful during the next stage of your planning: setting goals. You want to keep taxes and administration costs to a minimum. But beyond that, what's important to you?

There's taking care of yourself financially. You may be surprised to learn that many elements of an estate plan involve smart ways to manage your finances now, during your lifetime.

And there's taking care of your loved ones. Perhaps you're married; if so, you and your spouse may want to decide how your assets will be administered for the maximum advantage of the survivor.

If you have children (or grandchildren), what are their needs? Are there other relatives or friends for whom you should plan? Do you know of charitable organizations, such as your favorite charitable organizations, that you wish to benefit from your estate?

Finding the Right Strategies
Once you've chosen your beneficiaries, the next step is to select the best estate planning arrangements to implement your wishes. Keep in mind the needs of your beneficiaries, the protection of your money and the impact of estate taxes. Here are some components of an estate plan.

Your will. This disposes of your assets that won't pass by other means, such as those described below. Also, your will can name a personal representative (executor) to settle your estate. When it comes to good estate planning, this document makes certain nothing is overlooked.

Title arrangements. These can supersede the terms of your will. For example, you may hold bank accounts, securities or your home in a form of joint tenancy with rights of survivorship with someone else--perhaps your spouse--that entitles the survivor to full and outright ownership of that asset.

Retirement plans. Benefits from your employer, a rollover IRA or other retirement plan may comprise a substantial part of your estate. After your lifetime, these benefits will be paid to the beneficiaries you have designated in the plan.

Life insurance. The proceeds are payable to the beneficiaries you've named under the options you selected in your policies or subsequent endorsements.

Trusts. You can create a trust in your will or during your lifetime through a separate trust agreement. You can put assets in a "living trust" during your lifetime, perhaps for your own benefit; the disposition of the trust principal and income will be governed by the terms of the trust agreement.

Getting Help
Seek the assistance of legal and tax professionals who specialize in estate planning. And call on our planned giving specialist, Lori Squires, to explain the wide range of gift opportunities that can satisfy your wishes, save taxes and support our mission at the same time.

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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