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End of year charitable donations

Many people make their charitable contributions at the end of the year, which is fast approaching.  Did you know that there can be even better ways to make donations than writing a check?

Appreciated assets:

One tax-efficient way to donate to a charity is to use appreciated assets.  This includes stocks, bonds, or other investments that you have held for more than a year and that have gone up in value since you bought them.  The great thing about donating these assets is that you get a charitable deduction equal to the fair market value of the asset (just like you would if you wrote a check), but you do not have to pay tax on the capital gains (like you would if you cashed in the asset in the future).

Qualified charitable distributions:

Certain individuals who are over 70 1/2 can request that the required minimum distribution from their IRA be made directly to a charity of their choice.  This can be an incredibly smart move for many people because you avoid paying any income tax on the distribution from the IRA.  So, people who do not need the income from their IRA, but must take a distribution anyway because it is required, have a great option for making their charitable donations.

If you have questions about charitable donations, including how you can include a charity in your will or trust, call our office today.  We are here to help.

Why should I have a trust? Part III

Today is our final post in a series of posts about trusts.  See our previous posts here, here and here.  Today we continue explaining the advantages trusts can offer.

  1. Trusts Can Provide for Minor Children, Grandchildren or Disabled Beneficiaries. Minors and incompetent individuals cannot hold property in their own name, without court supervision.  A trust can avoid probate for your beneficiaries and provide for management of your assets for these beneficiaries who are unable to manage assets themselves, which will save thousands of dollars in court costs and legal fees.  A trust can hold a beneficiary’s share in trust until a beneficiary can manage property on their own, which could be a period of years, when they reach a certain age, college graduation or for their lifetime. You can choose how long your assets are to remain in trust.
  2. Trusts Provide Greater Flexibility. The trustee under your trust will have as much flexibility in terms of the investment, management and administration of your assets as you desire to grant to the trustee.  There are no rigid and automatic court imposed restrictions placed on the trustee, like those placed on court-appointed executors, guardians and conservators. As the initial trustee, you are accountable to no one but yourself.  Successor trustees are accountable to the beneficiaries of the trust.  Only if it appears that the trustees are not properly carrying out their duties can they be required to account to a court.
  3. Avoid a multi-state probate. If you have real estate in more than one state, a trust avoids probate in each state.    If you have a vacation home, deeded time share, oil, gas or mineral interests, family farm interest or other real property in another state, those assets must be separately probated in that state, in addition to probate in your home state of Missouri (if you are a Missouri resident). Having more than one probate court and more than one set of attorneys involved often is extremely complicated and expensive. If all of these real estate and property interests were titled in the name of your revocable trust, both the Missouri probate and the out of state probate would be avoided.

Call us today at 573-441-9000 to learn how you can protect your assets and provide for your family with a trust.

Why should I have a trust? Part II

Today is our third post in a series of posts about trusts.  See our previous posts here and here.  Today we continue explaining the advantages trusts can offer.

  1. Trusts Avoid Probate in the Event of Death. All assets held in the revocable trust at your death will pass to your beneficiaries without probate. This avoids all court costs and expenses, publicity, delay and restrictions on the management of your assets that would result if your estate were to pass through probate.
  2. Trusts have Lower Administration Expenses. There are many requirements of the probate court that will not be necessary with your trust, such as the court filing fees, surety bond premiums, and the minimum executor and attorney’s fees.  There will be expenses of administering a trust; however, all fees will be related to the actual work done rather than a minimum percentage set by state law.
  3. A Trust Keeps Your Business Private and Avoids Publicity. A revocable trust need not be filed with any court, and the assets in a trust need not be reported to any court, probate office or become part of the public record.  A revocable trust provides you and your beneficiaries with privacy regarding your finances and the details of your property, assets and affairs.  This is especially important when most probate courts records are accessible online by the general public.

Call us today at 573-441-9000 to learn how you can protect your assets and provide for your family with a trust.

Don’t forget to read Part III of this post.

How will you pay for long-term care?

Many people, as they approach retirement, begin thinking about how hard they have worked to build their nest egg.  The thought of using the money they worked so hard to save to pay for their future care is not a pleasant one.  According to the U.S. Department of Health and Human Services, 7 in 10 people over the age of 65 will require long-term care.  Therefore, it is incredibly important for those approaching retirement to consider how they will pay for this care.

Did you know that Medicare doesn’t pay for assisted living or nursing home costs?  Fortunately, there are many products on the market to assist with paying for long-term care.  You should speak with your attorney and your financial advisor to determine what options are best for you.  Our office can help you review your estate and finances and determine the best course of action.  Remember, the key is to plan– the longer you wait, the more limited your options.  Call us today.

Giving IRA assets to charity

This article from Forbes summarizes the extension of the IRA charitable rollover rules through 2013.  You can even still rollover some 2012 distributions, but you have to act before the end of January.

Thinking about an annuity? Think again.

Let’s start by saying this: annuities can be a legitimate investment and could be the right thing for you.  That said, instances where an annuity is the best financial tool for your situation are rare.

As with any financial product, you should always ask yourself, “does this product make sense for me, or does it only make sense to the person selling it to me?”  This is even truer with annuities.  Scams and elder financial abuse are rampant in the annuity sales industry.  The simple reason is that the sale of an annuity usually generates a large commission for the salesperson.  The sales pitch usually begins with promises of asset protection and high returns with low or no-risk.

Unfortunately, there are “wealth strategy” companies out there that make a living selling annuities to seniors.  In our experience, this problem is only becoming more prevalent.  It is the rare case indeed when a 15-20 year annuity is the best investment for someone over 80 years old.  In addition to annuities sometimes being inappropriate investments, they can also greatly complicate the application process for Medicaid or Veterans Benefits.  In some instances, investing in an annuity can disqualify an applicant from these benefits for years.

If you or a loved one are considering an annuity, please contact our office to discuss how the annuity would fit into your overall estate plan and whether an annuity is really the appropriate investment for you.  We do not sell annuities or any other financial products.  Instead, we serve as an independent advisor who does not stand to gain or lose a commission.  Our goal is to help you create the best financial and estate plan for your individual situation by avoiding probate, minimizing taxes, and ensuring that your assets pass to your loved ones efficiently.

In the event you do choose to invest in an annuity, or need advice regarding other investments in general, be sure to contact a Certified Financial Planner (CFP).  A CFP is a financial professional who has the appropriate education, licensing and background to give you sound financial advice.  Annuity salespeople or “wealth planners or strategists” that hold no professional designations or licenses should be avoided.

You can find a CFP in your area by searching at this website.

Fiscal Cliff Averted (at least for now)

It appears that Congress has reached an agreement on the tax-side, but not the spending side, of the Fiscal Cliff situation.  Although the legislation has not been signed by the President yet, he has indicated that he will sign it.  In the agreement, Congress postponed their decision on automatic spending cuts for a short time.  Therefore, another Fiscal Cliff, albeit smaller, is on the horizon.

For our clients, the tax implications of the agreement are mostly good news.  Long-term capital gain and dividend rates will remain at 15% except for those earning more than $400-$450,000 (depending on marital status).  This is great news for anyone holding stocks, bonds or rental properties as the tax rate on the gain when you sell those investments will remain at 15%, assuming you have held them for at least a year before sale.

Perhaps the most important outcome from this agreement is its effect on estate and gift taxes.  In 2012, a person could pass up to $5.12 million by gift or inheritance, tax-free.  Any amounts over that exemption were taxed at 35%.  Absent an agreement from Congress, the exemption was set to fall to only $1 million with a 55% tax rate.  In this agreement, Congress has decided to set the exemption for both the estate tax and gift tax at $5 million with a 40% tax rate.  Additionally, this unused portion of the exemption is portable between spouses, which means the exemption is essentially doubled for a married couple to $10 million.  Best of all, the legislation makes all of the estate and gift tax laws permanent, so there is finally a little bit of certainty in this area.  The vast majority of Americans will no longer need to worry about the “death tax.”

A full summary of the provisions of the legislation, called the American Taxpayer Relief Act of 2012, is available here.

If you would like to discuss how these new laws affect you and your family, call us.  We can review your current plan or create a new plan that takes full advantage of all probate avoidance and tax minimization strategies available.

The Fiscal Cliff: will we fall off?

Here we are on New Year’s Eve and still no deal in Washington to avoid falling off the “Fiscal Cliff.”  You can read our post from last week to find out how the Fiscal Cliff might affect you, your estate and your family.

Unless Congress takes action today, the new year will begin with automatic spending cuts and significant tax increases.  Call our office to schedule an appointment to discuss the best way to minimize taxes and burdens on your beneficiaries.  We can help you protect your assets.

The Fiscal Cliff, the Estate Tax, and You

In July we posted about the major changes coming to the estate tax if Congress takes no action before the end of the year.  With only two weeks left in 2012, Congress has still not done anything to avoid the so-called “fiscal cliff.”

The fiscal cliff refers to a multitude of tax breaks all expiring at the beginning of 2013.  It also refers to automatic spending cuts that may be triggered.  Capital gain and income tax rates are set to increase.  However, one tax, which is set to change dramatically, is not getting much attention, but is critical for estate planning:  the estate tax (sometimes called the death tax or known as an inheritance tax).

Currently, the estate tax credit is $5.12 million per person.  There’s also a “portability” provision that effectively allows a married couple to double this exemption to $10.24 million.  At these levels, the vast majority of our clients can avoid estate tax issues and estate tax problems.

However, unless Congress passes a law stating otherwise, in 2013 estates worth $1 million and up will be subject to the estate tax.  In the event that no action is taken, and no new law is enacted, the exemption will drop to $1 million per individual, and the portability provisions of the estate tax will not exist.  At the new level of $1 million and without portability, there are a great number of people who need to review their current documents and planning to ensure the most tax advantageous plan.

Additionally, the top estate tax rate will go up to 55%!  This is not an error or typo – the top rate really is 55%.

While $1 million may sound like a lot of money, your estate for estate tax purposes, called the “gross estate,” includes your home, rental property, farming property and equipment, retirement accounts, life insurance, bank accounts, and everything else you own.  If you own your own business, it’s also included in your gross estate.  It does not matter if this property passes to your heirs by Will, Trust, beneficiary designation, through probate or avoiding probate.  By dropping the exemption from $5.12 million to $1 million, many people will be affected by the estate tax and will need a tax advantaged plan.

If you would like to discuss the estate tax in further detail and how you can limit the taxes on your own estate, contact our office.  We can help you protect your assets.

It’s Official: “Everyone Does It” Not A Valid Defense

The Missouri Court of Appeals bars a former State employee from benefits due to improper personal use of the State computers.  The “everyone does it” defense was completely rejected by the court, as was the “I didn’t know it was wrong” defense.  You can read the opinion here: http://www.courts.mo.gov/file.jsp?id=56432.

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