Estate Planning is
the process of
planning how to
preserve your assets
and arranging for
the distribution of
assets upon death.
The key factor is
insuring that an
individual’s assets
upon death pass to
the decedent’s
intended
beneficiaries in an
intended manner.
Certainly, a parent
would not leave
assets outright to a
minor or disabled
child. In this case
and in many other
cases, trusts need
to be created for
the benefit of a
particular
individual such as a
minor child or
disabled child.
These same documents
appoint fiduciaries
such as Executors,
Trustees and
Guardians who can
act on behalf of an
individual after the
individual dies.
Estate Planning
involves the
creation of
documents such as
wills, trusts and
beneficiary
designations that
fulfill an
individual’s wishes.
Estate Tax Planning
Estate Tax Planning
is often a critical
component of the
estate planning
process for high net
worth individuals.
While everyone can
protect $2,000,000
of assets from
federal estate
taxes, it is
important to note
that with insurance
policies and
retirement accounts
it is very easy to
surpass the
$2,000,000
threshold. For
individuals that
have taxable estates
in excess of the
$2,000,000 federal
estate tax
exemption, the
excess can be taxed
at federal estate
rates as high as
45%. Other assets
such as IRAs or
retirement accounts
can be taxed at high
as 75%. The purpose
of estate tax
planning is to set
up structures that
minimize the assets
that will be subject
to very onerous
estate taxes so that
more assets pass to
family members.
Charitable Planning/Foundations
Few things offer as
much fulfillment as
giving to a worthy
cause. Including
donations to
charitable
organizations in
your estate plan can
require careful
preparation in order
to make the most of
your contributions.
Many alternatives
are available. They
include:
Donating
Outright –
An individual
can make
outright
donations of
assets to a
charity during
their life or
after their
death. They can
also take
advantage of
income and
estate tax
deductions.
Designation
as a Beneficiary
- Naming a
charity as the
beneficiary on a
life insurance
policy allows
clients to
exclude the
policy's value
in their taxable
estate. More
favorable tax
advantages may
be possible by
also naming the
charity as a
policy owner.
Charitable
Lead Trusts
- Also called
charitable
income trusts,
this irrevocable
trust allows a
designated
charity to
receive annual
trust income,
while the
remainder
returns to the
individual or
their designated
beneficiary.
Charitable
Remainder Trusts
- This trust
allows
individuals to
benefit from the
trust by
receiving an
annuity during
their lifetimes,
and to transfer
trust assets to
a charity after
the death of the
surviving
spouse. This
type of trust is
excellent for
low basis assets
that do not
generate income.
The Charitable
Remainder Trust
can create
lifetime cash
flow and defer
capital gains.
Private
Foundations
- Individuals
can set up their
own charitable
foundation that
qualifies as a
charitable
organization
under Section
501(c)(3) of the
Internal Revenue
Code. They
receive a full
income tax
deduction for
the fair value
of assets
contributed to
the foundation.
Timing gifts
during high
income tax years
offers even
greater saving
advantages.
Donor Advisor
Funds -
Contributions
can be made to
this type of
foundation that
will administer
the donations
for a fee.
Although
individuals lose
some control
over management
of the funds,
they save most
expenses
associated with
running a
foundation.
