Giving

When counseling clients, I am always concerned when I learn that parents have made, or are proposing to make, large monetary gifts or loans to their adult children.  The reasons for such gifts or loans vary.  Perhaps a child finds him or herself in financial difficulty, often as a result of a job loss, divorce, business failure, or dependency addiction.  Few parents, even if they have limited means, turn away a child in need.   As the father of two children, I have nothing against such a parental bailout where a child is in genuine need.  After all, family is family.  However, I frequently see situations where an adult child convinces his or her parents into transferring a significant portion of the parents' life savings for non-essential needs—oft...

Many people who have been charitably inclined during their lifetimes like the idea of establishing a charitable foundation that will continue after they die. The foundation can be created while you are living, or it can be established after you die. To qualify, a small percentage of the trust assets must be distributed to charity each year. But you can name whomever you wish to run the foundation, including your children, and the foundation can pay them a reasonable salary. You can be very specific about which charities you want to support, or you can leave that up to the trustees of the foundation to decide (within IRS guidelines, of course). The tax benefits of setting up your own foundation can be substantial. You can save estate, capital gains and ordinary income taxes:...

If you have a sizeable estate, you may want to consider giving some of your assets now to the people or organizations who will receive them after you die. Why? First, it can be very satisfying to see the results of your gifts -- something you can't do if you hold onto everything until you die. Second, gifting is an excellent way to reduce estate taxes because you are reducing the size of your taxable estate. (Just make sure you don't give away any assets you may need later.) And third, well, we'll wait and explain the third reason at the end. One of the easiest ways to do this is through annual tax-free gifts. Each year, you can give up to $13,000 to as many people as you wish. If you are married, you and your spouse together can give $26,000 per recipient per year....

“Those who labour in the earth are the chosen people of God, if ever he had a chosen people, whose breasts he has made his peculiar deposit for substantial and genuine virtue.”  - Thomas Jefferson The farmer as virtuous is well-established in our national conscious and reverence for the family farm sets planning for it apart from other types of family owned businesses. Even children who do not plan to actively participate in farming have a deep emotional attachment to the farm. According to the USDA, approximately 96 percent of the 2.2 million farms are classified as “family farms.” The average age of a farm operator is 57 and the fastest growing segment is tho...

Your estate will have to pay estate taxes when you die if the net value (assets minus debts) is more than the exempt amount at that time. In 2011 and 2012, the federal exemption is $5 million (adjusted for inflation in 2012) and the tax rate is 35%. However, if Congress does not act again before the end of 2012, on January 1, 2013 the exemption will be $1 million and the top tax rate will be 55%. Also, some states have their own estate or inheritance tax, so while your estate may not have to pay a federal estate tax, it may have to pay a state tax. With the federal estate tax exemption at $5 million, you may not need the estate tax savings right now. But it's important to understand how gifting works because the exemption may be reduced in the future (as early as 2013) and the v...

Charitable lead annuity trusts (“CLATs”) are an interesting vehicle for testamentary planning due to the historically low interest rates. Further, proper use of a testamentary CLAT not only zeroes out the estate tax but also offers a donor the chance to leave a charitable legacy with the organization of his or her choosing. This short article has two main goals: (1) to present the estate planner with a brief overview and description of a testa­mentary CLAT and (2) suggest assets this author finds most suitable for funding a CLAT. As the title suggests, this is a brief overview of these two topics, and for those who want a more in-depth discussion, I suggest visiting the Leimberg Information Services website at http://leimbergservices.com/wc_access.cfm, and doing a search fo...

You know that many clients and potential clients do not have optimal estate plans in place. Indeed, in the recent climate, the very concept of optimal estate planning has become muddled.   However, most clients and potential clients also lack op­timal charitable planning. This lack of optimal charitable planning creates an opportunity for planners to use chari­table planning as a business development tool.   Clients and potential clients usually have either too much or too little charitable planning.   Too Much Charitable Planning How can a client have too much charitable planning? By having previously committed to charitable endeavors that he no longer needs or desires. The most common example of this occurs when a client has a charitable remainder trust (CR...