Downs Law Firm, P.C.

Estate planning

Advantages of Gifting Now

Why put off for tomorrow what you can do today? That adage might ring true for your family, as you try to figure out how to enjoy giving funds to your family today, while potentially saving your family money down the line.

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Charitable giving

Passing on Assets? Perhaps Some Can Be Given Away

Want to make a big impact? Consider passing on some of your assets through charitable giving. While many people transfer their assets to the next generation, there are many who want to give some, or even all, of their assets away through charitable giving. That can make a big impact, according to MarketWatch in “Giving your money away when you die: 10 questions to ask.” If you haven’t thought about charitable giving or estate planning, these 10 questions should prompt some thought and discussion with family members: Should you give money away now? Don’t give away money or assets you’ll need to pay your living expenses, unless you have what you need for retirement and any bumps that may come up along the way. There are no limits to the gifts you can make to a charity. Do you have the right beneficiaries listed on retirement accounts and life insurance policies? If you want these assets to go to the right person or place, make sure the beneficiary names are correct. Note that there are rules, usually from the financial institution, about who can be a beneficiary—some require it be a person and do not permit the beneficiary to be an organization. Who do you want making end-of-life decisions, and how much intervention do you want to prolong your life? A health care power of attorney and living will are used to express these wishes. Without these documents, your family may not know what you want. Healthcare providers won’t know and will have to make decisions based on law, and not your wishes. Do you have a will? Many Americans do not, and it creates stress, adds costs and creates real problems for their family members. Make an appointment with an estate planning attorney to put your wishes into a will. Are you worried about federal estate taxes? Unless you are in the 1%, your chances of having to pay federal taxes are slim to none. However, if your will was created to address federal estate taxes from back in the days when it was a problem, you may have a strategy that no longer works. This is another reason to meet with your estate planning attorney. Does your state have estate or inheritance taxes? This is more likely to be where your heirs need to come up with the money to pay taxes on your estate. Maryland has a 10% tax for gifts to people who are not close relatives. This would include nieces and nephews. There is no such tax on life insurance proceeds. Your decisions of “Who gets what” can include significant tax consequences. A local estate planning attorney will be able to help you make a plan so that your heirs will have the resources to pay these costs. Should you keep your Roth IRA for an heir? Leaving a Roth IRA for an heir, could be a generous bequest. You may also want to encourage your heirs to start and fund Roth IRAs of their

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Unexpected Fortune

Unexpected Fortune? What’s Your Next Step?

Would you be generous? If yes, you’d be siding with the majority. I had a friend who won several million dollars in the Lottery. Yes, he did go to work when he was next scheduled to be there, but did something else first. He had created a button that he pinned to his shirt that simply read “Yes, and No”. If a lot of money should arrive unexpectedly through an inheritance, the lottery or some other windfall, the majority of Americans say they would be generous and share the wealth, according to the Financial Advisor in “In U.S., Instant Wealth Spawns Philanthropy Boom.” When asked what they’d do after sharing with family, friends and charities, one thousand people who took part in a survey from BMO Wealth Management in Chicago knew exactly what they’d do: A total of 51% said they’d pay off their debts after sharing the wealth. After that, they’d invest in the stock market, buy a business or purchase some real estate (49%). They also said they would keep their financial goals basically the same (43%). A total of 22% said they’d buy big ticket items, and only 18% said they would splurge and go on a wild spending spree. Their main concern for their estate and legacy would be helping others, learning how to create a legacy with their windfall and avoiding family conflict over the money. More than a third of those surveyed (36%) said that a big concern would be to have some help with investment and retirement planning. That was followed by concerns of how this new money would impact their retirement plans, and equally concerning, how they would know who to trust now that they were in a position of wealth. They also said they would have to decide whether to work and wondered if the new wealth would cause any stress. Anyone who receives a large amount of money with no prior notice, faces a challenge with their new-found wealth. People who win large amounts in the lottery, for instance, are often ill-equipped to manage the money. They need help getting their money managed, so that the cash does not overwhelm them—or evaporate. Today’s new-found wealth doesn’t just come from lottery winnings. With the transfer of wealth between the Boomer generation to their children surpassing the amount of money transferred from the “Greatest Generation” to the Boomers, estimated at $12 trillion, the next few years will see a huge transfer of wealth from one generation to another. Without proper advice, many people go through such funds very quickly. Reference: Financial Advisor (Dec. 10, 2018) “In U.S., Instant Wealth Spawns Philanthropy Boom”

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Gifting to Charity

Getting the Best Results from Charity Giving

End of the year is the busiest time for charities. As the holidays near and the New Year approaches, people often think of charitable giving. Charities certainly do. There are ways to have your donations get the best results, according to the Lebanon Democrat in “A few thoughts on charitable giving, taxes.” Here are a few ways that your generosity can maximize the benefit you and your charity of choice: Bundle your itemized deductions, if possible. If you can time the payment of qualifying deductible expenses, including charitable donations, do so in alternate years. This increases the chances that you’ll be able to itemize your deductions. You may want to notify the charity that you are giving this year is a larger gift, because it will be covering a two-year period. Select the right assets to contribute to a charity. For outright gifts made in your lifetime, consider using highly appreciated assets, like stocks. This will allow you to bypass owing capital gains taxes on the appreciation and claim the entire value of the assets, as a charitable contribution. If you make a donation using this method to fund an income-returning gift or a charitable gift annuity or charitable remainder trust, you delay the recognition of the capital gain. In most cases, you can pay this in smaller amounts, over a period of years. What if you want to make a gift that also generates income? Use a charitable gift annuity or a charitable remainder trust. These gifts typically require significantly higher values, so you may be able to itemize in the year they are funded. However, only a portion of the contribution is deductible. That is because the donor receives income for life or for a certain amount of time. These gifts are usually funded with stock, cash or real estate. Taxpayers who are 70½ years old or older and required to take minimum distributions from retirement accounts, may have distributions made directly from their account to a qualified charity. If this transaction is done properly, the amount of the distribution is not added to taxable income. You will not receive a charitable deduction using this method, but you can lower your taxable income for the year and give your charity of choice a much-needed donation. Lastly, consider adding bequests and beneficiary designations in your end-of-life planning. Part of your legacy can include charitable gifts. There are a few ways to do this: designate a percentage of your estate to be donated to charity, specify a charitable organization as the full or partial beneficiary of a life insurance policy, an investment or bank account or any account that transfers by designation or leave a dollar amount or property to a charity. An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and can include charitable giving. Reference: Lebanon Democrat (Nov. 21, 2018) “A few thoughts on charitable giving, taxes”

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