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Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Volume Six Number Ten October 2008

Charitable Opportunities

Charitable Opportunities Who will forget the year 2001? Do you remember where you were that morning of 9/11? The terrorism of that day sent shockwaves throughout America that continue to reverberate. Despite the evil of others, Americans remained generous in the midst of their suffering, giving an estimated $212 billion that year to charity.
Are you a gracious giver, perhaps even a philanthropist? If you are a taxpayer, then the answer is yes. How, you ask? During your lifetime, your wealth is subject to taxes in a variety of forms. Income taxes levied on your wages, interest and dividends, and capital gains taxes extracted on the sale of your appreciated assets may tend to make April 15th one of your least favorite days each year.

Voluntary Taxes

     Our tax system is voluntary in its form, but the civil and criminal penalties for noncompliance make the process involuntary in its substance. Thankfully for our national defense and other essential programs of the federal government, most taxpayers voluntarily comply with the Internal Revenue Code (IRC) and pay their fair share.
     Beyond the essentials of government, however, are there any programs funded by the federal government you personally consider nonessential and perhaps even wasteful? If there are, then you are an involuntary philanthropist by your financial support of such causes as selected by Congress and the White House.
     Perhaps there are private sector charities you deem more worthy of your tax dollars? Chances are you already support these charities. If so, then you really should know about IRC § 664 and how you may turn your involuntary philanthropy into tax-savvy voluntary philanthropy.

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The Trifecta Challenge

The Trifecta Challenge In the world of high-stakes wagering on horse races, winning the Trifecta is a most noteworthy achievement. To win, you must pick not only the winner of the race, but also the second and third place finishers. When it comes to gracious giving, most taxpayers would prefer to benefit their charities first, themselves second, their loved ones third … and the IRS dead last. This Charitable Planning Trifecta can be achieved through a carefully coordinated financial and legal strategy that includes both a Charitable Remainder Trust (CRT) and a Wealth Replacement Trust (WRT).

The Trifecta Challenge

The creation of a CRT helps your charity finish first, with you (and your spouse) a close second. Before the charity inherits the assets held in the CRT upon your death (or upon the death of your spouse, if later), you (and your spouse) enjoy a lifetime income from the CRT and valuable charitable tax deductions. However, when the charity inherits the assets held in the CRT, they are forever unavailable to your loved ones. That is where the WRT comes in.

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Did You Know?

Did you know that:

While three in ten Americans DO have a plan, the average age of a will coming into a law office for update or probate is nearly 20 years?
A Power of Attorney of similar vintage may be rejected by banks and other third parties?
In three out of four cases, a Health Care Directive (also sometimes called a "Living Will") is unavailable when needed?
Nine out of ten Americans MISTAKENLY believe that life insurance proceeds are automatically exempted from Federal Estate Tax?
The Wills of most married couples control ONLY personal effects?
There are legitimate means of leveraging the $12,000 annual gifting exclusion, of avoiding capital gains tax on super-appreciated low-yield assets, and of ensuring that 99% of assets flow to the next generation in a thoughtful, protected manner?

Is it Time to Review Your Plan?

Proper estate planning is a process, not simply a one-time event. Therefore, it only makes sense to periodically review your planning goals and legal instruments. Review this list of life changes that could alter your estate-planning needs. If you notice some areas that might apply to you or your family, it may be time for an estate plan check-up.

Marriage, remarriage or divorce.
Death of a spouse.
Substantial change in estate size.
Death or incapacity of an executor, trustee or guardian.
Move to another state.
Acquisition of property in another state.
Birth or adoption of a child or grandchild.
Serious illness of a family member.
Change in business interest or retirement.
Change in insurability for life insurance.
Marriage or divorce of a beneficiary.
Change in beneficiary attitudes.
Financial irresponsibility of a child.
Change in tax law.
More than two years since review of plan with attorney.

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