Charitable Remainder Trusts for Disabled Beneficiaries

The IRS has approved charitable remainder trusts that pay income to a legally incompetent child for life, but with payments going to a special needs trust established for the child.  The IRS also has approved a plan where the charitable remainder trust was payable to a trust for the lifetime of a child who was merely “financially disabled.”

The IRS has indicated that such arrangements are appropriate where the income beneficiary, by reason of a medically determinable physical or mental impairment, is unable to manage his or her own financial affairs.  The trustee of the special needs trust could have broad discretion as to how much income or principal would be paid to the beneficiary, and could take into account government benefits to which the beneficiary may be entitled.  Assets in the special needs trust could pass at the beneficiary’s death either to charitable or family beneficiaries.  Proceeds from the charitable remainder trust would be paid, of course, for our benefit or to any qualified organization.

 

 

Estate Planning for the Care of Pets

One hears stories from time to time about people who attempted to leave large sums of money to a dog or cat in their wills.  (Heiress Leona Helmsley famously left a multi-million dollar trust to provide for her dog, whose name happened to be “Trouble.”)

What will actually happen to a pet when the owner passes away?  Is there any way to ensure the continued care of a beloved animal?  One possibility is simply to leave the pet through your will or living trust to a faithful friend or family member, along with sufficient funds to provide for food and medical treatment during the animal’s life expectancy.  But what if the caretaker becomes incapable, through death or illness, of attending to the pet’s needs?  Many states in recent years have passed laws permitting “statutory pet trusts” that address some of these challenges.  A traditional trust may or may not be helpful, depending on the laws of your state or the state where the caretaker and trustee reside.   You may be able to find animal shelters or similar organizations that will sign a contract for the future care of your pets.  It’s wise to check with legal counsel as to the correct legal form of such arrangements in your area and whether they can be enforced.

 

 

Last Minute Gifts Can Reduce 2009 Taxes

Late 2009 can be a good time to make tax-saving contributions.  The stock market has been on a tear since last March, and donors ideally should make gifts with stocks and bonds in which they have a large paper profit (long-term capital gain).  The profit escapes tax and the charitable deduction will be the investment’s full fair market value, if held more than one year. Note:  Gifts of securities may be deducted up to 30% of your adjusted gross income, with a five-year carryover for excess deductions.

If you want to ensure that gifts made in December are deductible for 2009, keep these rules in mind:

• Checks will be deductible if mailed and postmarked no later than December 31, 2009;
• Stock certificates and separate stock powers can be mailed and deducted for 2009 if the envelopes are postmarked by December 31, 2009;
• Securities held by your broker in “street name” are deductible as of the date they are received electronically in our account – no later than December 31, for 2009 deductibility;
• Gifts charged to a credit card are deductible as of the date the charge is “made” – but the IRS has clarified that the date the gift is actually “made” is the transaction posting date, which might not occur until January for a December 31 charge;
• Other gift assets are deductible on the date they are “delivered” to charity – usually involving physical transfer of an item or deed to the organization’s representative.

Here are examples of the tax savings that are available in different tax brackets.

Gift                     Tax Bracket
Amount    25%       28%       33%      35%
$ 100        $ 25        $ 28       $ 33      $ 35
$ 500         125         140        165       175
$1,000       250         280        330       350
$5,000    1,250      1,400     1,650    1,750

Please call our office at 800-843-8114 and ask to speak with a member of our Gift Planning Department, if you have any questions at all about planning your contributions.

 

 

Make Plans for Someone to Handle Your Finances

Who would take over the management of your financial affairs if – for any reason – you become unable to handle them personally?   Who would do your banking, pay bills or manage investments?  Two or three options generally are available:

1.  Power of Attorney.  In most areas you can establish a “durable” power of attorney, naming a friend or relative to act for you on a broad or narrow range of activities.  Standard forms are usually available, although you may need an attorney’s assistance for complex situations.  In any event, check with your advisers whether your power of attorney indeed will continue in effect if you are disabled (a “durable” power). 

2.  Trusteeship.  You can set up a revocable living trust and name a trustee (money manager) who will act on your behalf as to the assets placed in the trust.  The trustee can provide valuable assistance in the event of disability.  You could be the trustee at first and provide for a “standby” trustee in case you are disabled.  A power of attorney sometimes is incorporated into trust arrangements, as well.

3.  Guardianships.  Courts will appoint guardians for persons who become incompetent – an often cumbersome, costly and time-consuming arrangement.  With trusteeship or a power of attorney, you – not a court – decide who will handle your affairs.  Guardianships nonetheless provide the protection of court supervision of all transactions made on your behalf.

Note: If you have made charitable bequests in your will or living trust, many advisors would suggest that you give the person who holds power of attorney, or who would be your standby trustee, the power to “accelerate” such bequests into lifetime gifts that provide income tax savings to you or your family.  Estate tax savings would be available as well.

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