“I Don’t Need a Will Because . . . ”

• “It’s fine with me if a large part of my property is distributed under state ‘intestacy’ law.  After all, those legislators are smart people who surely know what’s best for my estate.”
• “I know a will can save taxes for my family, but the government needs money, too.”
• “Yes, some of my heirs may need money management, and setting up a trust in my will would help.  But I think they should be free to squander their inheritances.” 
• “True, a will lets me name an executor to handle my estate, or a guardian for minors under my care – but those decisions are best left to a judge who doesn’t know anything about me or my family.”
• “Money is tight; I’d rather not spend anything on a will – even though the modest cost could avoid later confusion, conflict and expense for my family.”

Unfortunately, three out of five people never get around to making a will, undoubtedly because they haven’t given much thought to the consequences discussed above.  Clearly, every adult should have a thoughtful, up-to-date will.  We should also add that a will enables you to continue your support for the organizations that are important in your life.  Please call us at 1-800-843-8114 if you would like more information on will planning, including how to arrange a satisfying bequest for our future.

 

 

Converting to a Roth IRA?  It’s a Good Time to Give

Thousands of Americans are expected to begin converting traditional IRAs to tax-free Roth IRAs this month, now that income restrictions on conversions have been repealed.  But the decision whether to convert to a Roth IRA can be complicated.  Taxes will have to be paid when you convert, which may not make sense if you expect to be in a lower tax bracket in future years.  You’ll also have to decide whether to spread the tax on a 2010 conversion over 2011 and 2012, when tax rates could be higher than they are today.

One way to cut through these difficult questions is to establish deductions that minimize the Roth IRA conversion tax.  Suppose your estate plan contains a large bequest for our benefit.  If you accelerate that bequest into a 2010 gift, the charitable deduction would reduce or avoid the conversion tax.  But what if you need all your assets to preserve current financial security?  One strategy is to make a gift that provides a large deduction and lifetime income as well, through a charitable gift annuity or charitable remainder trust.  You can magnify your deductions by postponing the initial payment from a gift annuity for several years, or by choosing to receive payments from a charitable remainder trust for 10 or 15 years, rather than for life.

Another idea is to contribute all or part of a home, vacation home or farm property this year but keep lifetime use of the property.  Sylvia, age 68, owns a vacation home worth $400,000.  She hopes to convert a $150,000 traditional IRA to a Roth IRA this year, but doesn’t like the idea of paying tax on $150,000 of additional income.  However, if Sylvia makes a gift of her vacation property in 2010, while retaining lifetime occupancy, she will receive a charitable deduction of almost $200,000 – which simplifies her decision to convert to a “Roth.”  We’d be glad to provide you with more information on planning gifts of any kind at any time. Feel free to call 1-800-843-8114 for answers to your questions.

 

 

How Accurate Is the Rule of 72?

To estimate how many years it will take for an investment to double in value, you can divide 72 by the annual interest rate you might expect to receive (assuming tax-free annual compounding).

          72
____________ =   Number of years money will take to double in value
  Interest Rate

Here is a comparison of Rule-of-72 estimates to results obtained from a financial calculator, which proves that the Rule of 72 is close enough for most purposes:

Interest	Years to Double	Actual Years for
Rate	Under Rule of 72	Funds to Double

3	24	23.9
5	14.4	14.3
7	10.3	10.2
10	7.2	7.3
12	6.0	6.1

 

A Thoughtful Resolution for 2010

The year 2010 could be a timely one for charitable contributions, particularly if you:

• Decide to sell real estate, stocks or other investments at a profit.  Prior to any sale, you can give us a portion of the asset, avoid some capital gains taxes and receive a deduction for the fair market value of the portion we receive (if you have owned the asset more than one year).
• Make or amend your will or living trust.  Please call us at 1-800-843-8114 about including a bequest for our future as part of your planning.
• Roll over certificates of deposit.  Transferring savings in exchange for a charitable gift annuity will entitle you to a charitable deduction and large annual payout that is partly tax free.
• Name beneficiaries for life insurance or retirement accounts.  It’s easy to include us as one of your beneficiaries, and you may save considerable taxes for your estate, as well.

Please call us at 1-800-843-8114 about planning a gift whenever any of the above events occurs in your life.

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