Estate Planning’s Extra Innings
Most people think that estate planning ends at death. In fact, there are several strategies and elections that may be made after a family member dies to save taxes and make a more equitable distribution of an estate. A few of the choices available for “post-mortem planning”:
Time to Redeem?
Check the drawers where you keep important papers to see if you have any of the following savings bonds:
If you find any of these, your bonds are no longer earning interest and it’s time to redeem them. You’ll be subject to tax on the untaxed interest, but you can reinvest the proceeds to produce more income.
Another option is to use the proceeds from redeeming the bonds to make a charitable gift. Your income tax deduction may offset the tax. You can even retain payments for life from your gift by funding a charitable gift annuity or charitable remainder trust.
Exactly how long do you want to control the assets you accumulated during your lifetime? Most people are happy making bequests to family members and charities and trusting the beneficiaries. A few, however, want to retain control long after their deaths. One way to exert some control is through a trust, although many states have rules limiting how long trusts can last.
Whether the beneficiary is a family member or a charity, there are drawbacks to putting limits on the use of the bequest. Even in states without a limit on trust longevity, the economics may be impractical. For example, trust income that is divided among four children might be practical, but three or four generations later, the number of beneficiaries may be so large that trustee fees will eclipse the amount that any one individual beneficiary receives.
A similar concern can arise with charitable bequests. It’s important to ask whether a use that is practical today will still be relevant in 75 or 100 years. For example, a bequest in trust to provide scholarships in a particular subject area might create a problem if the school no longer offers courses in that field of study. Or a bequest of land that is to be used solely for a playground could be obsolete if the land becomes surrounded by manufacturing. Consider language allowing the charity enough flexibility to put the bequest to a similar use or simply have the funds distributed outright at some point.
The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.