Hold Series EE Bonds at Least 20 Years – But Then What?

A 3.5% interest rate on savings is hard to find these days, but that’s the rate enjoyed by owners of Series EE savings bonds – if they hold them for 20 years.   EE bonds double in value after 20 years, accounting for the 3.5% rate, but redeeming bonds earlier can result in significantly lower interest payments.  (For detailed information on savings bonds go to http://savingsbonds.gov.)

After 20 years EE savings bonds will continue to earn interest until “final maturity” occurs, 30 years after the purchase date.  Keep in mind that EE bonds don’t provide “spendable income” until they are cashed, which typically results in taxation on the buildup of interest.  But what if there were a way to convert savings bonds to a lifelong stream of income with little or no tax?  Charitable gift annuities offer such an opportunity.  You can cash savings bonds and contribute the proceeds for a gift annuity that provides lifetime payments to one or two persons – plus a charitable deduction that can reduce or eliminate the taxes from redeeming the bonds.  Furthermore, a large portion of your payments will be tax free.  Call us for details.

 


 

Four Steps to a Lower Tax Bill for 2014

Tax and financial planners generally recommend a four-part strategy for reducing clients’ income taxes: Deduct, Divert, Defer and Convert

  • Deduct:  Taxpayers should strive to itemize their deductions (rather than use the standard deduction) and then maximize all deductible expenses, including charitable contributions.
  • Divert:  In some cases, investment income can be channeled to a family member
    (a parent or child, for example) who is in a low tax bracket.
  • Defer:  Postponing taxes to a future year can enable your investments to grow faster, which is possible through tax-deferred retirement accounts, deferred annuities, U.S. savings bonds and growth stocks.
  • Convert:  Investors in high tax brackets should consider investments that are taxed at low rates, such as tax-free bonds or stocks that produce long-term capital gains or dividends, which generally are taxed at a low 15% rate.

Here is an example that reflects all four tax strategies.  In recent years, thousands of people have decided to convert their taxable IRAs to tax-free Roth IRAs.  IRA amounts that had been deferred from taxation in past years were then treated as taxable income.  It made sense for these people to deduct as much as possible in the conversion year to offset that extra income, which they could accomplish by maximizing charitable gifts.  One plan might be a charitable gift annuity that provides a large deduction and also diverts payments to a parent or other person in a lower tax bracket than the donor.  (Charitable remainder trusts offer good deduction opportunities, as well.)

We have more ideas on how deduct-divert-defer-convert strategies can magnify your support.  Please call our office for details. 

 



Unloading Your “Boat of Life”

Nineteenth century English humorist Jerome K. Jerome encouraged readers to “let your boat of life be light, packed only with what you need – a homely home and simple pleasures, one or two friends worth the name, someone to love and someone to love you . . .” 

Estate planning is largely about how best to unload one’s boat of life, disposing of assets, minimizing taxes and probate costs, creating trusts, etc. – but it can go much further.  Your will, for example, can be far more than just a dry, legal document.  Wise planning and creativity will enable you to:

  • Leave special items to special people.
  • Help a friend.  Lois is making a charitable bequest for the purpose of establishing a gift that will provide income to her best friend, Maria, who has been struggling financially, with eventual assistance for our programs.
  • Establish a memorial in the names of your parents or other loved ones.  Many gifts and bequests we receive are made as tributes to the wonderful people who influenced donors’ lives.
  • Encourage a young person.  Millie is making bequests that will provide college funding for her young grandchildren.
  • Leave the world a better place.  Your bequest to our future can make a lasting difference in the lives of unborn generations.

 



Please Tell Us about Your Bequest – It’s Important!

We recently learned that a longtime supporter had passed away and provided generously for us in her will.  Sadly, there was never an opportunity to thank this good person:  The gift had come as a complete surprise.

Estate gifts that arrive unannounced sometimes can be misdirected or otherwise fail to carry out donors’ intentions.  In one legendary example, a donor’s hand-written will left a significant bequest to “the University of Southern California, also known as UCLA.”  In another case, a donor left funds to a hospital in a retirement community – restricted to a nonexistent prenatal care program!

Why do people include worthwhile causes and institutions in their estate plans?  Personal satisfaction from leaving their mark on our future.  You can magnify that satisfaction by communicating your own good news to our office, and you’ll also ensure that:

  • Your gift will go to benefit a particular area of interest, if desired;
  • We can recognize you appropriately (or determine that you wish to remain anonymous);
  • Your gift meets criteria for specific programs or purposes that are important to you;
  • Your gift can encourage friends, colleagues and others to make their own gifts;
  • You receive a most sincere “thank you,” either publicly or privately, for your thoughtful generosity.

Sharing the good news of your bequest will also help us better plan for the future and evaluate the success of our planned giving program.  A short note, e-mail or telephone call to our office will be much appreciated . . . and you’ll brighten everyone’s day!

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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.