Why Estate Planning isn’t just for Multimillionaires

 Putting an estate plan in place is so much more than saving taxes.  It provides a roadmap for folks who want to better preserve, protect and transfer wealth to the people they care most about. Last year, the American Taxpayer Relief Act (ATRA), made permanent the gift and estate tax exemption amount. In 2013 that amount is $5,250,000 for individuals and $10,500,000 for married couples.  But you don’t have to leave behind millions to still need careful planning.  

Key takeaways to consider:

• Having an estate plan, including a will, generally means a family can avoid much of the intestate probate process.  Proceedings vary state to state, but without a proper estate plan, many families could experience costs, including time, money, and loss of privacy.         
• An appropriate solution designed to avoid any probate process is often the creation of a living trust, which helps maintain control over assets and seeks to avoid uncertainties for the family and designated beneficiaries.         

 Other important considerations:

• Designating guardianship for minor children and grandchildren will reduce the court’s control over both the minor’s inheritance and caretaker.
• Establishing a charitable plan as part of the estate plan ensures designated assets will be distributed to the charity of choice rather than by state law.

Finally, while an estate plan protects assets and family, it also provides the opportunity to pass on cherished values through gifts to family members or favorite charities.  A written reflection of hopes for the future and life lessons learned can be conveyed through legacy letters and ethical wills. Putting an estate plan in place addresses legal and tax issues and ultimately ensures assets will be used according to your wishes.

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

Leaving a Legacy

 There are many ways to make your mark in the world today.  Some give of their time and talents through volunteering and others give financially to the causes near and dear to their hearts  Consider a hypothetical couple that wants to preserve their legacy and give to four organizations that they would like to help succeed, we’ll call them Dick and Jane. Dick and Jane have been good savers throughout their working years. Fortunately, they accumulated enough assets to care for their own retirement needs with a high expectation of having a surplus, regardless of what financial markets deliver for their remaining years. In a recent annual review meeting, Dick and Jane determined that it was time to make financial contributions to some of area institutions that they feel are benefitting the larger society. Essentially, they wanted to help ensure these organizations are around to enrich other lives like they have their own. 

Suppose Dick and Jane could comfortably gift $50,000 each to four organizations; Detroit Institute of Arts, Michigan Opera Theatre, Michigan Nature Conservancy, and the Detroit Symphony.  Each of these organizations contributed to their well-being and they may consider it is time to “give back”.  Working together, we may be able to identify securities in their portfolio that could help maximize their contributions as discussed in this prior blog .  If Dick and Jane would like their gifting to remain anonymous, they could consider establishing a Donor Advised Fund (as I discussed in a recent blog) to facilitate the donations. In the end, Dick and Jane can make tax leveraged gifts benefitting four organizations with the hopes that these groups will continue to enrich the lives of Michigan residents.  As a fellow Michigander and financial planner, it would be rewarding to see them leave their mark. 

If you are planning to leave a legacy, here are 4 Steps to get you started:

1. Determine your financial ability to give financially – never give away a dollar that you might need for your needs
2. Research possible organizations
3. Determine the most tax efficient manner to give – preferably appreciated securities
4. Enjoy knowing that you have made a significant contribution to society

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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The illustration above is hypothetical.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

Why is 2020 So Significant to Boomers and Their Children?

 We’re not talking about 20/20 the news program, or about your vision.  We’re talking about the startling statistic released by the Alzheimer’s Association that by the year 2020, there will be 20 million baby boomers with Alzheimer’s disease.  In case you’re counting, that will be nearly 1 out of every 3 baby boomers that have Alzheimer’s or a related dementia.  The cost of care will be a huge concern for these boomers and their families (according to AARP, the current average cost to care for someone with Alzheimer’s is $56,800 annually), among the many issues that will arise.

If you are a boomer, here are the top 3 things you can do to prepare for this risk:

1. Put Together a Team of Professionals – Start with a Certified Financial Planner™, who can help you plan ahead for the financial risks.  This will involve simplifying accounts, managing your assets, and helping you plan for your financial future with your personal preferences in mind.  Your financial planner will help you to put together a team of the additional professionals you may need and will bring on additional team members, as needed, along the way.
2. Make Sure Your Legal Documents are Up-To-Date – We are talking here about your wills, possibly a trust, but most importantly Durable Powers of Attorney.  All individuals should have two durable powers of attorney – one for Health Care and the other for General/Financial affairs.  These Powers of Attorney will be invaluable if you ever need someone to make health care or financial decisions when you are unable to make them yourself. 
3. Get Your Financial Life in Order and Document – Not only is it a good practice to take inventory of what you have and where it is, but it is also (and equally) important to document these items and indicate where and who to contact if there are questions.  Documenting investment accounts, insurance policies, legal documents, former employer benefits, etc., will be invaluable to family members or close friends who may need to assist you with your financial affairs in the future.  Click Here for our Personal Record Keeping document that can serve as a guideline for this purpose.

While an Alzheimer’s diagnosis is not something any of us want to think about, it is better to plan ahead so that your financial life will be handled as you intend, rather than leaving the burden of making those decisions to your family when you might not be able to communicate your wishes. 

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing information is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

Parents and Children Misaligned on Finances

 As the mother of a teen and a pre-teen, I can testify that parents and children often speak different languages. Like when my daughter says "I'm going to die," it doesn't generally mean she's seriously ill; it more likely means she got a hole in her favorite pants! I live for the promise of the day when my children are grown and we will be able to communicate on the same plane.  After reading the recent Intra-Family Generations Study conducted by Fidelity Investments, I’m not so sure that will ever happen…at least when it comes to finances.

The Intra Family Generations Study found that parents and their adult children are on different pages when it comes to several key family financial issues, including retirement planning, inheritance planning, and caring for elderly parents.  The study found that 97% of parents and children surveyed disagreed on whether adult children will care for their elderly parents if they need long term care assistance.  Children tend to overestimate the value of their parents’ assets (by an average of $100,000 or more) and parents are overly critical of their children’s financial decisions.  In addition, while 24% of adult children surveyed say they will need to help their parents in retirement, 97% of parents say they won’t need help.  Clearly, there are misunderstandings between the generations.

So why, you might ask, are adult children and parents so disconnected?  According to the study, (which I can vouch for in my personal experience) families simply don’t talk about financial issues.  Talking about things like investments, debts, savings shortfalls, income taxes, or estate planning is taboo in many families. 

Most interestingly, the study did find that 60% of adult children and 68% of parents indicated that they would be more comfortable discussing these important financial issues with a third party financial professional than with each other.  Financial planners are the ideal financial professionals to lead productive family meetings.

If you find yourself as either a parent who has not discussed future financial issues with your adult children or as an adult child who has not discussed long term care or financial issues with your parent, contact your financial planner to schedule your family meeting today.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any websites users and/or members.

Give a Gift to Your Family This Holiday Season: Document Your Five Wishes

 For most of us, referring to our “five wishes” during the holiday season means naming the top five items on our gift list or your five wishes for the coming New Year.  The five wishes I’m talking about here is something quite different, but in the end, much more valuable.

Five Wishes is a document that assists individuals and families discuss and document preferences for end of life care.  It is a personal living will that goes beyond the basics to give individuals the opportunity to express their wishes, and thus ease the burden of loved ones who may be left to make critical questions during stressful times.  The document, written by Aging with Dignity, is easily navigated to help communicate the following:

• Who do you want to make decisions about your care when you can’t?  
• What kind of care do you want and/or what kind of care would you refuse? 
• How do you want to be kept comfortable?
• How do you want people to treat you?
• What specific information do you want your family to know?

This document can be considered a legal document in Michigan and 41 other states if it is signed and witnessed*.  If you already have an up-to-date Patient Advocate/Health Care Durable Power of Attorney document in place, Five Wishes can still be valuable as a way to communicate your wishes for your end of life care to others. 

Consider using Five Wishes to structure your conversations this holiday season as you hold the family meeting I recommended in my recent post.  And while you’re at it, share you wishes for 2013 with your family, as well!

*Five Wishes meets the legal requirements for an advance directive in Michigan. Just like in 41 other states, you can use Five Wishes in Michigan to express how you want to be treated if you are seriously ill and unable to speak for yourself, using a document that is easy to understand. All you need to do is check a box, circle a direction, or write a few sentences. Once it is signed and witnessed, your Five Wishes is a legal document. Additionally, the state of Michigan requires your health care agent to sign a Patient Advocate Acceptance Form. The people you name in Wish 1 of Five Wishes must sign this form before they begin making decisions for you. This form is not included in Five Wishes because you are not required to complete the acceptance form at the same time. It is offered here as a helpful resource.  Five Wishes can be found at www.agingwithdignity.org.

Michigan Patient Advocate Acceptance Form

Sandra Adams, CFP® is a Lead Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Year End Planning: Gifting and Estate

 As we approach year end, many people begin thinking about gifts – whether they be to their family or the charitable causes near and dear to their hearts.  The mainstream media has focused plenty of attention on the upcoming income tax law changes, unless Congress acts before the end of the year.  However, the media has not focused as much attention on the impending changes to our estate tax law which many would argue is more confiscatory than the income tax.

Let’s compare the current law to what will be put in place in 2013 if Congress does not act:

	2012	2013
Gift tax unified credit equivalent:	$5,120,000	$1,000,000
Gift tax annual exclusion per person:	$13,000	$13,000
Estate tax unified credit equivalent:	$5,120,000	$1,000,000
Top estate tax rate:	35%	55%
The generation-skipping transfer tax exemption:	$5,120,000	$1,000,000

Therefore, if Congress does not choose to extend the current law, families might consider making sizeable lifetime gifts in 2012 to take advantage of a friendly tax policy. For example, wealthy families might choose to gift up to $5,120,000 during their life rather than at death if they believe that the credit equivalent will only be $1,000,000 in the future. This $5.12M transfer can occur without gift tax to the donor (a parent in this example) or the donee (perhaps children). By way of example, the difference between making a gift of $5.12M in 2012 or dying with $5.12M in 2013 could result in a savings of close to $1,500,000 in future estate taxes! And, that figure would double to over $3,000,000 if both husband and wife use their $5.12M equivalent. 

Annual exclusion gifts are another way to give money (by families of all wealth levels) to family members throughout the year.   Essentially, you can gift up to $13,000 to any number of people each year without gift tax consequences.  For example, we are working with a client who wishes to gift $13,000 to his two children and two grandchildren for a total gift of $52,000.  Because no one person will receive more than $13,000; there are no gift tax issues.  If you need another reason to be thankful you are married:  Married couples can double the above amounts as you and your spouse both can gift $13,000. 

Another type of gift that is popular near year end is the charitable gift. And for purposes of this article, I am addressing substantial gifts.  There are three main issues to consider when making a charitable gift (I assume that you have the charitable intent – meaning you want to benefit the organization or cause).  First, you need to be comfortable with the affordability of the gift.  Never give a dollar away that you might need for yourself. Your personal financial plan can assist in helping determine the affordability. Second, you can give away any amount that you would like without estate or gift tax concerns. Really, you can give it all away.  Third, there are restrictions on how much you may deduct for INCOME tax purposes.  The income tax deduction details are outside of the scope of this article so please consult your tax preparer for additional information. 

A couple of specific charitable gifting strategies include the IRA Charitable Gift and the Donor Advised Fund. Unfortunately at this time the IRA Charitable Gift law has not been reenacted after expiring in 2011.  There is some hope, however, that we might see an end of the year extension.  The second charitable gifting strategy or vehicle is the the Donor Advised Fund that I wrote about June 25, 2012, and I still think it is one of the best-kept secrets for those charitably inclined. 

On a final note, sometimes folks (and their advisors) get caught up or side tracked trying to save taxes via gifting.  Ideally, your gifting strategy is about transferring values (personal & family) and not just asset values. If we can be of help putting together a gifting plan that reflects your values feel free to call or email. 

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The information contained in this report has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

A GIFT FOR A LIFETIME: Grandparent Giving for Education

 We all know grandparents and grandchildren have a special bond. If you are a grandparent of college age children, or those attending private schools in some cases, you have to be alarmed about the amount of debt students are racking up. Economists are estimating students will be paying loans for as long as 20 years, affecting their ability to get homes and cars.*

Grandparents have a special tax saving measure that will be a wonderful gift to their favorite student.  They can make direct payments of tuition to a school free of gift tax.  So what does that mean to the grandparent?  It means that even if you have contributed to 529 plans or given to your student directly, you can exceed the $13,000 annual gift tax exclusion by writing the check directly to the educational institution for tuition payments.  The grandparent is giving now and also reducing their future taxable estate.

What does it mean to your grandchild?  It could mean less debt and the ability to start their professional career on a more solid financial basis.   With the giving season right around the corner, this may be a strategy you want to consider. To learn more, contact your financial planner at the Center.

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Source: Huffington Report, 7/20/2012

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

Donor Advised Fund – A Way to Manage Your Charitable Giving

 It is better to give than to receive.

Whether it is giving of your time, talents or financial resources, there is a lot to be gained by simply being generous. As a professional financial advisor, one of my many great pleasures is helping clients plan and then efficiently give to causes near and dear to them.  Recently, I helped long-time clients do just that.  After conducting a Financial Independence analysis that provided confidence that they were in a position to provide financial assistance to others, they decided to earmark a significant amount for charitable giving.  However, like many, these clients were not sure which charity to give support … just yet.

Enter the DONOR ADVISED FUND. Donor Advised Funds have been around for a while – but I am still surprised at how little they are used. Many firms and organizations offer them – Southeast MI Community Foundation, Fidelity, Raymond James, etc. There are many situations where a donor advised fund might make sense.

Hopefully you are aware of the advantages of gifting appreciated securities, which allow you to avoid capital gains taxation (note that I said avoid and not evade).  When you gift appreciated securities to a charity or donor advised fund held for longer than 12 months, you are able to deduct the fair market value of the securities and avoid capital gains. I like to say that there are three parties to a charitable donation; you, the charity, and your silent partner the IRS.  We want you and the charity to benefit the most.

A donor advised fund allows you to lock in the gain by transferring the shares to the donor advised fund. Next, you get an immediate income tax deduction. And then, you can decide on the specific charity or charities to benefit at a later date. For more information visit the web site www.myfamilyfoundation.org. If you would like additional assistance – give us a call – we’d like nothing more than to help you with your charitable giving.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Charitable Giving: Your Annual Giving Plan

 Once you have determined the causes you want to support and have done your homework on those chosen charities, it’s time to put together your giving plan.  A giving plan can help you track your giving on an annual basis, to document your legacy giving wishes, and to communicate your giving desires to your family. 

Your annual giving plan could look something like this and helps you outline your giving based on:

• Funding areas – Cultural arts, education, social programs, the environment, animals, religious affiliations, support programs, health/research, etc.
• Local versus Global reach – Determine your desire to support organizations that serve close to home versus those that serve a broader/global community.
• Identify the Specific Organization(s) in each funding area
• Identify specific organizations and specific gifting – Determine your annual giving amount in dollars and/or percentages and track when you’ve met each annual goal.
• Identify your Legacy Gifting Wishes – Document the organizations you have identified to receive charitable dollars from your estate.  While this form does not have any legal authority and does not replace the needed legal documents (trusts, wills, etc.), it is a way to communicate your charitable giving desires.

Your annual giving plan will help you (1) plan and track your annual giving and (2) provide a tool with which to communicate your charitable giving with your family.  Feel free to use our Giving Plan (link form here) form, or develop a format that works best for you.  The important part is to develop your personal giving goals based on what is important to you, to verify the organizations you choose use your gifts to provide the most good, and to make sure that your gifting fits into your overall financial plan.

“What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal.” ~Albert Pike

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Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.  Please discuss tax matters with the appropriate professional.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Charitable Giving: Researching Your Charities

 In my previous post, I addressed the reasons that individuals decide to give to charities.  Once you have made the conscious decision to give, how do you make sure your contributions are making a real difference and not just funding the salaries of the organization’s executives?

The internet makes it easier than ever to do your own investigating.  By doing your own due diligence, you can make better decisions about which charitable organizations most deserve your hard-earned dollars.  Here are a few things to look for:

• Look for IRS-Approved Charities – Verifying that a charity is an IRS-approved nonprofit organization will not only ensure that your contribution will be tax deductible, but IRS-approved charities have stringent application and reporting requirements, which generally weeds out those organizations that are ill-intended.
• Look at the Financial Strength and Practices of the Charities – Web sites like Charity Navigator (also a tax-exempt charity) rates over 3,000 of the largest charities by looking at their financial practices (revenue spent on executing programs and services, overall financial strength, etc.). You may have to dig a little deeper on the web to get information on smaller charities.  Your local United Way may be of assistance with local charities.
• Look at the Programs and Services Provided by the Charities – The name of the charity itself may not define the scope of the programs or services provided.  Be sure you understand whom the organization serves and how they serve them. This way you can make sure you are supporting the cause you are aiming to support.

Once you’ve narrowed down your list of high-quality charities that satisfy your desire to give, you need to put together an annual giving plan. Watch for my next post where I discuss how to put together such a plan.

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Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.  Please discuss tax matters with the appropriate professional.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.