The Blitz Newsletter - April, 2022

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APRIL 2022

Blitz

Our Mission at Work

Information on Tax and Estate Planning from the Masonic Charities of the Grand Lodge of Pennsylvania

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Ways we are recruiting and retaining staff

HELP SPONSOR A NURSE AIDE TRAINING PROGRAM The Nurse Aide Training Program at Masonic Village at Elizabethtown is a concentrated 140+ hour program, certified and approved by the Pennsylvania Department of Education. The program provides students with the essential skills to pass the National Nurse Aide Assessment Program Competency Examination and the skills to care for residents in skilled nursing and personal care settings. To address its staffing needs, Masonic Village has scheduled 11 nurse aide training programs for 10 students each throughout the year. The cost is $1,800 for each student, or $18,000 for each class. We are seeking sponsors for each class. This is an opportunity to help a student seeking a career as a nurse aide and to help Masonic Village provide sufficient staff to provide the best quality care for its residents in need.

Providing care and support for our residents is a primary function of the Masonic Villages. Each year, we provide over $35 million in charitable care and services.

As the pandemic has impacted frontline staff, it has become more difficult to recruit and retain employees.

To this end, Masonic Villages has embarked on two significant programs for funding opportunities.

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MASONIC VILLAGE AT SEWICKLEY SCHOLARSHIP PROGRAM FOR DINING STAFF The pandemic has also caused significant dining staff shortages. Retaining staff during their high school and postsecondary education is critical to the success of providing dining services on our campuses. The residents at Masonic Village at Sewickley have started a fund to provide scholarships for dining staff based on their length of service. Scholarships for the first year are intended to be between $1,500 and $2,000 per applicant. Masonic Villages is seeking donations to provide scholarships for each year for dining staff and, if the fund grows large enough, it will be expanded to provide scholarships for other frontline staff to promote staff retention.

If you are interested in supporting either or both of these worthwhile programs to train and retain our frontline staff at Masonic Villages, please call our office for more information.

THE HOUSE

Ways to Maximize Your Inheritance for Your Heirs (They will love you more in the end!)

I was visiting a Masonic widow in Sarasota, FL, the other day to present her with her Masonic Blue Slipper pin.

Debbie lost her husband, John, about eight months ago and was trying to get her estate affairs in order. Besides asking me to steer her toward a good estate attorney and accountant, she wanted some suggestions on giving her assets to her two children, Jim and Betty. She had the usual assets I am seeing today: namely, a large IRA worth over $1 million, her house worth around $500,000 (she paid $200,000 for it) that has appreciated significantly in the past couple years and her brokerage account with stocks and bonds worth around $500,000. This represents a nice nest egg for a couple who worked in the steel mills in Butler, PA, before moving south for the fun and sun of Florida.

I told Debbie not all assets are taxed in the same way and how you dispose of them could have a significant impact on how much your kids receive. Also, if she has any interest in giving to charity when she passes, there are additional ways to minimize taxes. Betty said John always talked highly of the Masonic Children’s Home, and she wanted to provide for it in her estate plan. She was also interested in giving to the Methodist Church she had attended in Butler. I said, “Betty, let me give you a quick primer on the taxation of your assets in your estate so you can work with your attorney and accountant to put together a solid estate plan for your kids and charity.”

Below are the highlights of what I went over with Betty.

Betty said she hopes to stay in the house the rest of her life and have the estate dispose of it since the children were not interested in it. I told her since the house is a capital asset, it would receive a step-up in basis to the fair market value of the real estate on her date of death (usually done by an appraisal based on similar sales around such date). This means all the appreciation in the home would not be taxed, thereby saving the estate lots of capital gains taxes and yielding happier children.

However, if she gave the house to the children before she passed and they sold it, there would be NO step-up in basis, and the children would pay capital gains taxes on all the appreciation on the house (not a good outcome).

THE BROKERAGE ACCOUNT I told Betty the brokerage account would receive the same treatment as the house, except it was easier to determine the date of death values for the account, since her estate would just use the published values of her stocks and bonds. Thereafter, when the account is liquidated by the estate, it would pay taxes only on any stocks or bonds sold for more than the date of death value.

This would be a nice outcome for the children. I warned Betty that giving away highly appreciated stock to her children would have a similar outcome as giving away the house, since the children would have to pay taxes on any appreciation in the stock over what she bought it for.

THE IRA I explained to Betty that her traditional IRA could be complicated from a tax perspective when she passes.

First, I told her it is CRITICAL she check her beneficiary designation form for her IRA and make sure the children are on it; otherwise, it could go to her estate, which would be the worst tax outcome for the children. Second, I mentioned that when the children take any distributions from the IRA they inherit from her, they will have to pay ordinary income taxes on the full amount of the distribution, which could be quite substantial when added to their regular income. Third, I mentioned that the children will have to take all the money out of their IRAs within 10 years after her passing. That means at least $500,000 of taxable income for each of them before including any appreciation of the assets during the 10-year period.

WOW! The IRS makes out big time on this asset.

Neither Masonic Charities of the Grand Lodge of Pennsylvania, nor Alvin H. Blitz, Esq., provide legal, financial or tax advice. None of the information in The Blitz should be deemed legal, financial or tax advice or acted upon by any person without prior consultation with appropriate professional advisors.

A CHARITABLE ALTERNATIVE Fortunately, Betty’s desire to help charity could lessen the tax pain for her children. I suggested she consider two options to provide for the Masonic Children’s Home and her church.

OPTION 1: GIVE PART OF THE IRA TO CHARITY I explained to Betty that since the house and brokerage account will go free from income taxes to the kids but the IRA will not, she could consider designating part of her IRA to her church and the Masonic Children’s Home because charities don’t pay taxes and will receive the full amount from the IRA she gives them. I told her it was important that she talk to her attorney about including the charities on the IRA beneficiary designation form and NOT through her Will to assure the best tax outcome.

OPTION 2: GIVE THE IRA TO AN INCOME FOR LIFE TRUST A popular planning technique for large IRAs (usually $500,000 or more) is to consider distributing the IRA at death to an Income for Life Trust (aka Charitable Remainder Unitrust or CRUT) to maximize the amount of income received by the children from the IRA. Although the children will not have access to the trust to withdraw money when they want, they will receive regular payments from the trust

TAKE ADVANTAGE of OUR WEBSITES Important information on charitable giving, estate planning and the mission of the Masonic Charities is only a click away. Here are some links I highly recommend you visit: MasonicCharitiesPa.org This is the link to Masonic Charities, where you can see a video on the mission of our organization. You can also access past articles from The Blitz newsletter.

for the rest of their lives. This technique could result in them receiving significantly more income than having to drain an Inherited IRA in 10 years. When the children pass away, the remaining funds in the trust go to the charities. I told Betty that Masonic Charities now serves as trustee for such trusts, for free, if it is a beneficiary of the trust. The trust is managed at our offices in Elizabethtown. Betty was intrigued by this offer and wanted to talk to her attorney about it.

THE RESULT After meeting with her attorney, Betty decided to draft a Will leaving all her assets, except the IRA, equally to her children. That way, they will get the proceeds from the house and brokerage account tax-free. She decided to designate the IRA to an Income for Life Trust naming the children as equal beneficiaries and splitting the remaining proceeds in the trust after the children pass between her church and the Masonic Children’s Home. Masonic Charities was appointed trustee of the trust. This resulted in a happy ending for everyone, except the IRS! If you would like to see how an Income for Life Trust might benefit you and your family, please contact our office at 1-800-599-6454 or email me at ablitz@masonicvillages.org for your Income for Life Trust Planning Kit.

MasonicCharitiesPa.org/news At this link, you can watch my three-part video presentation on how to use your IRA for charitable giving. This presentation is especially informative for anyone over age 70 ½ with a traditional IRA. MasonicCharitiesLegacy.org This link provides valuable information on estate and charitable planning with the help of the Masonic Charities.

MasonicCharitiesLegacy.org/willsguide At this link, you can download an Estate Planning Guide to complete for developing your own personal estate plan.

1-800-599-6454 | MasonicCharitiesPa.org

Masonic Charities One Masonic Drive Elizabethtown, PA 17022

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Blitz

Join Me for Lunch Please see the dates below where I will be holding upcoming luncheons.

To RSVP, call 1-800-599-6454 or email ABlitz@masonicvillages.org.

New Bern, NC April 26 – 28

San Jose, CA May 10 – 12

Norfolk, VA June 1 Brother Alvin H. Blitz, Esq., Carlisle Lodge No. 260, serves the Masonic Charities of the R.W. Grand Lodge of Pennsylvania, which consists of the Masonic Villages, the Masonic Children's Home, the Pennsylvania Masonic Youth Foundation, The Masonic Library and Museum of Pennsylvania and the Grand Lodge of Pennsylvania Charity Foundation.

APRIL 2022