Items to Remember

For Your Estate Plan

When Moses came down from the Temple Mount with the Ten Commandments, he provided God’s guide for conducting a moral life. As I wind down this final issue of The Blitz newsletter, I thought it would be appropriate to provide a top 10 list as a guide for estate and charitable planning. I don’t pretend to be any Moses or God, or even a great authority on this topic, but my hope is that this list will at least provide some simple recommendations for developing an estate plan. So, here we go.

1 Do yourself and your loved ones a great favor by making sure your Will, Financial Power of Attorney, Medical Power of Attorney and Living Will are up-to-date. If you don’t have all of these documents, put them on your to-do list.

Make sure your Will is easily accessible. Preferably, keep it with your attorney. A copy of a lost Will is difficult to probate and can lead to many estate problems.

Anyone age 70½ or older who owns a traditional IRA may consider giving to charity through a qualified charitable distribution (QCD) to avoid income taxes. If charity is included in your estate, leaving part of your traditional IRA to charity and other assets to your heirs can prevent your heirs from paying unnecessary income taxes.

Make sure there are enough assets in your estate to pay the executor fees, attorney fees, taxes and other costs. Distributing all your assets to heirs outside the estate could result in an insolvent estate, causing serious problems for its settlement.

Pennsylvania residents should be adept at understanding the PA Inheritance Tax Code in an attempt to avoid challenging scenarios. I offer two examples. One is the anticipation of death rule, which taxes any gift exceeding $3,000 that is made within one year of death. The other is adding someone to your account who passes away before you do, which results in a tax on the additional account owner, even if he or she never used any funds from the account. Ouch!

Understand not all assets are alike. For those giving to charity upon death, remember that it is usually better to give assets subject to income tax (such as a traditional IRA) to charity and assets (such as your house or brokerage account) that get a step up in basis and avoid income tax, to your heirs. This type of planning results in a win-win for the charity and heirs since charities never pay income tax. Also, Roth IRAs should always go to the heirs.

Remember my rule for establishing a revocable trust in PA. If the advisor says you always need a trust, then move on. If he or she says you never need a trust, then move on. The right answer should be that it depends upon your particular circumstance. One size does not fit all.

If you are leaving a traditional IRA to any heir other than your spouse, consider using a charitable remainder trust for the traditional IRA upon your passing. You can make payments for the life of each heir, and the remaining funds upon the death of the beneficiary goes to charity. This method avoids the 10-year rule requiring the beneficiary to cash out an IRA within 10 years after the death of the account owner, and over time, can result in the beneficiary heir receiving more money than if he or she received the IRA outright.

If you are even remotely considering moving to the Masonic Village at Elizabethtown during your lifetime and you are 60 or older, then get on the priority waiting list NOW! It is only a $1,000 refundable deposit and assures your spot in line in case you want to move there. The waiting period is over four years for cottages right now, and since we do not anticipate any new construction in the foreseeable future, it will only get longer. Signing up at the last minute is NOT an option.

When preparing your estate plan, consider a legacy gift to your favorite charities. For many charitable organizations, estate gifts are a lifeline to their future. You can make a difference!