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OCTOBER 2021
Information on Tax and Estate Planning from the Masonic Charities of the Grand Lodge of Pennsylvania
Joe, being a Pennsylvania resident, will have to pay inheritance tax on the value of his estate going to his heirs when he passes. If Joe is lucky enough to have lots of money (more than $11.7 million, but it may be less, like $3.5 million, if the law changes), then his estate will have to pay lots of death taxes. Here is where the 529 Loophole comes in. Section 529 plans are funded with after-tax dollars like a Roth IRA account. They then grow tax-free in the same way as a Roth. When the funds are withdrawn for certain education costs, they are not taxed. If the money is used for non-education purposes, you must pay income taxes on the growth, plus a 10% penalty. You are not taxed on the original contribution to the account.
Funding the Education of Your Loved Ones and Saving Taxes The Perfect Formula I was visiting Brother Joe the other day in Meadville, PA. Joe, like almost everyone I visit, started complaining about paying taxes and wanted to know if I had any tips for reducing his estate taxes.
“ I would rather pay to educate my family than see my hardearned money go to pay taxes.” He also told me he has several grandchildren, greatgrandchildren and great nieces and nephews who he wants to help with their education. He quipped, “I would rather pay to educate my family than see my hard-earned money go to pay taxes.” I responded, “Joe, you are in luck. There is a way to do this, and we call it the 529 Loophole. Even the average person can take advantage of this technique.” Joe replied, “Tell me more, Al. This seems too good to be true.”
When you fund the account, you can be the owner and then designate a loved one as a beneficiary. Here is the silver lining: unlike many other techniques which require irrevocable gifts you can’t control to reduce your estate, a 529 account owner can move money between beneficiaries as long as they are in the same family.
You can pass the unused funds in the 529 account to fund other generations in the family such as grandchildren, great-grandchildren and beyond. So, if Johnny skips college or never comes to see you after you gave him a big birthday gift, you can move the funds for Johnny to his sister, Ann, who wants to be a doctor and go to Harvard. Even sweeter is that you can pass the unused funds in the 529 account to fund other generations in the family such as grandchildren, great-grandchildren and beyond. You can contribute $15,000 per beneficiary per year to a 529 account. Federal tax law allows an initial contribution of $75,000 for five years to a 529 account.
The list keeps growing on what 529 accounts can be used to pay for tax-free.
If you are married, that means you can initially fund up to $150,000 for each beneficiary in a 529 account. In addition, PA residents can deduct up to $15,000 per beneficiary per year from taxable income for 529 accounts. Earnings on the account are tax-free from PA tax, and the account is exempt from PA inheritance tax. The list keeps growing on what 529 accounts can be used to pay for tax-free. You can pay up to $10,000 per year toward private elementary and high schools. It can be used to pay for education expenses of special-needs students. There is even a special exception if the child is awarded a college scholarship. Money can be withdrawn equal to the scholarship amount without paying the 10% penalty, but the child will owe taxes on the gains received.
Brother Joe was overcome with joy at the thought of helping provide an education for his family now and for generations to come. But wait. What’s to stop you from helping your loved ones with non-education expenses when you think they deserve it? For instance, if Ann completed med school and was not making much money yet, you could give her money from her 529 plan for the new Tesla she always wanted. Sure, she pays taxes on the earnings and a 10% penalty on the distribution, but the fund has grown tax-free for years, and it is still better than borrowing from the bank. After hearing all of this, Brother Joe was overcome with joy at the thought of helping provide an education for his family now and for generations to come and reducing his death taxes at the same time. He asked, “Al, what do I do next?” I said, “Call my office or send me an email for our outline called An Overview of Section 529 Plans with an Emphasis on PA 529 Plans. After you read the outline, contact your financial advisor and/or go to the PA 529 website at pa529.com for more information on how to set up your own 529 account.” You will never look back.
Helping Create a Special Space for Our Loved Ones Needing End-of-Life Comfort Care How Brother Shott is helping to make this a reality with your support The Masonic Village at Elizabethtown currently provides end-of-life comfort care to individuals in rooms throughout the Masonic Health Care Center, based upon availability. With the advent of the pandemic, fewer individuals were admitted to the Masonic Health Care Center, and eventually a wing in the building was vacated. Matt Mayo, assistant executive director/nursing home administrator, and his team (including past hospice medical directors Dr. George Simms and Dr. Ken Brubaker) proposed a concept for a dedicated comfort care area by converting the vacated neighborhood (nursing unit) into a dedicated area for residents needing end-of-life comfort care. My office was approached to see if we could raise up to $300,000 to make the project a reality and provide funds to support the future of the program. Several weeks later, I was having lunch with Brother Tom Shott in Palmyra, PA. His wife, Dolores, was a patient in the hospice program when she passed away in 2018. Tom was very grateful for the care Dolores received while at the Masonic Health Care Center. So, I showed Tom the plans for the new end-of-life comfort care neighborhood. It included proposed space for 16 private resident rooms, a chapel, kitchen and private family rooms. I asked Tom if he would consider helping make the project a reality. Both Tom and Dolores were wonderful supporters of charity, especially to St. Andrew’s Presbyterian Church and the Annville-Cleona Kiwanis Club.
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.
Tom said he could come up with $150,000 toward the project, which he believed would benefit future loved ones who may need end-of-life comfort services like Dolores did.
I told him how thankful I was that a fellow Mason could support a program his wife benefited from. I told Tom that would be great, and we could dedicate the neighborhood in her memory. I told him how thankful I was that a fellow Mason could support a program his wife benefited from, and I would work hard to raise the matching funds to complete the project. This is where I ask my readers for your support. Help us transform this space at the Masonic Health Care Center in Elizabethtown into a home where our loved ones can live out their lives in dignity. This would be a perfect way to give a Qualified Charitable Distribution (QCD) or appreciated stock to support the end-of-life comfort care program.
Fall is the Time to Get Your Estate and Charitable Giving Plans in Order As the days get shorter and the first frost is just around the corner in beautiful Pennsylvania, it is time to consider some estate and charitable planning tips. So, here we go: 1
If you haven’t updated your Will, Trust, Power-ofAttorney or Living Will recently, now is the time to do it. Request an Estate Planning Guide and Attorney List from our office or visit our website at MasonicCharitiesLegacy.org to download your guide.
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If you are getting a Required Minimum Distribution this year, now is the time to consider supporting your favorite charities (we hope you’ll choose one or more of our Masonic Charities) by doing a Qualified Charitable Distribution (QCD). Call our office to get your QCD Kit if you need help.
I am hopeful we can reach the finish line for this important project to support our Masonic family and residents at Masonic Village at Elizabethtown by the end of the year. Of course, a check works just as well. Gifts should be made to “Masonic Charities of the Grand Lodge of Pennsylvania” and restricted to “End-of-Life Comfort Care Program.” Feel free to call me at 1-800-599-6454 or email me at ablitz@masonicvillages.org if you have any questions about supporting this project. Our goal is to initiate use of the space by the beginning of 2022, so I am hopeful we can reach the finish line for this important project to support our Masonic family and residents at Masonic Village at Elizabethtown by the end of the year. Thank you in advance for your support.
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This is the last year to get a charitable deduction up to 100% of your adjusted gross income (AGI) for cash gifts to charity. Next year, it goes down to 60% of AGI. For anyone considering a large cash gift, a large gift from their IRA (if over age 59½ and not doing a QCD) or purchasing a charitable gift annuity with cash, this opportunity expires on Dec. 31, 2021. Call my office or email me for more information on how this perk could benefit you. With the stock markets hitting all-time highs, this may be the time to use some of your highly appreciated stock to make a gift to charity to avoid capital gain taxes and get a nice tax deduction, or fund a charitable gift annuity (minimum of $5,000 in value) or income for life trust (minimum of $250,000 in value) where you can limit your tax liability and get income from your gift for your lifetime.
Call or email me for more information. You can also find further information at our website, www.MasonicCharitiesLegacy.org.
1-800-599-6454 | MasonicCharitiesPa.org
Masonic Charities One Masonic Drive Elizabethtown, PA 17022
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Join Me for Lunch Please see the dates below where I will be holding “Welcome” Luncheons during the remainder of 2021. To RSVP, call 1-800-599-6454 or email ABlitz@masonicvillages.org.
Daytona Beach/West Palm, FL Oct. 17 – 22 Tampa/Bradenton, FL Fort Myers/Englewood, FL Nov. 7 – 13 Nov. 29 – Dec. 4 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.
OCTOBER 2021