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Creating a Legacy of Impact through Estate Planning
Every once in a while you may stop to consider the impact your life has on the people around you. Many people can look at their family and friends, knowing they’ve had a positive influence. Many still yearn to do something more…something deeper for mankind…something positive for God’s Kingdom that will survive the challenge of time.
Often our cash resources are limited. We would like to give more to our favorite charitable causes, but there simply isn’t enough resources available. What if you could give a lasting and permanent gift…one with bigger impact than you ever dreamed possible? And what if you could do it in a way that honored and protected your loved ones inheritance at the same time?
The great news is that this is possible with a planned gift made through your estate!
If estate planning is something you’re thinking about for the first time, or if you need to update an older estate plan, we have resources and people available to help you. Here are a few great tools to get you started:
Estate Planning Guide Estate Inventory Form
In addition, we have a staff representative who is well-versed in the technical aspects of business transition, retirement, and estate planning. While Forward Edge cannot serve as your legal counsel, our staff representative is trained to help in areas such as:
- how to sell a property or business while minimizing capital gains tax,
- protecting the way in which your loved ones receive their inheritance,
- minimizing taxation on retirement plans, and
- reducing or eliminate estates tax
We can help with all of this while significantly including stewardship in the planning decisions you make. If you have questions about estate planning, call 360-558-5889. Or fill out the form below and someone from Forward Edge will contact you.
Various Ways You Can Give
If you’re interested in donating to Forward Edge, but have publicly traded stock that has appreciated in value, it is more advantageous to you to donate the stock rather than the cash. Why? Because any capital gains tax you would have incurred if you sold the stock will be avoided when you give it to Forward Edge instead. Then, if you happen to like that particular stock, you can buy it again with your available cash.
While cash, CDs and marketable securities are thought of most often when making a gift to a charitable organization, real estate is sometimes the best gift of all. Many people reach a stage in life where they simply don’t want the management responsibility that accompanies property ownership.
For those who have rental apartments or commercial buildings, not only can they avoid capital gains tax, but they can avoid depreciation recapture tax as well. For those with farms or vacation homes, life-income arrangements, such as CRTs or Gift Annuities, can be equally rewarding.
Call Forward Edge at 360-558-5889 and a representative will be happy to discuss a gift of real estate with you.
Forward Edge is able to receive life insurance gifts in two ways. First, people often have what is called a “paid up” policy. In other words, they have owned the life insurance for so long that cash value has grown inside the contract. Sometimes the cash is significant enough that the earnings on that cash are enough to pay the premiums. In those instances, the life insurance is deemed to be “paid up.” The second way to give through a life insurance plan is by deeming Forward Edge a beneficiary of the cash surrender value of the policy.
NOTE: Forward Edge does not participate in start-up life insurance programs, in any form, where the goal is to have donors make donations with the expectation that Forward Edge will use those proceeds to pay insurance premiums.
Recently, Congress changed the rules on retirement plans. Today, the payout rate requirement after age 70.5 is much lower than it used to be. Consequently, as people get into their 80s and 90s, it’s more likely that their IRA, KEOGH, or 401k balances will remain higher. That’s good news for most older Americans!
However, there is a looming…and often large…tax on retirement plans that people don’t often consider while doing their estate planning. Here’s how it works:
Congress allows each of us to put money into a retirement account during our working years tax-free. In other words, we don’t have to pay income tax on the amount of money we place in IRAs, KEOGHs, or 401ks. Additionally, these accounts get to compound in value tax-free to grow as quickly as possible.
However, the IRS doesn’t forget that those very same retirement plans have never been subject to tax! So, if a person passes away while holding the retirement plan in their estate, income tax to your heirs, and possibly estate taxes, will be due.
To avoid this scenario, it’s often advisable for people simply to name their favorite charitable organization(s) as the remainder beneficiary of their retirement plan. This can be easily done by calling the retirement plan administrator and filling out a new beneficiary designation form. Charitable organizations are not subject to estate or income tax, so the full value of the retirement plan can become a gift.
Often referred to as “bequests,” a person, or married couple, can name Forward Edge as a beneficiary in their estate documents, using either a Will or Living Trust. This is one of the most meaningful ways a charitable organization can be supported by those passionate about its cause. And it’s easy to do! Simply call us at 360-558-5889 and our staff will be happy to provide language you can give your attorney as you update, or complete, your estate plan.
Some people like to include a portion of their Will or Living Trust to a charitable organization. This is sometimes referred to as a “Charity Child.” For example, a married couple with three children may desire to leave each child 25% of their estate and allocate their “charity child” the remaining 25%.
Gifts that Provide Income Back to You
Charitable Remainder Trusts (CRTs) can be one of the most powerful planning tools available as people do retirement and estate planning.
CRTs afford the donor potentially five favorable tax outcomes by virtue of one financial transaction. They are: 1) capital gain tax avoidance 2) income tax deduction, 3) tax-free compounding 4) income payments taxed favorably, and 5) estate tax elimination (for those people with large estates).
- Capital Gain Tax Avoidance allows people to place an asset(s) in a CRT and avoid paying initial capital gain tax in the process. For example, if you paid $100,000 for some property that is now worth $500,000 you can sell the property through a CRT without having to report the $400,000 of capital gain as income.
- An Income Tax Deduction is available to those who create CRTs. If you live in Oregon, you are able to receive both a state and federal income tax deduction based upon a portion of the market value of the asset they place in a CRT.
- Tax-Free Compounding occurs on the asset(s) that is placed in a CRT. For example, if you place an appreciated piece of real estate in a CRT and then sell it, the proceeds are typically then invested in stocks and bonds. Any investment growth inside the CRT will occur tax-free for as long as the trust is in existence.
- Income Payments Taxed Favorably occurs as people receive their payments from a CRT. Often, if invested carefully, the person(s) receiving income from a CRT may receive portions of that income taxed at long-term capital gain rates. For many people, the long-term capital gain of 15% is less than their ordinary income tax bracket.
- Estate Tax Elimination can be accomplished for those with large estates. Effectively, the value of the asset placed in a CRT now comes out of the donor’s estate, thereby lowering the donor’s taxable estate. As an example, if an individual has an estate valued at $5,500,000, and she places a $500,000 asset in a CRT, the taxable value of her estate would be lowered to $5,000,000.
Finally, life insurance can sometimes be a viable part of a CRT plan. If the donor(s) want their loved ones to participate in the full value of their estate, then creating a life insurance trust with some of the CRT tax savings and additional cash flow can allow loved ones to “remain whole” as it relates to their inheritance.