Integrated Strategies
For Every Step of Life

  • Main Office:
  • 102 South Main Street
  • Bluffton, OH 45817
  • 419.358.8060
  • cwmg@lpl.com
Mid-Year Outlook 2014 Investment Services Financial Planning Women and Retirement

Welcome to Citizens Wealth Management Group

 

Legacy Planning for Women

Women often become guardians of family wealth. Many women outlive their spouses, and have the opportunity to have the “final say” (from an estate planning standpoint) about the wealth they have built or inherited. Legacy planning is essential for single women and couples, too, as one or two successful careers may leave a woman or a couple with a significant estate.

So how do you take steps to convey the bulk of your wealth to the next generation, or to your favorite causes or charities after you are gone? It all starts with a conversation today – a conversation with a legacy planning professional.

Analyze the risks to your net worth & strategize to alleviate them. You have years to go, perhaps many years, before you pass away. In those years or decades, you must manage portfolio risk, taxation, medical or long term care costs, and perhaps “predators and creditors” as well. What tax and risk management strategies can be put into place with an eye toward enhancing your net worth? Can you reduce the size of your taxable estate along the way?

How might trusts come into play? If you want to shrink your taxable estate, a well-crafted trust may provide a way to do it. There are many, many different kinds of trusts. A basic revocable living trust helps a family avoid probate, but it doesn’t do anything to reduce estate taxes. Other trusts do offer grantors and beneficiaries opportunities for substantial estate and/or income tax savings.1                                                                                                    

For example, you can bequeath an amount of money up to the limit of the current estate tax exemption to a bypass trust; at your death, the remainder of your estate can therefore transfer to your spouse tax-free, or optionally your spouse can enjoy income from the trust while living with your heirs receiving the remaining principal tax-free at his or her death. Blended families sometimes choose to use a qualified terminable interest property trust (QTIP) plus a bypass trust to direct income derived from assets within an estate to a surviving spouse and then the bulk of the estate to their children and stepchildren. Grandparents sometimes use generation-skipping trusts (GSTs) to forward big chunks of money tax-free to grandchildren.2 

Women business owners have employed irrevocable life insurance trusts (ILITs) to shrewdly remove their life insurance from their taxable estates. In an ILIT, the trust becomes the owner of the life insurance policy. When the business owner passes away, the beneficiaries receive tax-free policy proceeds, which can be used to sustain the family business and pay estate costs.

A qualified personal residence trust (QPRT) will permit you to gift your primary residence or vacation home to your children while you retain control of it for the term of the trust (typically 10 years). If your home seems poised to rise in value, the QPRT may lead to major estate and gift tax savings – it helps you transfer the home out of your taxable estate, thereby reducing its size. The hitch is that to validate the QPRT, you have to outlive the term of trust. Assuming you do, you can either a) move out of your house at that point or b) keep living in it while paying your heirs fair market rent as a tenant.2 

How well can your legacy plan sustain your values? Can you design it to teach your adult children and grandchildren lessons in character, responsibility, ethics and social service? Philanthropically, what do you want to accomplish? If you want to direct wealth to charities or other non-profits, you will need to pick one or more vehicles with the help of a legacy planner – options may include a family foundation, a charitable remainder trust (CRT), a tax-deductible charitable gift of appreciated securities with a resulting income stream, or donor-advised funds. A conversation with a tax professional can inform you of the kinds of assets you do and don’t want to gift from a taxation perspective.

As you craft your legacy plan, can you do it at reasonable cost? There is truth in the old maxim “you get what you pay for”, but at the same time, you want to work with a legacy planner whose fees aren’t exorbitant. Even the fees for creating a simple living trust can vary widely. You definitely want the help of experienced professionals here; given that each legacy plan is on some level an agreement with the federal tax code, legacy planning is not a do-it-yourself project.

Your legacy plan can represent your final, thoughtful gift to your loved ones. When you think of it that way, it becomes easier to conceive and implement with the input of your spouse, your children and your grandchildren. Along the way, valuable money lessons can be taught and responsibilities shouldered.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - kiplinger.com/article/retirement/T021-C000-S001-four-facts-of-living-trusts.html#iwrC4LSHbmjf9emt.99 [4/4/13]

2 - money.cnn.com/magazines/moneymag/money101/lesson21/index6.htm [9/17/13]

 

ComplianceMAX tracking # 1-205954

 

 

Helpful Content

Choosing a Business Structure

Choosing a Business Structure

Entrepreneurs all face the same question, “Which business structure should I adopt?”

The ABCs of Zero Coupon Bonds

The ABCs of Zero Coupon Bonds

Understanding some basic concepts may help you assess whether zero-coupon bonds have a place in your portfolio.

Inflation - Back to the Future

Inflation - Back to the Future

Even low inflation rates over an extended period of time can impact your finances in retirement.

 

Do Your Kids Know The Value of a Silver Spoon?

You taught them how to read and how to ride a bike, but have you taught your children how to manage money?

9 Facts About Retirement

Regardless of how you approach retirement, there are some things about it that might surprise you.

Bitcoin 101

Bitcoin has emerged as a digital currency that exists virtually, making it different in fundamental ways.

Estimating the Cost of College

This worksheet can help you estimate the costs of a four-year college program.

Is Term Life Insurance for You?

Term insurance is the simplest form of life insurance. Here's how it works.

How Does Your Credit Score Compare?

Have you ever wondered how your credit score compares to the rest of the country? Take a look and see.

View all articles arrow

Assess Your Life Insurance Needs

This calculator estimates how much life insurance you would need to meet your family's needs if you were to die prematurely.

Comparing Mortgage Terms

Estimate the total cost in today's dollars of various mortgage alternatives.

What Is the Dividend Yield?

This calculator helps determine your pre-tax and after-tax dividend yield on a particular stock.

Potential Income from an IRA

Estimate your monthly and annual income from various IRA types.

Inflation & Retirement

Estimate how much income may be needed at retirement to maintain your standard of living.

Can I Refinance My Mortgage?

This calculator can help determine whether it makes sense to refinance your mortgage.

View all calculators arrow

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Investment Strategies for Retirement

Investment tools and strategies that can enable you to pursue your retirement goals.

Protecting Those Who Matter Most

The importance of life insurance, how it works, and how much coverage you need.

Tax Management Strategies

Learn more about taxes, tax-favored investing, and tax strategies.

Retirement Plan Distributions

There are a number of ways to withdraw money from a qualified retirement plan.

5 Smart Investing Principles

Principles that can help create a portfolio designed to pursue investment goals.

View all presentations arrow

Interest Rates: How Low Can They Go?

The question used to be how low can interest rates go. Now it's how long can rates remain at their historic low levels?

The Business Cycle

How will you weather the ups and downs of the business cycle?

Your DNA Test

If you have a family that relies on your income, it’s critical to know what their needs would be in the event of your death.

Perception vs. Reality

There’s an alarming difference between perception and reality for current and future retirees.

Do You Feel Lucky?

Recent changes in estate tax laws could affect the strategy you have in place.

Making Your Tax Bracket Work

Have you explored all of your choices when it comes to managing your taxable income?

View all videos arrow