King & Wood, P.A.

Keeping Yourself and Loved Ones Safe during the Pandemic

 

“Seniors are especially at risk during the coronavirus pandemic. The numbers are shocking.”

The numbers are frightening, especially for those over 80. By the time seniors with COVID-19 are admitted to the hospital, it’s usually too late to do anything about their legacy. This topic was taken up recently in the article “Tips for protecting seniors and their legacy in the pandemic” from My Edmond News. That includes creating a last will and testament, naming a health care power of attorney, or having a conversation about their end-of-life wishes. Here are thoughts on how to stay safe and prepare for the worst.

Follow the recommended health guidelines and be careful. Hand washing, social distancing, avoiding crowds, wearing masks and cleaning surfaces are very important for seniors. Online shopping or going to the grocery store during senior hours are better choices, if you have a choice.

Beware of scammers. Scammers who target the elderly use their fear of the pandemic to provoke action. One of the latest scams is a phone call from someone claiming to be a contact tracer, saying they are tracking people who have been exposed to COVID-19. They ask for Social Security numbers, birthdays and zip codes. No legitimate contact tracer will ask these questions.

Make a plan for your digital assets. Seniors are active on Facebook, use email and a variety of apps to stay in touch with grandchildren and manage their finances. Make a list of all of your online accounts and passwords, so that a trusted family member or friend will be able to help, if you are incapacitated or die. Untangling digital assets is much more complex than tangible assets—there’s no paper trail to follow.

Get your legal affairs in order now. Depending on your state of residence, you may be able to have documents witnessed and notarized remotely. Your estate planning attorney will know what the current rules are and be able to get documents prepared.

Create a Power of Attorney. This will let the person you name as POA take care of your finances, pay bills and keep your financial life from falling apart if you become ill.

Have a Health Care Power of Attorney created. This allows the person you name to get information on your medical decisions and make health care decisions, if you cannot.

Use an estate planning attorney to have these documents created. They are powerful documents, and their advice in helping select the right person can prevent a world of trouble in the future. The estate planning attorney who hears you say “Well, my nephew is the only one, but he’s been in and out of rehab for six years now,” can help you make a better choice!

Have a Will, or Last Will and Testament, created by an estate planning attorney. A professionally prepared last will sets out your wishes for distribution of your assets and is legally enforceable.

Update your beneficiaries. Distributions from accounts including IRAs, pensions and life insurance policies are not governed by your last will, but by the beneficiaries you name. As your life changes, these need to be updated. You really don’t want an old boyfriend or ex-spouse receiving your entire life insurance policy.

Once you have your estate plan done, you’ll realize it was easy to do, and well worth the peace of mind of knowing that you and your loved ones are protected.

Reference: My Edmond News (June 1, 2020) “Tips for protecting seniors and their legacy in the pandemic”

 

Five Top Reasons to Add Beneficiaries to Investment Accounts

“Losing a loved one isn’t just an emotional burden—it also carries an administrative load. There are flower arrangements to pick, eulogies to write and a stream of paperwork to sort through.”

One way to show loved ones that you care, is by having an estate plan and communicating your wishes to them clearly, notes the article “Why You Should Add Beneficiaries to Your Investment Accounts Now” from The Street. That includes adding beneficiaries to your retirement and investment accounts. This simple step will help save heirs time, money and emotional stress at a time when they are likely to be overwhelmed with grief and paperwork.

They’ll retain more of your estate and get it faster too. When beneficiaries are assigned to investment and retirement accounts, the assets pass directly to them. If there are no beneficiaries, the asset may have to go through probate, the legal process of settling an estate when someone dies.

Probating an estate usually involves going to court, which is something your beneficiaries would probably prefer not to deal with during a challenging time. A typical probate case could last a year, sometimes longer, depending on where you live. During this time, your beneficiaries are not able to access their inheritance. Going to court also means court fees, attorney fees, lost time, and additional stress.

Let’s not leave out how much of a bite probate can take out of your estate. Depending on its complexity, probate can consume anywhere from 0.5% to 5% of the estate.

Removes one stress for loved ones. Having assets transfer directly to beneficiaries lessens what can be an intense burden for heirs, while they are grieving. Once the account provider is notified of the death of the account holder, the provider typically notifies beneficiaries. The beneficiaries have to provide the correct documentation, like a death certificate, but that’s a whole lot easier than going through probate. Obtaining death certificates is usually part of the executor’s responsibility and doesn’t cost very much.

Beneficiary designations override your last will and testament. By law, a beneficiary designation determines who receives assets, regardless of what is in your will. That’s why it’s so important to make sure your beneficiary designations are up to date. What happens if you neglect to update your beneficiaries on a life insurance policy purchased when your children were young? For instance, what if you are divorced from their father, but you forget to replace him as the policy beneficiary? In that case, your ex-spouse will receive the policy proceeds, no matter how many years you have been divorced.

It’s easy and relatively painless. Updating or establishing beneficiaries is one of the easiest parts of estate planning. Start by making a list of your accounts, which you should have anyway and contact the account custodian to find out who is listed as a beneficiary. If no one has been named, get directions on how to establish the beneficiary designation and if possible, name a secondary beneficiary.

If you have an IRA or a 401(k), your account will typically offer a beneficiary form within the account. If you have investment accounts, you’ll need to request a form from the custodian.

Special rules for retirement account beneficiaries. There are rules about leaving retirement plan assets to a spouse, so if you want to leave those assets to children or grandchildren, your spouse will have to sign off on that, with a waiver. Depending upon where you live, a spouse may be entitled to have of the assets in an IRA, even if other beneficiaries are listed, unless there is written consent.

Reference: The Street (June 12, 2020) “Why You Should Add Beneficiaries to Your Investment Accounts Now”

 

 

How Does an Intentionally Defective Grantor Trust Work?

 

“This type of trust can be established to benefit your spouse, children, grandchildren and other descendants. However, it may be more appropriate in some situations than others. Getting to know the details of what an IDGT is and how it works can help you decide if it makes sense for you.”

Using trusts as part of an estate plan creates many benefits, including minimizing estate taxes. One type of trust is known as an “intentionally defective grantor trust,” or IDGT. It’s a type of irrevocable trust used to limit tax liability when transferring wealth to heirs, as reported in the recent article “Intentionally Defective Grantor Trust (IDGT)” from Yahoo! Finance. It’s good to understand the details, so you can decide if an IDGT will help your family.

An irrevocable trust is one that can’t be changed once it’s created. Once assets are transferred into the trust, they can’t be transferred back out again, and the terms of the trust can’t be changed.  You will want to talk with your estate planning attorney in detail about the use of the IDGT, before it is created.

An IDGT allows you to permanently remove assets from your estate. The assets are then managed by a trustee, who is a fiduciary and is responsible for managing the trust for the beneficiaries. All of this is written down in the trust documents.

However, what makes an IDGT trust different, is how assets are treated for tax purposes. The IDGT lets you transfer assets outside of your estate, which lets you avoid paying estate and gift taxes on the assets.

The IDGT gets its “defective” name from its structure, which is an intentional flaw designed to provide tax benefits for the trust grantor—the person who creates the trust—and their beneficiaries. The trust is defective because the grantor still pays income taxes on the income generated by the trust, even though the assets are no longer part of the estate. It seems like that would be a mistake, hence the term “defective.”

However, there’s a reason for that. The creation of an IDGT trust freezes the assets in the trust. Since it is irrevocable, the assets stay in the trust until the owner dies. During the owner’s lifetime, the assets can continue to appreciate in value and are free from any transfer taxes. The owner pays taxes on the assets while they are living, and children or grandchildren don’t get stuck with paying the taxes after the owner dies. Typically, no estate tax applies on death with an IDGT.

Whether there is a gift tax upon the owner’s death will depend upon the value of the assets in the trust and whether the owner has used up his or her lifetime generation-skipping tax exemption limit.

Your estate planning attorney can help establish an IDGT, which should be created to work with the rest of your estate plan. Be aware of any exceptions that might alter the trust’s status or result in assets being lumped in with your estate. Funding the IDGT also takes careful planning. The trust may be funded with an irrevocable gift of assets, or assets can be sold to the trust. Your attorney will be able to make recommendations, based on your specific situation.

Reference: Yahoo! Finance (June 3, 2020) “Intentionally Defective Grantor Trust (IDGT)”

 

Can Mom Leave a Home to Daughter but Not Grandchildren?

“If you want a legal plan that avoids probate court, there are two options: first, an enhanced life estate deed, and second a living trust. Each has its pros and cons.”

There are numerous ways to accomplish distributing property, according to specific wishes. A woman with three grown daughters faced a problem about passing down the family home. She wanted to give it to the youngest daughter, who has taken care of and is closest to her. However, she also wanted to be sure that, if something happened to this daughter, the house would go to her two other daughters and not the close daughter’s adult children.

With proper planning, this can be done, as described in the article “Mom needs contingency plan to pass house title” from mySanAntonio.

One way is to rely on a last will and testament. The will would state that she leaves the house to the youngest daughter, under terms of a testamentary trust inside the will. The daughter is permitted to use, enjoy, and live in the house during her lifetime, as the beneficiary of the testamentary trust.

The two older daughters would be named as the secondary beneficiaries of the trust. When the younger daughter dies, the trust distributes the house to the older daughters.

The plan will need to be prepared by a qualified estate planning attorney and it will likely be probated. This is not a terrible process, if the will is professionally written, properly signed by the mother and two witnesses, includes an executor and a trustee and clear instructions about her wishes. An estate planning attorney can prepare it correctly.

If the goal includes avoiding probate, there are other options. One is an enhanced life estate deed, and another is a living trust. The enhanced life estate deed specifies that the woman is retaining a life estate, that is, the right to use, enjoy and occupy her home, for the rest of her life. The document specifies that when she dies, the home goes to her youngest daughter. The owner would also want to specify that she has the right to change her mind at any time.

This approach avoids probate. However, there is a downside. If the youngest daughter dies before the mother, then the mother will need to take legal action to cancel the deed and issue a new one to the two older daughters. If the daughter outlives her mother, once she inherits the house, there will be no way to have it transferred to the other sisters in the future (unless the daughter choses to do so).

A living trust provides the detailed control allowed in a will, but the trust, which must be properly created and funded, avoids going to probate. The trust would let the mother live in the home, and when she dies, the title to the house stays in trust with her youngest daughter, who is able to live in the house. However, she never becomes the owner of the house. The trust would continue to own the house. The trust would specify that when the daughter dies, the house goes to the two older daughters. To be extra safe, it should also specify what she would want to happen, if one or both of the older daughters dies.

None of these is simple, but they are all feasible. Speak with an experienced estate planning attorney.

Reference: mySanAntonio (June 8, 2020) “Mom needs contingency plan to pass house title”

 

Why You Need an Advance Directive Right Now

 

“COVID-19 is quickly becoming the leading cause of death in the United States. As of today, Indiana has over 37,000 cases of COVID-19 and over 2,100 deaths. That is why articulating your wishes regarding end-of-life health care, is more important than ever.”

The number of Americans who have died in the last few months because of COVID-19 is staggering, reports Inside Indiana Business in an article that advises readers to “Get Your Advance Directives in Place Now.” Just talking with family members about your wishes is not enough. You’ll need to put the proper legal documents in place. It’s not that hard, and it is necessary.

Only one in three Americans has completed any kind of advance directive. Many younger adults don’t feel the need to complete these documents, but there have been many examples that prove this is the wrong approach. Both Terri Schiavo and Karen Ann Quinlan were only in their twenties when they were not able to make their wishes known. Family members fought in and out of court for years.

The clinical realities of COVID-19 make it hard for healthcare workers to determine their patient’s wishes. Visitors are not permitted, and staff members are overwhelmed with patients. COVID-19 respiratory symptoms come on rapidly in many cases, making it impossible to convey end-of-life wishes.

Advance directives are the written instructions regarding health care decisions, if you are not able to communicate your wishes. They must be in compliance with your state’s laws. The most common types of advance care directives are the durable power of attorney for health care and the living will.

A durable power of attorney for health care names a person, usually a spouse or family member, to be a health care agent. You may also name alternative agents. This person will be able to make decisions about your health care on your behalf, so be sure they know what your wishes are.

A living will is the document that states your wishes about the type of care you do or don’t want to receive. Living wills typically concern treatments like CPR (cardiopulmonary resuscitation), breathing machines (ventilators), dialysis, feeding tubes and certain treatments, like the use of an IV (intravenous, meaning medicine delivered directly into the bloodstream).

Studies show that people who have properly executed advance directives are more likely to get care that reflects their stated preferences.

Traditional documents will cover most health situations. However, the specific symptoms of COVID-19 may require you to reconsider opinions on certain treatments. Many COVID-19 patients need ventilators to breathe and do subsequently recover. If in the past you wanted to refuse being put on a ventilator, this may cause you to reconsider.

Almost all states require notarization and/or witnesses for advance directives and other estate planning documents to be valid. Many states, including Indiana and New York, now allow for remote notarization.

Talk with your estate planning attorney about putting all of your estate planning documents in order.

Reference: Inside Indiana Business (June 8, 2020) “Get Your Advance Directives in Place Now”

 

How Can You Disinherit Someone and Be Sure it Sticks?

“Parents may delay creating an elder law estate plan, because of the in-law issue. Some parents are unfortunately estranged from an adult child, only because of the problematic son-in-law or daughter-in-law.”

Let’s say you want to leave everything you own to your children, but you can’t stand and don’t trust their spouses. That might make you want to delay making an estate plan, because it’s a hard thing to come to terms with, says a recent article “Dealing with disinheritance, spouses” from the Times Herald-Record. There are options, but make the right choice, or your estate could face challenges.

Some people choose to leave nothing at all for their child in the will, so that if there is a divorce or if the child dies, their assets won’t end up in the daughter or son-in-law’s pocket. For some parents, particularly those who are estranged from their children, this can create more problems than it solves.

Disinheriting a child with a will is not always a good idea. If you die with assets in your name only, they go through the court proceeding called probate, when the will is used to guide asset distribution. The law requires that all children, even disinherited ones, are notified that you have died, and that probate is going to occur. The disinherited child can object to the provisions in the will, which can lead to a will contest. Most families engaged in litigation over a will become estranged—even those that weren’t beforehand. The cost of litigation will also take a bite out of the value of your estate.

A common tactic is to leave a small amount of money to the disinherited child in the will and add a no-contest clause in the will. The no-contest clause expressly states that anyone who contests the will loses any right to their inheritance. Here is the problem: the disgruntled child may still object, despite the no contest clause, and invalidate the will by claiming undue influence or incapacity or that the will was not executed properly. If their claims are valid, then they’ll have great satisfaction of undoing your planning.

How can you disinherit a child, and be sure that your plan is going to stand up to challenge?

A trust is better in this case than a will. Not only do trusts avoid probate, but (unless state law requires otherwise at death) the children do not receive notice of the creation of a trust. An inheritance trust, where you leave money to your child, names a trustee to be in charge of the trust and the child is the only beneficiary of the trust. The child might be a co-trustee, but they do not have complete control over the trust. The spouse has no control over the inheritance, and you can also name what happens to the assets in the trust, if the child dies.

This kind of planning is called “controlling from the grave,” but it’s better than not knowing if your child will be able to protect their inheritance from a divorce or from creditors.

With a national divorce rate around fifty percent, it’s hard to tell if the in-law you welcome with an open heart, will one day become a predatory enemy in the future, even after you are gone. The use of trusts can ensure that assets remain in the bloodline and protect your hard work from divorces, lawsuits, creditors and other unexpected events.

Reference: Times Herald-Record (June 6, 2020) “Dealing with disinheritance, spouses”

 

Why You Need an Estate Plan, Especially Now

 

 

“It's never too early to start working on how your things will be handled, once you pass away.”

Estate planning is an all-encompassing term that refers to the entire process of gathering and organizing assets and making preparations for when you die, including caring for minor children and heirs. It also includes putting protections into place, if you should become incapacitated, says an article that covers estate planning basics from c|net titled “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents.” Your estate plan involves writing a will, power of attorney and funeral arrangements. Here are some of the key steps:

Distributing assets. Your estate includes more than just real estate. It includes everything you own, including your car, jewelry, sentimental belongings and intangible assets, like investments and insurance. If you own a business, that is also part of your estate.

Preparing for family life without you. An estate plan sets out how you want to care for loved ones. A will is used to name a guardian for minor children, and to name someone to be in charge of their finances. One person can have both roles, but it is generally advised to name one person for each role. If you fail to name a guardian, the court will select one for your children.

Assign the tasks of handling the estate or your health, if you are incapacitated. An estate plan includes a medical power of attorney and a financial power of attorney, so decisions can be made on your behalf, if you are incapacitated. You’ll also name an executor. This is the person who will be in charge of following the directions you leave in your will and distributing assets. Depending on your estate, the person may also be in charge of selling your home, negotiating with creditors, or managing the sale of your business. It’s a big assignment and requires someone who is organized and trustworthy.

Work with an estate planning attorney. An estate planning lawyer will save you a lot of time, energy and effort in creating an estate plan. The attorney will also be able to help you manage estate, inheritance and gift taxes to minimize the impact of federal and state laws on your beneficiaries.

Document everything properly. Just stating your wishes won’t solve anything. You need an estate plan with all of the right documents, prepared in accordance with the laws of your state. An invalid will could create just as many problems as no will at all. You’ll need a last will and testament to appoint an executor, outline how you want assets to be distributed and see your will through the probate process.

If you want to avoid probate court, you may want your estate plan to include a trust. A “funded” revocable trust can be adjusted while you are living. When you die, the trust is managed by trustees of your trust.

A living will details your healthcare preferences, in case you are not able to communicate or make decisions on your own. If you require life support, or life saving measures, the living will specifically outlines what you want to have done—or not done—rather than having children or relatives guess at your wishes.

Having an estate plan is not a set-it-and-forget-it plan. As you proceed through life, getting married, having children, divorcing, buying property, etc., the estate planning documents need to be revised, so they continue to reflect your wishes. Whenever there are big changes to the law, you may also need to revise the will, so you don’t miss out on any planning opportunities.

Reference: c|net (June 8, 2020) “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents”

 

How Does a Constructive Trust Work?

“Certain types of trusts, however, may only be used in very specific situations and a constructive trust is one of them.”

Trusts are useful in estate planning to avoid probate or minimize estate taxes. A commonly used trust is a revocable trust, often used to pass on assets to beneficiaries and keep them outside of the taxable estate. A constructive trust is a trust used to correct situations where property belonging to one person is held unfairly by someone else, explains the article “What is a Constructive Trust?” from Yahoo! Finance.

A constructive trust isn’t a traditional trust. A revocable living trust requires certain steps, like drawing up a trust document, naming a trustee, selecting beneficiaries, and transferring property or assets into the trust, referred to as “funding the trust.” This is used to manage assets for your own lifetime and potentially for generations to come.

A constructive trust is established by the court, when two parties are involved in a civil dispute over property. It might be created when someone is unfairly given ownership over property, which could happen because of deliberate misconduct or a mistake in a property transfer.

Here’s an example. Let’s say a person sets up a living trust and a trustee commits a breach of fiduciary duty that allows them to take control of trust assets. The estate planning attorney for the person who had the trust created would go to court to have a constructive trust created. This is known as an “equitable remedy.”

The first requirement for a constructive trust is that there is a court action between a property owner and another person, who is wrongly benefiting from the property. Another example: an elderly person’s caretaker coerces her into signing over the title for a piece of real estate. The mother’s legal guardian would bring a lawsuit against the caregiver on behalf of the mother. If the court agrees that the caretaker abused their position to gain ownership of the property, a constructive trust would be created. The property would be placed in the trust, out of the ownership of the caregiver, while the ownership is being transferred to the mother.

The constructive trust is meant to be a short-term arrangement to provide temporary relief. The person who is benefitting wrongfully from the property is directed by the court to transfer it to the trust. If the property itself cannot be returned, they are required to pay money to the trust of the equivalent value.

Here are examples of situations when a constructive trust could be used to transfer property:

• Undue influence,
• Duress or coercion,
• Mistake,
• Breach of fiduciary duty,
• Embezzlement, or
• Commission of a crime, including theft or homicide.

The constructive trust is also used if there is a dispute over how property should be distributed after a person dies. Let’s say the oldest sibling of a family convinces his parents not to write a will, assuring them that he will make sure that assets are distributed fairly to the younger siblings. He then keeps everything or sells assets and does not distribute proceeds. If the other siblings take him to court, the court may establish a constructive trust to provide relief and ensure that the estate is distributed according to the state’s inheritance laws.

Reference: Yahoo! Finance (June 5, 2020) “What is a Constructive Trust?”

 

Using Retirement Funds in a Financial Crisis

“U.S. has been making it easier for people to access long-term savings for emergencies, trading future financial security to stay afloat.”

For generations, the tax code has been a public policy tool, used to encourage people to save for retirement and what used to be called “old age.” However, the coronavirus pandemic has created financial emergencies for so many households that lawmakers have responded by making it easier to tap these accounts. The article “Should You Tap Retirement Funds in a Crisis? Increasingly, People Say Yes” from The Wall Street Journal asks if this is really a good idea.

This shift in thinking actually coincides with trends that began to emerge before the last recession. People were living and working longer. Unemployment and career changes later in life were becoming more commonplace, and fewer and fewer people devoted four decades to working for a single employer, before retiring with an employer-funded pension.

For those who have been affected by the economic downturns of the coronavirus, withdrawals up to $100,000 from retirement savings accounts are now allowed, with no early-withdrawal penalty. That includes IRAs (Individual Retirement Accounts) or employment-linked 401(k) plans. In addition, $100,000 may be borrowed from 401(k) plans.

Americans are not alone in this. Australia and Malaysia are also allowing citizens to take money from retirement accounts.

Lawmakers are hoping that putting money into pockets now may help households prevent foreclosures, evictions and bankruptcies, with less of an impact on government spending. With trillions in retirement accounts in the U.S., these accounts are where legislators frequently look when resources are threatened.

However, there’s a tradeoff. If you take out money from accounts that have lost value because of the market’s volatility, those losses are not likely to be recouped. And if money is taken out and not replaced when the world returns to work, there will be less money during retirement. Not only will you miss out on the money you took out, but on the return, it might have made through years of tax-advantaged investments.

The danger is that if retirement accounts are widely seen as accessible and necessary now, a return to saving for retirement or the possibility of putting money back into these accounts when the economy returns to normal may not happen.

IRA and 401(k) accounts began to supplant pensions in the 1970s as a way to encourage people to save for retirement, by deferring income tax on money that was saved. By the end of 2019, IRAs and 401(k) types of accounts held about $20 trillion in the US.

Boston College’s Center for Retirement Research has estimated that even before the coronavirus, early withdrawals were reducing retirement accounts by a quarter over 30 years, taking into account the lost returns on savings that were no longer in the accounts. For many people, taking retirement funds now may be their only choice, but the risk to their financial future and retirement is very real.

Reference: The Wall Street Journal (June 4, 2020) “Should You Tap Retirement Funds in a Crisis? Increasingly, People Say Yes”

 

How a Charitable Remainder Trust Works

 

“The most well-known ‘death’ tax is the Federal Estate and Gift Tax. However, the reality is that few people really have to worry about the cost of federal estate taxes.”

The least popular beneficiary is almost always the federal government. Most people are concerned that their estate will need to pay taxes and do what they can through estate planning to keep federal estate tax liability to a minimum. However, with federal estate and gift tax exemptions at $11.58 million per person this year, and twice that when properly used with the spousal exemption, most people don’t need to worry about the federal estate tax, explains The News Enterprise in the article “New federal law resurrects Charitable Remainder Trust.”

The passage of the SECURE Act, effective January 1, 2020, made big changes in how we need to plan for taxes for beneficiaries. Federal estate and gift tax exemptions did not change, but anyone who inherits a retirement account is likely to find fewer options than before the SECURE Act.

Charitable remainder trusts have been used for many years to avoid high capital gains taxes on appreciated assets. Appreciated assets are placed into trusts and no taxes are due on the transfer.  The donor also gets a charitable tax deduction. The amount in the trust grows, while paying out a small amount to beneficiaries in installment payments.

With the passage of the SECURE Act, non-spousal beneficiaries, with certain exceptions, must withdraw the entire amount of the qualified retirement account within ten years. Generally, beneficiaries may not roll the account into their own qualified account, and there are no required annual distributions. However, there’s a ten-year window to empty the account. Taxes are due on every withdrawal, whether it takes place over ten years or as a single withdrawal.

By using a CRT, the full amount of the account may be transferred into the CRT, no taxes are due, and the donor (or the donor’s estate) gets a charitable deduction.

The trust is simply an instrument created, so that a beneficiary may receive regular payments, which may include the donor, beneficiaries or multiple beneficiaries, over the span of their lives, or in a set number of years, with the remainder interest of at least ten percent of the initial contribution paid to a qualified charity at the end of the trust.

This effectively creates a stretch for the IRA, with withdrawals being taxed to the beneficiary, over a longer time span. With only ten percent being required to be donated to a charity, those who plan on making a donation to a charity anyway receive a benefit, and their beneficiaries can receive a lifetime income stream.

Speak with your estate planning attorney to learn how a CRT could be part of your estate plan.

Reference: The News Enterprise (June 2, 2020) “New federal law resurrects Charitable Remainder Trust”