|
16.
How can lifetime gifts help me reduce my estate tax?
Gifts can ultimately reduce the size of your estate and thus, the corresponding
estate tax. You can make gifts of $12,000 each year to an unlimited number of recipients.
Currently, there is no limit to the number of these gifts that can be made in any given year.
Of course, when you make a gift, you must relinquish control of the assets to the recipient
(i.e., "no strings attached"). Gifts valued in excess of $12,000, per recipient, will count
against your applicable exclusion amount and reduce the amount that will be available to
you at your death. This amount is used for both estate and gift tax purposes. Gifts to your
spouse are generally not subject to gift tax if your spouse is a U.S. citizen. The current
limitation on lifetime gifts is $1,000,000.
17.
How can charitable gifts be used in my estate plan?
Your estate plan can include charitable gifts in your will and trust to create a
charitable deduction for estate tax. You can also give charitable gifts during your lifetime in
a number of ways. These lifetime gifts have the dual benefit of providing a current income
tax deduction as well as estate tax benefits at your death.
18.
How can I make a charitable gift during my lifetime and still use the assets?
Charitable gifts made during your lifetime can provide a lifetime income to you, save
on income and estate taxes, and give you the satisfaction of seeing the benefit of the gift.
Lifetime charitable gifts can take a variety of forms, including charitable remainder trusts,
charitable lead trusts, pooled income funds, gift annuities, life estates and insurance.
19.
What is a Charitable Remainder Trust?
A Charitable Remainder Trust is an irrevocable trust where you (or persons you
designate) will receive distributions from the trust periodically during your lifetime or the
lifetime of others designated to receive distributions. The distribution amount is determined
at inception based on income needs, age, value of the property and other relevant factors.
The trust can be a Charitable Remainder "Unitrust" or a Charitable Remainder "Annuity
Trust."
Distributions from a Unitrust are calculated as a percentage of the asset value with
the value redetermined annually. Distributions from an Annuity Trust are a fixed amount
each year based on the value of the asset at inception.
Upon your death, or at the death of the designated income recipients, the remaining
trust assets will be distributed to the charities selected by you. You can retain the right to
change the charitable beneficiaries during your lifetime. The amount distributed to the
charities will be a deduction in your taxable estate. If the trust has other noncharitable
beneficiaries, then the deduction will be based on the anticipated remainder value to the
charities.
You can place a highly appreciated asset in a Charitable Remainder Trust and avoid
capital gains tax on the sale of the asset. For transfers made during your lifetime you will
receive an immediate income tax deduction, subject to an annual limitation of 50% or 30%
of your adjusted gross income, depending on the charity and the type of asset involved.
Any excess deduction not allowed in the year of the gift can be carried over for 5 years.
This deduction is based on the value of the interest that the charity will ultimately receive
and depends on a number of variables. Transfers made at your death will receive an estate
tax deduction rather than an income tax deduction.
20.
What is a Charitable Lead Trust?
The Charitable Lead Trust is just the opposite of the Charitable Remainder Trust
and provides for the charity to receive the income first and your beneficiaries to receive the
principal at the expiration of the trust term. The Charitable Lead Trust can be a Unitrust or
an Annuity Trust.
21.
How does a Pooled Income Fund work?
The pooled income fund is useful if you do not have sufficient assets to contribute to
a Charitable Remainder Trust or Charitable Lead Trust or if you prefer to make smaller
contributions over a period of time. Contributions from many individuals are pooled
together and shares of the fund are given to each contributor. An income tax deduction is
available in the year the contribution is made. Income is paid until the last income
beneficiary dies and then the shares transfer to the charity.
22.
How can I use a Gift Annuity in charitable giving?
A direct gift is made to a charity and a designated beneficiary receives income for
life. Part of the income received from the annuity is a return of the gift so only a portion is
taxable as income. A charitable income tax deduction is available in the year the
contribution is made. Upon death the charity keeps the remaining principal and
undistributed income.
23.
How can I use a Life Estate in charitable giving?
This arrangement is made when all or a portion of a home or other real property is
given to the charity while you are alive. Until death you enjoy the use of the property.
Upon your death the property belongs to the charity and you receive a charitable income
tax deduction for the value passing to the charity. The property is also removed from your
taxable estate for estate tax purposes.
24.
Can I give a life insurance policy to a charity?
Yes, a life insurance policy (new or existing) can be donated to a charity by making
the charity the owner and the beneficiary. An income tax deduction will be allowed for the
contribution.
25.
I own all of my assets jointly with another person. Is it true that when I die all of my
assets will go immediately to the surviving joint owner without going through the probate
process?
Generally, yes, if the asset is owned either as tenants-by-the-entirety (for husbands
and wives) or joint tenants with right of survivorship. However, at the death of the survivor,
the assets will be exposed to the probate process unless the survivor adds another joint
owner.
26.
What types of "joint" ownership property are allowed in Florida?
There are several types of Ajoint@ ownership in Florida. Some typical types are:
Joint Tenancy with Right of Survivorship is allowed in Florida, but to be sure that the
parties intended survivorship, which could result in the disinheritance of other family
members, Florida law requires that the title to such property specifically state: "John Brown
and Henry Brown, as joint tenants with right of survivorship and not as tenants-incommon."
Otherwise, the ownership may be construed as tenants-in-common and the
interest will pass under each owner's will.
Tenancy-by-the-Entirety
is joint ownership of property by a husband and wife and
provides that the survivor will own the property upon the death of the other spouse.
Neither spouse can sell, gift or convey their undivided one-half interest without the joinder
of the other spouse.
In Florida, real property titled in the name of husband and wife is presumed to be
tenants-by- the-entirety property unless there are more people on the deed. However, it is
a good idea to title any future joint purchases of real property by spouses as follows: "John
Brown and Mary Brown, Husband and Wife, as tenants-by-the-entirety."
In Florida, personal property titled in the name of husband and wife is not always
presumed to be tenants-by-the-entirety property. Therefore, personal property should also
be titled: "John Brown and Mary Brown, Husband and Wife, as tenants-by-the-entirety."
Tenants-in-Common
does not have the element of survivorship. Property owned in
this manner will pass under an owner's will upon death. Florida law will construe tenantsin-
common in situations where non-spouses are involved and it is not clearly survivorship
property. A suggested title so as to avoid tenancy-in-common treatment is: "John Brown
and Henry Brown, as joint tenants, with right of survivorship and not as tenants-incommon."
27.
What are some of the dangers of owning property jointly with someone other than a
spouse?
If a joint owner is involved in litigation with creditors, such as the IRS, or the victimof
an automobile accident with that joint owner, then the jointly-owned property may be
subject to attachment by those creditors, even if that joint owner really is on the title only to
avoid probate.
If a joint owner becomes incapacitated, and the property is jointly-owned real estate,
then a court appointed guardian may have to be obtained to sell the real estate.
The family of the first joint owner to die may be disinherited because the property
will pass by operation of law to an unrelated surviving joint tenant.
There can be a great deal of tax uncertainty with respect to whether a gift is made
when a joint account is set up and who should pay the income tax on interest earned by a
joint account.
28.
What kinds of insurance should I consider to enhance my financial and estate plan?
Life insurance, health insurance, long-term care insurance, umbrella liability and
disability insurance are examples of kinds of insurance you may need.
29.
How can life insurance pay estate taxes?
Life insurance proceeds can pay estate taxes and other expenses in settling an
estate. Annual premiums used to purchase life insurance to pay estate taxes can provide
a large payoff for low premiums. A major financial obligation of an estate can be estate
taxes. Federal estate taxes must be paid within nine months of the date of death. Estate
taxes can be substantial, currently as high as 45% of the taxable estate. Life insurance
can provide the liquidity needed to pay the tax.
30.
How can I use an Irrevocable Life Insurance Trust in my estate plan?
Life insurance proceeds are not usually part of a decedent's probate estate but are
included in a decedent's gross estate for federal estate tax purposes. If your estate is the
named beneficiary, or if no named beneficiary survives you, then the life insurance
proceeds become part of your probate estate. Inclusion in the gross estate for estate tax
purposes could dramatically increase the size of the estate and the amount of estate taxes
that must be paid.
Life insurance proceeds paid on a policy, held in an irrevocable life insurance trust,
are usually not included in the decedent's gross estate. The trust owns the life insurance
policy and is the designated beneficiary. If the insured has no Aincidents of ownership@ in
the policy, then it will not be included in his or her taxable estate. It is important to note that
any legal right to control a life insurance policy, such as the right to borrow from the policy
or designate the beneficiary, can cause the policy to be subject to estate tax.
|
