Free Retirement Plan

Last December, the White House Conference on Aging held its first meeting in 10 years. The conference addressed the growing number of baby boomers reaching retirement and highlighted how a large number of them are contemplating volunteering.

More and more retirees are volunteering for charities and non-profits in an effort to contribute to their community and stay active and healthy. Even the Peace Corps has seen a large increase in the number of older volunteers. But there’s a way you can contribute to society without going overseas, and it’s called a charitable trust. It has become an increasingly popular way to contribute to charity as well as save money on taxes.

Trusts, simply put, are a way for you to transfer assets and property into one solitary group. With a charitable trust, the assets and property contained within it provide an income for you during your lifetime. After you pass away, the remaining assets are given to the charity within the trust. There are two major forms of charitable trusts: charitable remainder trusts, and charitable lead trusts. Charitable trusts have a host of other benefits, as well as a few drawbacks, but here are the basics.

Charitable Remainder Trust (CRT)

A charitable remainder trust has two beneficiaries. In most cases, one of them is you (and possibly your spouse), and the other is the qualified charity or tax-exempt organization you plan on supporting. During your lifetime you receive a set percentage of income from the charitable trust. Once you pass away, the charity then receives whatever is left over. (If your spouse was receiving income as well, he or she will continue receiving it until passing away.)

One of the benefits of a charitable remainder trust is that you may be able to become the trustee and make decisions about the assets within the trust, including investment choices and other important matters. Unfortunately, charitable remainder trusts are irrevocable, but you may be able to change the beneficiaries when you wish. This allows you some degree of personal freedom, especially if you find a charity or non-profit that you feel is more deserving of your gift.

With a charitable remainder trust you get to choose the amount of income you’ll be paid from the trust on an annual basis. According to the IRS, every year you must distribute at least 5% of the value of the trust’s assets. Depending upon the type of trust, you can value the assets for distribution purposes at the time the trust is funded or on an annual basis. Some beneficiaries choose to take more, but it’s generally recommended to take no more than 10%.

All realized profit from investment sales within the trust is not subject to capital gains tax. This is because you are benefiting a charity. Charitable trusts are especially helpful when it comes to highly appreciated assets with limited income-producing potential. By avoiding the capital gains tax, more money goes to your charity instead of Uncle Sam. You also get an income tax deduction because your CRT supports a charity. Please note, however, that income from trust assets is subject to federal income taxes.

Charitable Lead Trust (CLT)

A charitable lead trust is basically the same concept as a charitable remainder trust, but in reverse. With a CLT, a charity receives a certain percentage of income every year. Once you pass away, whoever you’ve named as the beneficiary (a spouse or children) receives the assets that remain. A CLT offers the same advantages of a remainder trust, but the roles are reversed.

Both charitable remainder trusts and charitable lead trusts offer a variety of advantages over traditional estate planning tools. Above all, they allow you to give back to society while still taking advantage of tax deductions and exclusion from capital gains taxes.

There are numerous details and complex steps to take when looking at a charitable trust as an estate planning option. You should always find a trusted financial professional to help guide you through the process. They can usually refer you to a known estate planning attorney who will also help. Like all estate planning options, trusts have their pros and cons, but they’re certainly a good option worth considering if you wish to save on taxes, support a good cause, and feel great about it in the process.

Robert Valentine

http://www.articlesbase.com/finance-articles/estate-planning-supporting-a-noble-cause-70021.html

Life insurance is “Love Insurance”. In other words, you buy life insurance to protect the ones you love, to provide food, clothing, and shelter, in the event you are taken out of the picture. It’s to keep you family “in their own world”, financially speaking, if you should die.

Life insurance is an integral part of retirement planning. It provides for the family if you don’t live to retire, and can’t leave that retirement nest egg for your wife and kids.

Also, included in your retirement planning should be a savings vehicle, such as a 401K at work, or other retirement. In addition to that, you should invest in an IRA, and possibly another annuity, whether it be fixed or variable. A local agent can explain the differences.

To properly plan, ask an agent to do a Financial Need Analysis for you. This will help you determine what you need to do to plan for the protection of your family, and for retirement. This will help you to plan against the possiblity of living too long, or dying too soon.

In addition to the above, I recommend that you purchase a disability income policy. If you get injured or ill and can’t work, it will provide a monthly income while you are off from work, after a pre-selected elimination period in the policy. This could pay the mortgage, put food on the table, and provide for the necessities of life.

My question concerns only a fully deductible IRA, and the confusion over the IRS wording “to quality….you must not be eligible to participate in a company retirement plan”. My company does not offer a pension plan , but does offer a 401k plan, so does that disqualify me from a deductible IRA ? Basically the question comes down to the defination of a “company retirement plan”.

401k plan is considered a company retirement plan for what you are asking about. Note: actually participating is irrelevent. Your eligibility to participate is what drives this. You still may be able to qualify for it if your spouse (if any) doesn’t offer a plan.

Of course this assumes that you are over the income phaseout limits. I assumed you were as you specifically mentioned the wording and didn’t ask the typical vague question.

I want to make changes to my 401k allocations, but I am not sure what to choose. Also, my IRAs are in the same boat as my 401k (sinking fast). Do I have the option of rolling my IRAs into a safer investment? I do not like risk.

Put your money in a “bear fund.” This is a mutual fund that makes money during a recession.