Have Your Cake And Eat It Too!

Do you want to find a way to pass on family values to your adult children; control where your charitable dollars go; provide hope for future generations; reduce your current income tax and ultimately your estate tax?

Who doesn't want to do that?  All you need is more than $5,000,000 in extra assets ($10,000,000+ would actually be better). Add a family foundation; a charitable lead trust and this recent IRS private letter ruling. You get to have your cake and eat it too. Read on.

A recent private letter ruling as reported by the Planned Giving Design Center allows an individual to direct that a charitable lead trust created by him can make payments to the private foundation also created by him. This is a deductible gift for Federal gift tax purposes and no portion of the trust property will be included in the gross estate.

What is the catch? The three-legged stool concept. There is a long-standing principal of charitable trust instruments. The Settlor (or any beneficiary) may not be the trustee and the beneficiary.  An independent, professional fiduciary can be helpful to keep the benefits flowing and avoid problems with the IRS. Learn about The ACE Fiduciary Group here www.acefiduciary.com.

In this instance, the IRS has ruled that in order to keep the benefits planned for this estate, the trustor may not serve as the trustee or retain an interest in or right to alter or revoke the trust.  In this scenario, the funds paid from his charitable trust to his foundation must be separately managed and administered by an independent committee.   Again, keeping the concept of the three-legged stool in tact.

If you expect to accumulate more than $5,000,0000 in assets during your lifetime, this is a good hat trick to know about. Combined with the incentive to reduce long term capital gains taxes, it could be just the right strategy. Talk to a qualified estate planning attorney and tax advisor about your particular situation. Read the full ruling and analysis http://www.pgdc.com/pgdc/charitable-lead-annuity-trust-qualifies-gift-tax-deduction-and-excluded-estate.

Even without an extra large estate, high income individuals are taking a look at how a Charitable Lead Trust can be used to benefit a specific charity while reducing taxes on long-term capital gains.     http://www.pgdc.com/pgdc/charitable-giving-just-got-more-affordable.

Imagine if you had a large estate.  Where would you like to leave a legacy of hope? Post your comments here.

Financial Wellness - Part 2

How does Financial Wellness differ from Fiscal Capacity or Financial Independence?

 

Fiscal capacity is the ability to understand and decide about financial transactions. Fiscal capacity changes over the course of our lives. Financial independence depends more upon outside factors and early life choices like saving money, scrimping and a bit of luck.  Financial wellness is attainable by anyone at any age and in any situation.

 

For example, think about when you got an allowance or earned some spending money as a child.  What did you do with it?  I remember a big stuffed panda bear.  I designed and sold my own Christmas Cards and earned a princely sum of …….wait for it….. $10.  I thought I was RICH!  I saved some, gave some at church and used the rest for that soft, cuddly panda bear I had been wishing for. The panda bear was a reminder to me for years of what it felt like to be independently wealthy.

 

At 10 we learn to save for what we want, relying on parents or others to take care of our financial needs.

At 25 we learn to live within a budget and often rely on elders to help us secure our first job.

At 35 we become a homeowner and investor, relying on realtors and other professionals to provide advice and assistance. We learn to handle a number of financial choices through education and experience.  At times our education comes out of our mistakes.  At younger ages, we have time to recover.  As we age, financial mistakes can severely impact our standard of living.

Fiscal capacity is built over time from learning how to handle money.  It is knowing how to make good decisions and how to take action to insure our financial wellbeing.  This includes such areas as keeping important papers organized; paying our bills timely; having a clear understanding of income and expenses; being able to understand financial statements and make decisions about investments or evaluate the performance of an investment advisor; being able to understand the risks and benefits of possible deals or financial transactions; being able to prepare for and file required taxes regularly. Protecting and preserving assets and wealth for our own enjoyment and for those whom we wish to bless.  Fiscal capacity can also erode over time.

To retain our financial health and well-being as we age, it is vital that we regularly take an honest look at our abilities.  Elders can become prey to elder financial abuse when their fiscal capacity declines and they do not have a trustworthy circle of care.   The National Center on Elder Abuse, US. Dept. of Health and Human Services cites the following as to who are elder abusers;

“In the only national study that attempted to define the scope of elder abuse, the vast majority of abusers were family members (approximately 90%), most often adult children, spouses, partners, and others. Family members who abuse drugs or alcohol, who have a mental/emotional illness, and who feel burdened by their caregiving responsibilities abuse at higher rates than those who do not.”

As we age, it can help to reduce our stress to rely upon people who are trained and licensed to handle certain aspects of our financial needs.  Building a core group of professionals and friends who can be part of our circle of care will make it easier for us to focus on what we value and cherish during our remaining days on earth.

If financial wellness is not age or circumstance specific, what does it look like?  A person who is financially well has basic living needs met through shared community property; their own earnings or savings; inheritance; gifts, or pubic benefits. They are generous yet know what is needed for their sustanence.  They do not steal, gamble or borrow more than they are capable of paying back.

 

Financial wellbeing includes a lower stress level about money because we can trust that those basic needs will continue to be met in the foreseeable future.

We learn what we can do for ourselves;

We handle what we know about; and,

We find trustworthy people to provide help where needed.

Also,  just like a well-run business, we can incorporate checks and balances in our financial system to guard against abuse. When we have financial wellness, our life is not focused on worry about money but rather enjoying the fruits of our labors and finding ways to share our values where we can do so.

You can learn more about Loren Acuña and The ACE Fiduciary Group at

www.ACEfiduicary.com

Financial Wellness - Part 1

While discussing financial wellness recently with Pam Campbell, Sales Director for Byron Park of Walnut Creek, my first thought about this concept was protection and preservation of wealth.  Considering the idea more fully over the past week, I see a rich depth to this concept that can be useful at any age or season of our lives.  It might actually come down to an idea heard recently at church  - - - “our job in this life is not so much about getting rich but more about being rich”.  

A business is considered sound financially when the inflow exceeds the outflow by an amount that can be expected to continue growing over time.  A Chief Financial Officer is often employed to help a business plan future income and control expenses in order to achieve a financially sound business.

 

An individual’s financial health is more often looked at in the negative.  We see areas that indicate imbalance or fear for future financial stability: a pending bankruptcy or losing wealth due to poor decisions or fraud. 

 

A recent study by the American Psychological Association found that “money” was named as the top stressor by 75% of the respondents. Not surprisingly, another poll by Associated Press/AOL found a high correlation between high debt levels and health problems such as heart attacks, headaches, ulcers, and depression.  So, while there is a pretty clear measure of financial un-wellness, there is less agreement about what constitutes financial wellness. 

 

By the way, the above study about stressors found similar result across all age groups EXCEPT those over 65, who reported lower levels of stress. Possibly this age group grasps the idea of financial wellness better than the rest of us.

What is Financial Wellness?  Is it the same as financial independence or fiscal capacity?  I would argue that financial wellness is not about the amount of wealth we have accumulated but more about knowing what we are capable of handling at each stage of life and having the wisdom to ask for help appropriate to our needs at each stage.

A good example of this in the business world is an entrepreneur who has the wisdom to bring in managers whose skills complement and supplement what the entrepreneur can offer.

Why do you think those surveyed over the age of 65 have less stress about money? Could it be they have learned to live within their means; or, they have learned the secret of a generous mindset; or, they have learned to appreciate and value what life offers over what money can buy – love, peace, joy and hope? These mental attitudes allow us to see a bigger picture of the value of human life which  can help us be rich at any level of monetary wealth.

 

If you are curious about this topic and would like information about the community event at Byron Park in Walnut Creek, please contact Pam Campbell for details. 
 

You can also receive an alert when the next installment of this blog on "Financial Wellness - Part 2" is posted by entering your email address above.  What do you think about Financial Wellness?  Be rich and share your thoughts.

 

Do Not Resuscitate (DNR)

How Do I Tell People What I Really Want?

This past week the story and controversy surrounding the death of an 87 year-old woman who did not make her end of life wishes known in writing was covered in the news.  The article by Lisa M. Krieger, "CPR Flap Could Have Been Avoided" in the Mercury News discusses an important form which many people do not know about or confuse with an Advanced Health Care Directive.

While a POLST does not insure a peaceful passing, it does help your health agent know what types of decisions you would want should you become unconscious and unable to choose not to accept certain medical procedures. Paramedics and doctors are not required to follow a DNR form in your wallet or language in the standard form used to name an agent for Health Power.

If you are terminally ill or frail elderly, there are three documents that will allow someone you choose to help you in your final hours. Otherwise, the hospital, doctors, paramedics and all other persons will follow standard medical protocol to keep your body functioning.

The Advanced Health Care Directive.

Many people think an Advanced Health Care Directive will be sufficient. The purpose of this document is to name a person who can make health decisions for you when you are unable to do so. This is why the hospital wants one on file when you are admitted. Doctors and medical personnel cannot make this decision for the patient. While important, since the Advanced Health Care Directive is prepared by an attorney not a doctor, paramedics and emergency personnel do not need to follow any particulars included on this form. In addition, in an emergency there is not time for them to read a legal manifesto.


The HIPPA Authorization Release.

As people age or when they are ill, it can become difficult to manage health care matters - from remembering and getting to doctor appointments to asking the doctor pertinent questions. If you have ongoing health issues, are terminally ill, or elderly, you should also consider signing a HIPPA release form to allow your health agent or another designated person to speak with your doctors about your health care needs. This can be given to more than one person and it is used even while you are competent and able to make your own decisions to allow someone else to speak with your doctors. In the event that you need assistance with health care issues, a HIPPA release form is the only way that someone else can discuss your health needs with the medical community.
The Physicians Order for Life Sustaining Treatment or "POLST".

The medical community developed a solution to help people discuss their end of life wishes in detail with their doctor. It is one page, printed on pink paper and signed by your treating physician. I tell my clients to post it on an entry wall or bedroom door so paramedics and others can see it. This allows the paramedics to not perform CPR, should that be your wish.

Otherwise, once CPR is started and a person receives oxygen, the heart can continue even when the brain is no longer working. Once emergency resuscitation is started, only a POLST or a decision by the named Health Care agent can stop normal ICU and emergency life sustaining treatments.

Below you’ll see links to samples of each form and a short word to remember their use. Review your health care directive to determine if the people you named many years ago are still able to serve you. If changes are needed, a simple amendment with your attorney will keep your written wishes up to date. Should you find, as some of my clients do, that those persons named earlier can no longer serve due to death or illness, you may want to consider naming a licensed, professional fiduciary.

URGENT! First Priority - Advanced Health Care Directive. Attorney Document.
Everyone over the age of 18 years of age should have one. This legal document names who will decide for you in case you can no longer make your own health decisions. Best if prepared by attorney with estate planning package, but the State of California offers this free form here. Second Priority - Assistance with Health Care Management
If you are diagnosed with a significant illness or find that you have trouble remembering what to ask your doctor, it may be time to ask a family member; your health agent; or a patient advocate to assist you in getting the medical care you need. Click here to see sample wording.
Third Priority - POLST. Doctor's Orders 
Make your specific medical wishes known by discussing the options with your doctor and putting it in writing. Then post nearby. Especially important if you have been diagnosed with a terminal illness or you are a frail elder. Click here to see a sample.