​Are you planning your legacy? Are you thinking about ways to pass your hard-earned assets on to your children, grandchildren or other loved ones? An estate plan can help you do just that. Unfortunately, 60 percent of Americans haven’t even created a will, which is usually the first step in estate planning.1
 
An estate plan helps you avoid risks and protect your assets so they can be distributed to your heirs according to your wishes. Without a strategy, your estate could face a wide range of risks, expenses and costs. A few of those risks are listed below. If you haven’t taken steps to address these, now may be the time to do so.

Lack of a will. 

If you pass away without a will, your estate is considered intestate. That means the local probate court makes decisions about how the estate is distributed to heirs. It’s possible that the court’s decisions may not align with your wishes. It’s also possible that your executor may need to hire lawyers, accountants and others to guide your estate through the process. That could generate substantial fees, which would have to be paid out of your estate assets.
 
Fortunately, you can avoid this risk by simply creating a will. A will expresses your wishes for how your estate should be distributed to your loved ones. While your estate may still have to go through probate, that likely won’t be as costly or time-consuming as the intestacy process.

Incorrect beneficiary designations. 

You probably own accounts that have beneficiary designations, such as life insurance, annuities and qualified plans like 401(k) accounts and IRAs. When you die, the account balance is distributed to the individuals you name as beneficiaries.
 
Unfortunately, people sometimes make mistakes with their beneficiaries. A common one is to leave a former spouse on an account or policy as the primary beneficiary. Another common mistake is not to name a beneficiary at all or to name one’s estate as beneficiary.
 
Beneficiary designations are usually ironclad and difficult to challenge in court. That means your beneficiary will get the assets, even if this person was named mistakenly. Be sure to check your policies and accounts regularly, especially if you’ve recently gone through a major life change such as divorce.
 
Failing to name a beneficiary or naming the estate as beneficiary can also be problematic. Beneficiary-designated assets don’t go through probate. However, they will if the assets are left to the estate, which is what happens if there’s no beneficiary on the account. That can generate fees and delay distribution to your heirs. Again, you can avoid all of this by regularly checking your beneficiaries and making sure they align with your wishes.

Expenses associated with end-of-life care. 

As you approach the later years of retirement, you may become more vulnerable to various health challenges. Alzheimer’s and other cognitive issues are common among older seniors. You may need long-term care, which can cost thousands of dollars per month.
 
Incapacitation is another reality for seniors. That’s the inability to make or communicate decisions. If you become incapacitated, someone will have to make financial decisions on your behalf. It’s possible that the wrong person could fill that role and make decisions that aren’t in your best interest.
 
You can minimize the impact of long-term care and incapacitation by planning ahead. Long-term care insurance can help you reduce your out-of-pocket costs and protect your estate. You also may want to consider a power of attorney, which allows you to designate someone as your decision-maker should you become incapacitated. Other tools, such as joint accounts and living trusts, can provide further protection.

Ready to protect your legacy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 
1https://www.aarp.org/money/investing/info-2017/half-of-adults-do-not-have-wills.html#
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency
18280 - 2018/11/28.
 

Did you recently experience the death of a loved one? Were you a beneficiary on their IRA? An IRA can be a powerful savings vehicle because it offers tax-deferred growth. That means the account owner doesn’t pay taxes on earnings until they take a distribution from the account. In the case of a Roth IRA, the owner may never pay taxes on earnings.
 
An IRA can also be an effective tool to pass assets to the next generation. It’s driven by a beneficiary designation. That means the account owner names specific people as beneficiaries. When the owner passes away, the IRA custodian pays the benefit directly to the named individuals.
 
If you’re a beneficiary, you may be tempted to take the money as a lump sum. That may not be the wisest strategy, however. You have a few options available. Below are a few strategies you can take, depending on whether or not you are the owner’s spouse. You also may want to consult with a financial professional to determine the best strategy for your needs and goals.
 
Options for a Spouse
 
As the spouse of the account owner, you have more options available than a nonspousal beneficiary, including:
 
Roll it into your own IRA. This may be the simplest and most straightforward option. As the spousal beneficiary, you have the option to simply roll the death benefit into your own IRA. The funds become a part of your account and are subject to all the same rules as your own contributions. You can’t take a withdrawal until age 59½, and you may have to take required minimum distributions at age 70½.
 
Open an inherited IRA. You can also open what’s called an inherited IRA. This option is usually taken by nonspousal beneficiaries, but it’s also available to spouses. The IRA is in your name as the beneficiary of the deceased.
 
You can take the funds as a lump-sum distribution, but you could face taxes on the withdrawn amount. You can also keep the funds in the inherited IRA and start taking required minimum distributions based on your life expectancy. This stretches the tax liability over many years and reduces the impact in any one given year.
 
Take it as a lump sum. You can always take the death benefit as a lump sum. If the IRA is a Roth, you may be able to take the death benefit on a tax-free basis. If it’s a traditional IRA, however, the distribution will likely be taxable. The distribution could be large enough to push you into a higher tax bracket, which could create other financial challenges.
 
Options for a Non-Spouse
 
Did you inherit the IRA from a parent, grandparent or other nonspousal loved one? If so, you have two primary options:
 
Take the benefit as a lump sum. Again, it can be tempting to simply request the entire death benefit in a lump sum. If the IRA is a Roth, that could even be your best strategy as you may avoid any tax exposure. If it’s a traditional IRA, however, you will likely have to pay income taxes on the full amount.
 
Open an inherited IRA. Instead, consider rolling the benefit into an inherited IRA. You avoid taxes on the entire amount. You’ll likely be required to take minimum distributions from the IRA every year, but the distribution amount will be based on your age. If you are relatively young, the distributions could be spread out over many years, limiting the tax impact.
 
Ready to develop a strategy for your IRA windfall? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18279 - 2018/11/28

The holiday season is here. For many Americans, that means giving to their favorite charitable cause. In fact, a recent survey found that 63 percent of Americans donate to a charity in the last two weeks of December. More than 75 percent of those donations go to either churches, poverty-related charities or children’s causes.1
 
If you’re passionate about supporting charity, you may be looking for ways to make a lasting impact. Perhaps you would like to use a portion of your assets to leave a charitable legacy that will help others for years or decades to come.
 
A charitable remainder trust is an effective tool that can help you leave an impactful, charitable legacy and also meet some important financial objectives. You can use a charitable remainder trust to generate lifetime income and also to minimize tax exposure.
 
Is a charitable remainder trust right for you? That depends on your unique goals, needs and objectives. However, it may be worth considering as part of your overall legacy strategy.

How does a charitable trust work?A charitable remainder trust is a legal document that facilitates the sale and transfer of your assets to a charitable organization. It’s usually used in conjunction with assets that have appreciated significantly in value over time and could create a sizable tax liability.
 
You start by identifying the charity and creating the trust document. You then transfer ownership of specific assets from yourself to the trust. The trust can sell the assets and use those funds to create a diversified portfolio that’s aligned with your needs and goals. The trust then pays you income over a set period of time, usually the remainder of your life. Upon your death, the trust assets are transferred to the designated charity according to your instructions.
 
There are several tax benefits to this type of structure. First, the trust isn’t taxed on the sale of the assets because they are ultimately intended for charity. That means you could place a highly appreciated asset in the trust and minimize your tax exposure. Second, you also may realize a current income tax deduction for contributing assets to the trust, as they’re considered a charitable donation. A tax professional can help you determine exactly how you might benefit.

How does it generate income?Remember, the trust doesn’t transfer your assets to the charity until after you pass away. In the meantime, the trust pays you annual income. The amount of income depends on the type of trust you establish.
 
You can set up your trust to pay you a level income amount every year. The income amount stays the same regardless of what happens to the value of the trust assets. This type of arrangement can offer predictability, but there can also be drawbacks. If the trust assets decline in value, your income could become problematic and may deplete the trust value.
 
An alternative approach is to take a fixed percentage of the trust value each year as income. The trust value is reassessed at the beginning of every year, and your income is adjusted accordingly. Your income may not be predictable from year to year, but it will stay proportionate to the overall value of the trust. If the trust value increases, so will your income. if the value declines, your income will decline, too.

Is it right for everyone?A charitable remainder trust isn’t for everyone. One of the biggest drawbacks is that it’s irrevocable. That means you can’t get the assets back out of the trust, even if you change your mind after the fact. Before you establish a charitable trust, make sure you won’t need the assets in the future.
 
There are a number of risks that could arise through retirement, including the need for long-term care or costly medical care. Develop a plan to address those risks before donating assets to charity. It’s possible that there may be other charitable actions you could take that are more appropriate for your needs and goals. A financial professional can help you develop the right strategy for your objectives.
 
Ready to develop your charitable plan? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
 
1https://www.worldvision.org/about-us/media-center/survey-majority-americans-donate-charity-end-december
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18276 - 2018/11/27