Do you consider trusts to be instruments of the wealthy?  While it is true that many Americans of means have trusts to protect and pass their wealth, there are a number of reasons why trusts can also be useful for middle-class families.  Here are 7 of them:

1.  Control distribution of assets.  You wouldn’t hand over your car keys to a child who has had no proper preparation for driving, and chances are you would not want to hand over all your assets to a teenager either.  But if both parents die at the same time, the children would inherit all the assets upon their 18th birthdays.  A trust allows you to specify how and when you want your children to inherit.

2.  Protect assets from creditors.  Placing an inheritance in a trust ensures that those assets are protected from your heir’s  -- or their spouse’s – creditors. Consider a Lifetime Asset Protection or Wealth Creation Trust.

3.  Protect inheritance from spendthrift heirs.  Not everyone is good with money.  If your heirs fall into that category, you can use a trust to ensure the assets are not frittered away due to spendthrift behavior.

4.  Protect inheritance for children of prior marriage.  You can use a trust to both provide for your current spouse and any children from a previous marriage.

5.  Provide for a special needs heir.  Leaving assets outright to an heir with special needs could disqualify them from receiving important government benefits.  Leaving those assets in trust bypasses this potential risk.

6.  Avoid probate.  Assets can pass to heirs without going through probate by using a trust, saving beneficiaries the time and expense of the probate process. Probate is an expensive, public and unnecessary court process you can keep your family from having to deal with.

7. Protect privacy.  Once a will is entered into probate, it becomes public; a trust is a private document that will protect your family’s privacy.

If you would like more information about protecting your loved ones, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

According to a recent Forbes article, Americans donated more than $316 billion to charity last year – and most of that came from individuals.  Holidays are a traditional time of giving, and not just because we like to get in those year-end tax deductions!

Forbes provided 10 tips for getting the most out of your charitable giving this year:

1.  Be sure to itemize.  The IRS requires that you itemize your charitable deductions each year on your 1040 so be sure to keep careful records.

2.  Get a receipt.  If you are giving property, be sure you get a written receipt from the organization and that it lists the items you have donated.  If you are giving cash you need a receipt as well – either from the charity or a cancelled check or credit card receipt that includes the name of the charity.

3.  Choose wisely.  Not every charity is recognized by the IRS as an exempt organization.  You can check by name at the IRS Exempt Organizations Select Check website. 

4.  Remember payroll deductions.  If you give via a payroll deduction, your employer should furnish you with a record of your annual deduction.

5.  Deduct value of incentives.  If you receive something in exchange for your donation – even a coffee mug or a t-shirt – you are required to deduct the value of that item from the value of your donation.

6.  Consider giving appreciated assets.  You can receive a double benefit if you donate an appreciated asset like stock or real estate.  If you have owned the asset for at least a year, you can deduct the fair market value and avoid paying any capital gains tax. 

7.  Understand what you can deduct.  If you provide services to a charitable organization, you can deduct things like mileage or supplies, but you cannot deduct your time.

8.  Document gift value.  Non-cash items need to be documented in terms of the item’s condition in order to assess a fair market value.  If your donation is worth more than $500, the IRS requires a written appraisal for fair market value.

9.  Be aware of limits.  Many people are not aware that there are limits on charitable contributions, which are tied to your adjusted gross income (AGI).  If you give more than 20 percent of your AGI, then you may run up against these limits, which vary according to the gift (cash, non-cash items, appreciated assets). 

10.  Give by year-end.  You will only receive deductions for those items or cash you give during the calendar year, so be sure you make your donation by Dec. 31.  If you gift via check or credit card, you will receive the deduction as long as they are recorded by Dec. 31 – even if you don’t pay the credit card or the check isn’t cashed until 2014.

Most of us who have a pet consider them to be a part of the family; unfortunately, the plans we may have so carefully put together to protect our loved ones do not take our pets into consideration.

According to the ASPCA, only about 17% of dog and cat owners have taken the necessary legal steps to ensure their pets are cared for after they die.  Most of us assume that because our close family members know how much our pets mean to us, someone in the family will take responsibility for our pets after we are gone.  However, many pets that outlive their owners wind up in shelters because no formal provisions have been made for them.

Almost every state has laws that allow pet owners to create a trust for the care of their pets.  You can create a trust that would go into effect upon your death or if you become incapacitated and unable to care for your pet.  To ensure there are proper checks and balances, you may want to consider naming one person to serve as trustee to handle the money, and another person as your pet’s caregiver, who would be responsible for the day-to-day care of your pet.

In your trust, you can detail exactly how your pet is to be treated – how many vet and groomer visits per year, what the pet should be fed, and any special medical needs that will require special attention.  You will need to fund your pet trust sufficiently to cover your pet’s anticipated life span, including a cushion if your pet lives longer and needs additional medical care.

Don’t make the mistake of providing for your pet in your will since probate could tie it up for months in court, but you could make mention of the existence of your pet trust in your will.

If you would like more information about protecting your loved ones – including your pets -- call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.