There comes a point in life for many senior citizens when they recognize that they are really managing assets for the benefit of their heirs. This point is reached when they have resolved the problems involving funding for unexpected health problems, and have also satisfied the question of having adequate lifetime income.
Sometimes it is possible to provide funding for health care needs in such a way as to benefit the heirs with the funds that are not lost to long term care expense because of good luck or good health.
What we are talking about here is a form of life insurance recently made available to retirees that allows access to the insurance benefit if funds are needed for home care or for nursing facility care. For example, a $200,000 life insurance policy would allow a retiree to have $4,000 monthly to pay for care. If the benefit was not used for such care, it would then be available to the estate as a life insurance benefit, and those funds could then be available to fund a grandchild's college education.
There is a way that allows retirees to set up VERY SIGNIFICANT educational funds for the grandchildren and to TAKE A TAX DEDUCTION for doing so. It combines two very efficient financial tools -
A CHARITABLE GIFT ANNUITY
LAST SURVIVOR Life insurance (A wealth Replacement plan)
Let us look at an example:
John is 72 years old and his wife is also 72. John has a substantial IRA account and is required to take money from it each year even though he really would prefer to allow it to remain in the account to grow free of taxation.
His adviser gives him this idea:
Why not transfer $100,000 from the IRA account to a GIFT ANNUITY? By so doing, he would not only satisfy the mandatory IRS withdrawal, he would develop a tax credit to help pay the tax on his withdrawal. Quite important also, was this simple fact: he would receive $6,500 income from the annuity every year for as long as he lived.
This money would be sufficient to pay the premiums for a last survivor life insurance premium with a face amount of
$200,000
That is correct! You have just managed to transform a $100,000 gift into a $200,000 benefit that you can dedicate to colleges expenses for grandchildren if you so wish, or to pay the tax bill on the remaining IRA account. You also have done the following -
Benefited a favorite charity
Satisfied a current IRS requirement for your IRA account
Received a tax deduction for the current tax year.
Reduced the ultimate tax owed on your IRA account
In the process, you have also eliminated the problem of funding the cost of the insurance, since the check to pay the premium comes at the same time as the billing from the insurance company. The funds are guaranteed to last for your lifetime, and the insurance costs are also guaranteed to never increase.
You may wish to split the program into two segments in order to benefit two separate charities, and spread the tax benefits over two tax years. You have a number of planning alternatives that your adviser can help work out.
Here is the question for you: If your circumstances allow, is there any reason you would not make an investment with a guaranteed 2 for 1 return?
Like it or not, we all must be financial planners. Bob Zimmerman now brings over 50 years of experience to the aid of those seeking to better inform themselves. Holding a BS degree in Finance from the University of Detroit, he also has an MBA degree from that institution.
He spends his senior years devoted to advancing the goal of educating the public. To that end, he has published a book - THE ANNUITY-FROM MYSTERY TO MASTERY. It is further described on his website - http://www.safemoneyplus.com
He also has a website devoted to education the public about the practical usses of CHARITABLE GIFT ANNUITIES. That site is http://www.cga-advisor.com
For those with a charitable mindset, he is more than happy to offer NO FEE counseling .
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