Woonsocket Call

Fi­nance your fam­ily’s fu­ture

Amid com­plex fi­nan­cial en­vi­ron­ment, an es­tate plan is es­sen­tial to safe­guard wealth

- Christo­pher J. Bouley is vice pres­i­dent of Wealth Man­age­ment at UBS Fi­nan­cial Ser­vices Inc., 500 Ex­change Street, Ste 1210, Prov­i­dence, RI 02903. He can be reached at 401-455-6716 or 800-3336303.

You’ve worked hard to build your wealth and pro­vide for your fam­ily. To be con­fi­dent that the legacy you en­vi­sion will be­come a re­al­ity, it’s crit­i­cal to es­tab­lish and main­tain an es­tate plan.

This is es­pe­cially true in to­day’s chal­leng­ing fi­nan­cial en­vi­ron­ment, where tax laws can change from year to year, of­ten with dra­matic ef­fect on a com­plex es­tate. To­gether with your tax and le­gal pro­fes­sional, let’s ex­plore the op­ti­mal strate­gic op­tions for your sit­u­a­tion and de­velop an es­tate plan to help en­sure your fam­ily’s fu­ture will be pro­tected.

The fi­nan­cial se­cu­rity of your fam­ily de­pends not only on how you man­age your wealth to­day, but also on how it will be man­aged and max­i­mized in the fu­ture. It in­volves pre­serv­ing your es­tate to the great­est ex­tent pos­si­ble for your loved ones and for wealth to be trans­ferred ac­cord­ing to your wishes when the time comes.

Let’s take a look at a few of the es­sen­tial core el­e­ments of any es­tate plan:

• A will. Your last will and tes­ta­ment di­rects the dis­tri­bu­tion of much of the prop­erty you own upon your death. (Some as­sets pass out­side of a will based on op­er­a­tion of law or ti­tling, such as a joint ac­count with rights of sur­vivor­ship or an IRA through a ben­e­fi­ciary des­ig­na­tion; for this rea­son, cor­rect ti­tling of as­sets is es­sen­tial.) It also names an ex­ecu­tor for your es­tate and guardians for any mi­nor chil­dren. • Ad­vance med­i­cal di­rec­tives speak for you should you be­come in­ca­pac­i­tated. A health care proxy ap­points an in­di­vid­ual to make med­i­cal de­ci­sions for you if you are un­able to com­mu­ni­cate. A liv­ing will states your wishes with re­spect to life-sus­tain­ing med­i­cal treat­ment. • Power of at­tor­ney (POA). This au­tho­rizes some­one to make busi­ness or le­gal de­ci­sions on your be­half. You can pro­vide that your power of at­tor­ney is ef­fec­tive im­me­di­ately upon sign­ing or only in the event of your in­ca­pac­ity. Re­duce your tax­able es­tate through gift giv­ing

For high and ul­tra-high net worth in­di­vid­u­als, a com­mon ob­jec­tive of an es­tate plan is to min­i­mize taxes and pre­serve as much of their es­tates as pos­si­ble. “Gift­ing” as­sets to your ben­e­fi­cia­ries dur­ing your life­time is a pop­u­lar es­tate plan­ning strat­egy, de­signed to re­move prop­erty from your es­tate to help re­duce po­ten­tial fu­ture es­tate taxes.

The fed­eral govern­ment as­sesses a trans­fer tax on es­tates over a cer­tain thresh­old. The Amer­i­can Tax­payer Relief Act of 2012 (the “Act”) makes per­ma­nent the $5 mil­lion es­tate, gift and gen­er­a­tion-skip­ping trans­fer (“GST”) tax ex­emp­tions, and in­dexes them for in­fla­tion from 2011. Thus, for 2014, the ex­emp­tion amount will be $5.34 mil­lion. The Act sets the rate for all trans­fers in ex­cess of the ex­emp­tion amount (for all three taxes) at 40 per­cent. Gift­ing as­sets now not only pro­vides the ben­e­fit of re­mov­ing the as­sets from your es­tate where they may be sub­ject to higher es­tate taxes when you die, but also serves to re­move the fu­ture growth on the gifted amount from your es­tate, sav­ing fur­ther taxes.

Some pop­u­lar gift­ing strate­gies are:

• An­nual ex­clu­sion gifts. Each year, you can make rel­a­tively small gifts (called an­nual ex­clu­sion gifts) that don’t use any of your life­time gift tax ex­emp­tion amount. This year, the gift tax an­nual ex­clu­sion amount is $14,000, so you can gift up to $14,000 to as many in­di­vid­u­als as you’d like. • Fund­ing col­lege costs for chil­dren and grand­chil­dren. You can make a con­tri­bu­tion to a 529 col­lege sav­ings plan, which will be treated as a gift to the ben­e­fi­ciary. You are per­mit­ted to ac­cel­er­ate up to five years’ worth of an­nual ex­clu­sion gifts to a 529 plan, putting in as much as $70,000 at once ($140,000 with your spouse). This can re­move con­sid­er­able as­sets from your es­tate while pre­serv­ing your life­time gift and es­tate tax ex­emp­tion. • Mak­ing pay­ments di­rectly to ed­u­ca­tional or health­care in­sti­tu­tions. You can pay an un­lim­ited amount an­nu­ally on be­half of an­other per­son, as long as you send the money di­rectly to the in­sti­tu­tions where the ex­penses were in­curred. Qual­i­fy­ing med­i­cal and ed­u­ca­tional ex­penses can be made in ad­di­tion to the an­nual ex­clu­sion amount.

• Do­nat­ing to char­i­ta­ble or­ga­ni­za­tions. By mak­ing di­rect gifts to char­i­ties or in­vest­ing in char­i­ta­ble ve­hi­cles, like donor ad­vised funds, pri­vate foun­da­tions or com­mu­nity foun­da­tions, your char­i­ta­ble im­pact can last be­yond your life­time and pro­vide you with tax ben­e­fits. Donor ad­vised funds and pri­vate foun­da­tions per­mit you to make a tax-de­ductible do­na­tion, grow your do­na­tion, and then rec­om­mend and di­rect a con­tri­bu­tion to non­prof­its of your choice when­ever you like.

 ??  ?? CHRIS BOULEY Vice Pres­i­dent-Wealth Man­age­ment UBS Fi­nan­cial Ser­vices
CHRIS BOULEY Vice Pres­i­dent-Wealth Man­age­ment UBS Fi­nan­cial Ser­vices

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