Retirement Living: Getting Your Finances in Order

You can’t take it with you, but you don’t want Uncle Sam to get too much of it, either. Ladue News asked a couple of financial planning experts how we can best protect, preserve and transition the assets we leave behind.

Where there’s a will there’s a way, but a trust is a must.

“When you’ve got considerable assets, a will simply isn’t enough,” says Larry LeGrand, executive vice president of Plancorp Inc. “If your assets aren’t in a trust when you die, they’ll have to go through probate court before your beneficiaries receive them. Not only is probate time-consuming, taking anywhere from six to 18 months, but your estate will be charged a fee based on the percentage of assets in probate.”

Another advantage of a trust is that it’s private. “With a will, your executor has to list your assets in probate court and the information becomes a matter of public record,” LeGrand explains. “A trust account is a private document, so you and your family can preserve privacy.”

He advises clients to put their assets in a living trust and arrange for a portion of those assets, upon the client’s death, to be placed in a family trust. According to the tax code, a grantor can currently leave up to $3.5 million without estate taxes being levied, LeGrand says. “So you’ll want to arrange for the exempt amount, it changes every year, to go into a family trust. Any assets above the exempt amount should go into a marital trust, with your spouse as sole beneficiary.” Upon the spouse’s death, the assets can be distributed among the client’s children.

Or not. “You can arrange to hold the money in trust for your children’s benefit until they reach a certain age, thus protecting the assets from creditors or spouses who might try to claim the money, even if the marriage doesn’t work out,” LeGrand says. “Placing the money in trust assures you that most of the money you leave behind stays in the family, just as you intended.”

Give until it helps.

One of the greatest joys of having money is using it to help others. “If you’re philanthropically inclined, charitable giving fits into your estate plan,” says Don Kukla, a principal at Moneta Group. “It can also be a good way to reduce taxes on your estate and preserve and protect your assets. There are many different ways to accomplish this, so sit down with your adviser, explore your philanthropic interests and develop a plan to realize your goals.”

Some assets are better than others when it comes to charitable giving, Kukla says. “If you have stocks that you own personally versus stocks in an IRA, you’re better off leaving the personal stocks to your heirs and the IRA stocks to charity,” he explains. “Say you paid $10,000 for the stocks and, when your heirs are ready to sell, the stocks are worth $25,000. Your heirs will have to pay taxes on any gains in the IRA stock, but a charity can withdraw it tax-free. When your heirs sell the personal stock, they won’t have to pay taxes on any gains.”

Philanthropically inclined individuals can also use a portion of their assets to create a private foundation. “It allows you to contribute to a number of charities over time while reducing estate and income taxes,” Kukla says. “It’s almost like setting up a company, you can even pay an heir a salary to manage it.” The downside, he adds, is that administering a foundation can be a complicated, time-consuming task.

“A much simpler way to go is to create a donor-advised fund, which is similar to a private foundation but without the administrative burden,” Kukla explains. “Donor-advised funds are usually sponsored by a mutual-fund company or community foundation, which takes care of the paperwork and record-keeping.”

A benefit of both options, Kukla points out, is that they give your heirs a say-so in the decision-making process. “You can always make an outright gift by means of a charitable trust, but a private foundation or donor-advised fund can be arranged so that your heirs decide who gets the money, and when,” he says. “It’s a great gift to leave behind. When it comes to giving, it’s never too early, or too late, to teach your kids to be good stewards.”