Control Your Legacy with a Private Foundation

Private foundations can let you control your gifts, reduce taxes and impart your values to future generations.

Call it the golf and gala glut: the growing list of charitable parties, balls and outings aimed at raising funds for charitable causes from religious to educational to medical research. If your calendar has filled with worthy causes seeking your name and your wallet, you may want to consider channeling your time and money into a private family foundation.

If you think private family foundations belong to the Gates, Fords and Rockefellers of the world, you may be surprised by the estate planning industry’s rule of thumb: a foundation needs to have an annual minimum of about $25,000 – from endowments, annual contributions or both – available for making grants. This may be prohibitive to estates under $2 million, but you certainly don’t need the more than $29 billion that Bill and Melinda Gates have put into their foundation.

You can also establish a stand by foundation, which is created to receive lifetime contributions or a major bequest, or a flow through foundation, which converts appreciated property into cash and distributes the proceeds to public charities but does not build up an endowment. A flow through foundation can provide tax benefits if you have highly-appreciated assets whose sale would result in significant capital gains taxes.

Individuals may deduct cash contributions to a private foundation up to 30 percent of the donor’s adjusted gross income (AGI) and appreciated property up to 20 percent of AGI. All contributions specified in a will are fully deductible for estate tax purposes.

Your foundation can be a non-operating foundation, meaning it makes grants to help fund the efforts of other organizations or individuals. The alternative is an operating foundation, which runs a facility or institution, such as a museum or research lab. Your foundation’s purpose can be as broad as world hunger or as specific as modest scholarships to a local liberal arts college.

Of course, private family foundations must operate according to tax law, including distributing at least 5 percent of assets each year and paying a 1-2 percent tax on investment income. However, as part of an overall retirement and estate plan, a private family foundation decreases the amount of taxable assets in your estate. You can make gifts to your foundation without affecting the annual gift tax exclusion or the gift tax credit.

For many high net worth individuals, a major attraction of the private family foundation is the greater control compared to a large lump-sum donation to a public charity or the less flexible charitable trust. While trust instruments, once finalized, can be difficult to change, a private foundation incorporated as a nonprofit can adjust its goals and mission over time.

With a private family foundation, you can for generations to come involve your family directly in the issues and activities that mean the most to you. Family members can even receive salaries as trustees, directors or employees of the foundation, provided they legitimately serve in those roles and their work justifies their salary.

A private family foundation can provide greater control of your charitable giving, income and estate tax benefits and a way to share your values with future generations. Creating a foundation requires careful consideration and planning. Please consult with your legal, tax and investment advisors for more information.

Written by: Securities America, Inc. Distributed by: Lawrence D. Sprung.

A Lasting Legacy

Why planning for long-term care is so necessary in today’s world

James and Irene Norris spent their lives surviving. The two owned and operated a small business together for over 60 years, surviving the stock market crash, the Great Depression, seventeen U.S. Presidencies, and two World-Wars. All while raising two sons.

But there was one thing they didn’t plan on: long-term care.

Once they closed their small business and became too frail to care for each other, they became trapped in an unfortunate financial situation that is becoming all too common today. After several medical problems, they were forced to choose some sort of custodial care and they moved into a nursing home. Even though they had savings, it quickly disappeared when faced with the monthly nursing home costs. Medicare offered little support, because it does not cover stays in nursing homes for extended periods of time.

The bills continued to come and they soon realized they no longer had adequate financial resources to survive. They reached a turning-point and, after working their whole lives, they were forced to make the most painful decision of their lives. In order to qualify for Medicaid, they would not be able to hold onto all of their resources. They had to sell everything they worked so hard to earn, in order to receive Medicaid. Their prized possessions that had been so carefully collected through the years were gone in an instant, sold to pay the medical bills that had piled up.

Part of the reason they had to sell was because of Medicaid requirements, but much of their selling was due to a lack of planning. The Norris family had never consulted a financial planner or worried about saving for retirement. Had they even spent a small amount of time earlier in life with a financial planner, they would have probably learned a few techniques which would have allowed them to hold on to more assets and still legally qualify for Medicaid.

Once on Medicaid, they were limited in their options. They were forced to choose only the care that Medicaid would cover, rather than what would truly make them comfortable in their finals years. Finally, when they passed away, the family was left with thousands of dollars worth of debt from medical expenses and funeral arrangements.

This lack of preparation is common. It happens every day to hundreds of middle and upper-income families across the United States, and it can easily be prevented with some basic planning. Rather than watch your life’s work slip away because of costly medical expenses, with just a little planning, you’ll you be able to leave a legacy behind that will make your family proud and secure. Rather than seeing your memories sold, you can hold on to the things you worked so hard to attain.

Long-term care planning doesn’t mean the end of your livelihood. It means taking a small amount of time to decide what options you and your family will have in the future. It means making sure you have something left to pass on to the next generation.

When is long-term care needed?
Long-term care is generally something to consider when someone can no longer perform basic functions themselves. Generally, it means they need a medical professional to assist them with various tasks. This can be as simple as getting out of a chair or as complex as cooking a meal or bathing. Both mental and physical ailments can bring about a need for long-term care including strokes and car accidents. Alzheimer’s disease is just one of the many mental conditions that requires extensive long-term care. According to the Center for Disease Control, 14.2% of all nursing home residents suffer from Alzheimer’s disease. This can be extremely costly and can destroy your financial security quicker than you think.

What long-term care options will I have?
Most people automatically think of nursing homes as the only long-term care options. While it is true that nursing homes account for a large percentage of long-term care, it’s certainly not the only option available and depending on your ability to perform tasks you may have a wide-range of options to choose from if you plan ahead. Insurance that helps cover costs of nursing homes, assisted living facilities and even in-home health care are all options that can be considered.

What’s the next step?
When deciding what type of long-term care planning you should do, it’s always best to consult with your closest family members. Once you have decided to pursue long-term care planning, there are various options available to you through the help of a trusted financial advisor.

With just a small amount of financial planning, you may be able to spend your final years in comfort and stability, without all the added financial stress and anxiety. Your family members will be able to spend time around you sharing their love and support, instead of dealing with debt and foreclosure. You will be filled with pride knowing that all you worked for is still intact. Just a small amount of long-term care planning could ensure that the dreams you achieved in life don’t disappear overnight.

And you may find that you are able to leave this world a little bit better than you found it.

Written by: Securities America, Inc. Distributed by: Lawrence D. Sprung.

COBRA Premium Subsidy Program Extended - December 30, 2009

On December 19, 2009, President Obama signed into law the Department of Defense Appropriations Act, 2010 (DOD) which extends the 65% COBRA premium subsidy to February 28, 2010.

The American Recovery and Reinvestment Act of 2009 provided a government subsidy of 65% of the cost of COBRA coverage for employees (and their eligible family members) who lost their health insurance coverage due to involuntary termination of employment in 2009. The subsidy was to last for up to 9 months. The DOD extends the subsidy to 15 months and includes eligible employees (and their eligible family members) who lose their jobs in January or February of 2010.

This article was provided by Forefield and distributed by Lawrence Sprung.

Electing Early Social Security Retirement Benefits

You can elect to receive Social Security retirement benefits at age 62 instead of waiting until normal retirement age.

You want to optimize your Social Security retirement income, and:

  • You are at least age 62
  • You are fully insured for retirement benefits
  • You have applied for early retirement benefits by contacting the Social Security Administration

Key Strengths

  • You will receive more benefit checks, making your lifetime benefit potentially greater than if you wait to receive benefits until normal retirement age. See Tradeoffs.
  • You can invest some or all of your Social Security benefit

Key Tradeoffs

  • Your retirement benefit is permanently reduced
  • You will have less chance to increase your average indexed monthly earnings
  • You may outlive the financial value of receiving early retirement benefits
  • Your surviving spouse's benefit may be permanently reduced
  • Your total family benefit may be especially limited if both the early retirement reduction and the family maximum apply

Variations from State to State

  • None

How Difficult Is It to Implement?

  • For information on how electing early retirement benefits will affect you, you can order a Social Security Statementfrom the Social Security Administration.
  • To apply for early benefits, contact the Social Security Administration two or three months before your 62nd birthday (or the date you want to begin receiving benefits, if later). Visit a local office or call (800) 772-1213.
  • For investment options or retirement planning advice, contact a financial professional.

This article was provided by Forefield and distributed by Lawrence Sprung.

Happy Holidays!!!

To everyone,

Whatever holiday you celebrate I hope you enjoy your holiday season. We at Mitlin Financial would like to also wish you a healthy, happy and prosperous 2010!!

We will be back Monday, January 4, 2010 with a new posting. Till then enjoy this time with your family and friends!!


Mitlin Financial, Inc.

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