Tuesday, November 9, 2021

Charitable Giving with Taxable Retirement Accounts

More and more Americans have become better at putting money away towards retirement through 401(k)s, IRAs, and other retirement plans within their organizations.  Unsurprisingly, that means that come retirement, a large portion of an individual's wealth is held in tax-deferred accounts that create taxable income.  For those who are charitably inclined, there are options that individuals can utilize to reduce taxable income and to leave assets to charity or religious organizations while leaving other assets to family and friends that may not be taxable. 

Qualified Charitable Distribution ("QCD"): Once you have reached the age of 70 1/2, you can begin to make distributions directly from your IRA to a qualified 501(c)(3) charity.  By doing this, you can make limit the amount that would otherwise be taxed as ordinary income.  This would also be calculated in your annual required minimum distribution (RMD).  By utilizing a QCD, your taxable income would be lower and could also impact your Medicare premiums by reducing them in future years.

Charity Beneficial Designation:  If you wish to leave a portion of your estate to a charitable organization after your passing, you may be told to write those wishes into your Will or Trust.  Whereas, if you have a sizeable retirement account, it may be best to designate the charity directly as a beneficiary of your 401(k) or IRA assets.  This arrangement allows you to easily change charities you may wish to leave your assets to without the need to update your estate planning documents.  Secondly, you would be leaving taxable assets compared to a charity that is able to avoid taxation on the assets to leaving retirement assets to an individual that would be taxable to them on distribution.  This would allow you to leave the taxable, retirement assets to charities and leave other assets that would not result in income tax to individual beneficiaries.

Utilizing these two options allow you to give to your favorite charities while also obtaining tax benefits for yourself and to your heirs. 

If you have any questions about tax and estate planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group, or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Tuesday, November 2, 2021

A Simple Estate Plan with the Use of a Transfer on Death Instrument (TODI)

The largest asset that most individuals possess during their life is their residence.  Over the years, your residence may have been where you raised your children, shared family holidays, and spent money improving and repairing. 

When the main asset in your estate is real property, it oftentimes requires a probate estate to be opened in order to transfer the property to heirs or beneficiaries under a Will.  This can be costly and time-consuming for many families.  Thankfully, in Illinois, we have the option to create a Transfer-on-Death Instrument ("TODI") for real property that easily conveys ownership of the property on the owner's death to named beneficiaries. 

The TODI can be an effective substitute for a will or trust if a residence will be the main asset of an estate.  As long as the TODI is signed with the formalities of a Will (two witnesses and notarized), the TODI is effective once recorded with the County of the real property. Upon the death of the owner, the beneficiary then has to record a "notice of death affidavit and acceptance."  

With the use of a TODI, the transfer of the real property can be less complex and less costly than using a Will or Trust.  It is also revocable if the owner changes his/her mind and wishes to sell the property at any time.  

If you have any questions about preparing an estate plan, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.