Exit Strategies for Charitable Remainder Trusts

Exit Strategies for Charitable Remainder Trusts

In 1995, Bill and Sandy met with me to discuss what to do with a real estate investment that had appreciated significantly. The investment represented a meaningful portion of their net worth, and they felt the time was right to sell. However, they didn’t necessarily need a large infusion of cash and they didn’t want to pay the tax (in 1995, the capital gain rate was 29%).

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What Bill and Sandy really needed at that time was income. They had two active teenagers and were paying for private school, travel soccer, spring break trips, and summer excursions abroad. They also had a large home to keep up with and needed to keep everyone entertained.

A CRT Was a Good Choice at the Time

It seemed that at this time a charitable remainder trust (CRT) would be their best option. While there are many versions of the CRT, simply stated, the taxpayer establishes a trust in which the taxpayer is the income beneficiary and at death, the remainder of the assets in the trust pass to one or more named charities.  The CRT is established before the asset is sold, the asset is contributed to the trust, and on sale, no federal or state tax is due on the gain.  The taxpayer will receive a charitable income tax deduction on the present value of the future income stream, which can be used to offset some or all of the income tax liability. Thus the CRT would enable Bill and Sandy to put their real estate in the CRT, then sell it, and defer the related capital gain, garner an immediate charitable deduction, and collect income from the trust moving forward.

The CRT worked masterfully for years. They enjoyed the income stream while their children were still in the house and active. Afterward, they used it to help pay college tuition and were able to continue to use it during a period of world travel during early retirement.

Then Things Changed

But then Bill and Sandy decided to slow down a bit. They sold their house and moved into a condo near their golf and tennis club.

Today, they continue to enjoy their condo and frequently visit their children and grandchildren for months at a time. Their income need is minimal, and Bill recently had their CPA go on a “quest,” as Bill likes to say, to reduce their taxab

Read more: https://www.kiplinger.com/retirement/estate-planning/601007/exit-strategies-for-charitable-remainder-trusts

For Financially Responsible Kids, Do NOT Do These 3 Things

For Financially Responsible Kids, Do NOT Do These 3 Things

“I can’t afford it.” Whenever I hear a young person utter those words, it’s music to my ears.

Hey Parents: Financial 'Adulting' Tips for Your Kids

No, I’m not a middle-aged ogre delighting in the social setbacks of the young. I’m a fan of the young people out there who are learning to turn down things they cannot afford, like the friend who says no to a night out for dinner and drinks with their buddies. These young people are making several important financial decisions: prioritizing their spending, making a sacrifice and standing up to peer pressure. These are all important skills they’ll need on the road to financial responsibility.

Many young people never learn these important skills because their parents have never taught them. Somewhere along the way, it became unfashionable to have realistic financial conversations with our children. The thought never occurs to many people that they could simply tell their children, “We can’t afford it.” Those simple words are the foundation for establishing strong financial habits.

If you want your kids to be fiscally responsible (for their sake as well as yours), rethink how you handle certain life milestones.

Mistake No. 1: Leaving the college decision-making process to 17-year-olds

Americans have lost all sense of value when it comes to college selection. Most parents feel obliged to send their children to the best — and often the most expensive — school they can get into. We are leaving large financial decisions that will impact the whole family up to our 17-year-old children.

We don’t let our children shop for our cars or our homes, but somehow we feel compelled to leave this one up to them. A $300,000 after-tax decision should not be left in the hands of a child.

Yet parents are loath to set realistic expectations. They don’t want to disappoint their children if they have their hearts set on a private school — no matter the cost. There is also social pressure on parents and students. Combine these dynamics with unlimited borrowing options and you have $1.6 trillion in outstanding student loan debt. A burden for parents and their children.

Another way forward:

If you have saved $120,000 for college and the private school your child wants to attend is $

Read more: https://www.kiplinger.com/personal-finance/how-to-save-money/family-savings/601006/for-financially-responsible-kids-do-not-do

5 Steps to Take if You’ve Lost Your Job

5 Steps to Take if You’ve Lost Your Job

A record 39 million Americans have filed for unemployment benefits since March as a result of the economic crisis stemming from the coronavirus pandemic. The total number is staggering, particularly when you consider the impact a sudden job loss has on the lives and families of those who’ve been let go.

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If you’re among those who have been laid off, you may be feeling overwhelmed and anxious about your financial stability. That’s understandable, but don’t let panic or fear guide your reactions. Now is the time to take stock of your situation and control what you can. Here are five tips to help you manage your finances during this difficult time and establish good habits that can serve you well into the future.

1. Manage your expenses

After a job loss, re-evaluate your monthly spending and look for ways to reduce your expenses. Consider cutting discretionary services that you can handle yourself, such as house cleaning, landscaping or other household tasks that you’ve previously hired others to do.

Also, use the opportunity to reach out to your service providers of essential items — like internet, phone service and insurance coverage — and see if you can trim back these expenses. Now would be a good time to negotiate a lower rate, especially if you haven’t done so in some time. This move can reduce your expenses without sacrificing important things.

2. Obtain health care

As the global health crisis evolves, now is not the time to be without health insurance. If your employer provided you with a severance package, check the details to see if you qualify to remain on the company medical insurance and for how long. It’ll give you some time to decide how to handle health insurance, once you’re no longer on the company plan.

Typically, you have three health care options to choose from.

If you’re married, and your spouse remains in his or her job and it offers health coverage for you, then that’s most likely the family’s best bet. You can also choose to go on COBRA (Consolidated Omnibus Budget Reconciliation Act), which may allow you to continue the insurance coverage through your former employer for potentially 18 to 36 months. This will usually be your most expensive option, since

Read more: https://www.kiplinger.com/personal-finance/careers/unemployment/601000/5-steps-to-take-if-youve-lost-your-job

Stock Market Today: Stocks Close Stellar Q2 With a Flourish

Stock Market Today: Stocks Close Stellar Q2 With a Flourish

It's difficult to cast these past three months in a positive light given the fallout of the COVID-19 pandemic, but, for the stock market, Q2 was in fact a quarter to remember.

A day of gains for tech- and tech-adjacent sectors led the major blue-chip indices to higher ground, capping their best quarterly performances in years.

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Tuesday's gains came on little to crow about, mind you.

Joint testimony from Treasury Secretary Steve Mnuchin and Federal Reserve Chair Jerome Powell painted a mixed picture of America's economic recuperation. And Dr. Anthony Fauci, the nation's leading infectious-diseases expert, said America's daily coronavirus caseload could hit 100,000 if current trends continue, warning that America isn't "in total control" of the pandemic.

The tech-heavy Nasdaq, led by the likes of Amazon.com (AMZN, +2.9%) and Nvidia (NVDA, +3.2%), still pushed 1.9% higher to 10,058, capping a 30.6% three-month gain that marked its most productive quarter since 2001.

The Dow, which closed with a 0.9% gain to 25,812, enjoyed its best quarter since 1987 with a 17.8% rally. And the S&P 500, up 1.5% to 3,100, posted a 20.0% quarterly return for its best Q2 since the index's inception in 1957. The small-cap Russell 2000 climbed 1.4% to 1,441, its best quarter since 1991.

What's in Store for Stocks in Q3?

Mercifully, investors will get a day off early in the quarter. The stock and bond markets will be closed Friday in observation of Independence Day, as July 4 falls on a Saturday this year.

More broadly speaking, we enter Q3 in a much different place than we entered Q2 … but in a nonetheless similar scenario. 

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While stocks are in the middle of a heater, as opposed to in the midst of the quickest bear-market decline in U.S. history, the American economic horizon appears every bit as foggy now as it did three months ago.

How quickly will jobs return? Will Congress pass another round of stimulus? How will the evolving presidential race weigh on or prop up the stock market? Will we take the upper hand against COVID-19? These are just a few of the questions that, when answered, could take stocks for ano

Read more: https://www.kiplinger.com/investing/stocks/601005/stock-market-today-stocks-close-stellar-q2-with-a-flourish

5 Cheap Stocks to Buy for $10 or Less

5 Cheap Stocks to Buy for $10 or Less

Cheap stocks are effectively Wall Street's casino. It's OK to play them for fun once in a while – just don't make a habit of it.

Stocks come in all shapes, sizes and prices. Right now, some of the largest companies on earth include Amazon.com (AMZN) and Google parent Alphabet (GOOGL), both of which trade at four-figure prices. While nominal prices broadly don't mean much – a company with a $50 stock might be every bit as solid as a company with a $250 stock – these firms' outsize stock prices (and more importantly, their roughly trillion-dollar market values) reflect a long track record of success, not to mention extremely stable financial positions.

On the other end of the spectrum are small caps and even micro-caps: typically cheap stocks that trade for such low prices for a reason.

Investors often gravitate toward cheap stocks in part because of the psychological appeal of being able to buy many shares for a small dollar cost. Also, these stocks are often subject to bigger price swings, making it seemingly easier to reap big gains in a short time.

But institutional investors often do the opposite. Sometimes they bow out once a stock dips below $10, and more will exit once share prices dive below $5. That's because while nominal prices typically don't matter, when they're low enough, they reflect higher risk. Some stocks trading in single digits are in long-term decline. Very low stock prices often reflect smaller market values, and lower-value companies are more susceptible to "pump and dump" schemes. Also, the major exchanges have a $1-per-share minimum trading threshold – stocks that trade under this for long enough risk being delisted.

Even good cheap stocks to buy carry significant risks, such as high debt loads or narrow revenue streams.

Here, we've identified five cheap stocks to buy for their promising potential. In each case, they've caught the eye of at least one or two analysts; like institutional investors, Wall Street's analyst community often turns away from sub-$10 stocks. Just remember: These are extremely risky positions that can move in a hurry. If you invest in these at all, do so in small amounts that you can afford to lose. Also, use limit orders and stop-losses when speculating in cheap stocks, a

Read more: https://www.kiplinger.com/investing/stocks/small-cap-stocks/601004/5-cheap-stocks-to-buy-for-10-or-less

IRS Is Not Extending the Tax Deadline Again

IRS Is Not Extending the Tax Deadline Again

The IRS has some bad news if you were hoping for more time to file your tax return. Due to COVID-19, the original due date for filing 2019 returns was already postponed from April 15 to July 15, 2020. However, several groups were pressuring the IRS to allow even more time to file returns and pay taxes this year. But the IRS shot down that idea and announced that there will not be another delay. So, you still only have until July 15 to get your taxes done and pay any tax due.

If you can't meet the July 15 deadline for whatever reason, you can request an automatic extension of time to file until October 15 by filing Form 4868 by July 15. While this will give you more time to file your return, it does not give you more time to pay any tax due. You still have to estimate your tax liability on the extension form and pay any amount due by July 15 to avoid penalties and interest.

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You can also get an extension by paying all or part of the tax you owe using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. Make sure you indicate that the payment is for an extension. When getting an extension by making a payment, you don't have to file a separate extension form and will receive a confirmation number for your records.

If you're facing hardships, including those related to the coronavirus pandemic, and can't pay the tax you owe, pay what they can now and look into the various IRS payment options for the remaining balance. They include setting up a payment plan, an "offer in compromise," or requesting a temporary collection delay. Another option is to take out a loan to pay the taxes due, since loan costs could be lower than the combined IRS interest and penalties.

Tax Changes and Key Amounts for the 2020 Tax Year

Finally, don't forget about your state tax return. The due date for your state return could be different than the July 15 deadline for federal returns. Check with your state tax agency to double check the tax due date where you live.

Read more: https://www.kiplinger.com/taxes/tax-deadline/601001/irs-is-not-extending-the-tax-deadline-again

Hail to Your Finances, Regardless of Who Wins Presidency

Hail to Your Finances, Regardless of Who Wins Presidency

There’s a lot of uncertainty about who will win the presidential and congressional elections in November.

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Just what the results will mean for individual finances and investments is really anyone’s guess, but many of us are thinking about it. In fact, 72% of Americans believe whoever is elected to the White House will directly impact their personal finances, according to a survey released by personal finance website FinanceBuzz in January, and 32% are putting off a big financial decision until Election Day.

We can’t predict the future, but just what can — or should — we do to mitigate concerns about how the election will impact our finances? There are a few things to keep in mind:

1. Stay in control

You’re the commander-in-chief of your finances regardless of who’s in the White House, so it’s crucial to focus on what you can control rather than what politicians or pundits say will happen. That includes determining your savings rate, your discretionary spending, your asset allocation and your estate planning. While markets could be volatile, being proactive about identifying your financial goals and how to achieve them can help you ride out storms. Your objectives come first.

2. Avoid being reactive

One of the surest ways to hinder your financial plan is to make knee-jerk reactions that cost you money. Bailing out of investments at the height of the COVID-19 crisis, for example, costs investors billions of dollars in savings. But equally damaging can be paralysis by analysis—overanalyzing a situation to the point where investors struck by fear are moved to inaction.

Keeping a clear head is what’s needed, and focusing on your goals is the best way to stay on track. If you’re a long-term investor, for example, periodic reviews of your asset allocation are important but should lead more to tweaks than overhauls. Meanwhile, for short-term investors or those nearing retirement, a focus on reducing risk in your investments should be a main goal.

3. Ignore the pundits and political theories 7 Tips to Help Spot 'Fake' Financial News

There’s a long-held theory that stock markets are generally weakest in the first year of a first-term president. In fact, market indexes were up in the first yea

Read more: https://www.kiplinger.com/retirement/retirement-planning/600990/hail-to-your-finances-regardless-of-who-wins-presidency

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