“No-Kids” Estate Planning
We are often asked, “What particular issues face a childless couple in estate planning?” or, “What about single people with no dependents?” or, “What if we have one or more children who have created their own wealth and so neither want nor need a significant inheritance?” or, “What should we do to make sure that our wealth helps charities or family members who are not our children?” If you are asking those sorts of questions, we can help you. You are part of the substantial population of adults who do not fit the traditional or “nuclear” family model. Many of our clients are just like you.
In every family wealth planning engagement, we consider a broad range of planning techniques to determine which of them would best serve to meet that client’s own personal goals.
Some things are pretty constant. Everyone needs a foundation estate plan. If you have no children who will be the recipients of your remaining wealth, there are a several planning techniques worth considering. A few of them are:
Paying for College and Health Care
Structured the right way, you can pay for anyone’s higher education without owing gift taxes or using up part of your $1,000,000 lifetime tax-free gifting allowance (which is in addition to the $13,000 per year per person you can give). The rules are quite specific, so beware!
Also, you can establish tax-favored “529” college savings accounts in which the money will grow tax-deferred until it is tapped for tuition, books, and sometimes room and board. These accounts can be “front loaded” with a single-year gift of $65,000, but special care must be taken to keep the account balance out of the donor’s estate.
In this era of ever-rising health care costs, establishing a fund to provide for the health care of others can be a wonderful gift. You have total freedom to choose who your beneficiaries will be. It could be your own relatives, the family of whoever is serving as youth pastor of your church, or any other definable group or person.
Creating an Income Stream for Yourself
We can help you transfer assets to certain beneficiaries during your lifetime with substantial tax advantages while creating an income stream for yourself. This does not work if the beneficiary is your spouse, child, or sibling, but it is a wonderful way to benefit collateral relatives, such as nieces, nephews, and cousins.
The amount of wealth that can be passed on using this technique, even when you retain a 10-year income stream, can be quite astounding.
Establishing a Charitable Trust, Donor-Advised Charity Fund, or Private Foundation
Charitable gifts, subject to certain limitations, are income tax deductible. And, they usually don’t count against your $1,000,000 lifetime tax-free gifting allowance.
If you have $2,000,000 or more to give, you might want to create a private foundation that you can control so that the earnings on your gift will go to the charities that meet the criteria you set from time to time. Because of the reporting and record-keeping costs, with lesser amounts it usually does not make economic sense to create a private foundation, but good alternatives exist – like donor-advised funds at a community or national foundation or a charitable trust. If the ultimate amount given may reach that private foundation threshold over time, it might be best to start with a charitable trust that could later “pour over” into your private foundation or a owner-advised charity fund.
Often these techniques are ideal for the individual, couple or family with non-cash assets that have appreciated in value. The transfer of that sort of assets to one or more charities (either immediately or sometime in the future) can often be structured to provide an income tax deduction to the donor, eliminate the capital gains tax liability that a sale would create, provide a stream of income to the donor or other designated beneficiaries, and be earmarked for specific purposes.
There are numerous options for the childless and for those who do not choose to leave their entire estates to their own children. If you would like to explore these opportunities with us, please CLICK HERE.