Charitable trusts may help lower estate taxes

February 1, 2012

There are many factors to be considered prior to implementing any type of charitable trust strategy.

Key Points

Q I'm going to delay receiving Social Security benefits in order to receive a higher monthly amount. When, though, do I apply for Medicare?

The amount of the income tax deduction depends on the percentage of the income interest and the period over which it will be paid (usually the life of the donor and his/her spouse). This calculation is determined from the mortality tables published by the government.

On the other end of the charitable gifting spectrum are those individuals who want the charity to receive only the income, not the asset itself. A charitable income or lead trust is the reverse of the charitable remainder trust. The income interest is assigned to the charity, usually for a period of years, and then the remainder generally passes to the donor's heirs. The amount of the estate tax deduction and the amount left for the heirs will depend on the number of years income is to be paid to the charity, the size of the annual payments, and the investment results achieved by the trustee.

There are many factors to be considered prior to implementing any type of charitable trust strategy. To determine whether it makes sense for your particular situation, be sure to consult with your tax and estate planning advisers.

Q. I'm going to delay receiving Social Security benefits in order to receive a higher monthly amount. When, though, do I apply for Medicare?

A. Health care is one of your most significant expenses in retirement. Even if you don't plan to receive monthly Social Security benefits until a later age, you should sign up for Medicare 3 months before reaching age 65. Medicare Part A is for hospitalization and has no cost, Part B is for outpatient services and doctor visits, and Part D is for prescription drug coverage through private carriers. For both Part B and Part D, you have to pay premiums.

You can also purchase Medicare Supplement Insurance to cover gaps in Medicare coverage through private carriers. Medicare does not pay for assisted living or nursing home care after 100 days. Long-term care insurance policies provide coverage should you need at-home, assisted living, or nursing home care for an extended period of time. Policies can be customized and should be considered in your overall retirement planning.

Joel M. Blau, CFP, is president and Ronald J. Paprocki, JD, CFP, CHBC, is chief executive officer of MEDIQUS Asset Advisors, Inc. in Chicago. They can be reached at 800-883-8555 or blau@mediqus.com
or paprocki@mediqus.com
.