My blog has moved!

You should be automatically redirected in 6 seconds. If not, visit the page Planner's Thoughts at
and update your bookmarks.

Wednesday, May 28, 2008

"Docubank" for the Storage of HIPAA Releases and Powers of Attorney

I recently became aware of a service which maintains and makes available legal documents, such as releases under the Health Insurance Portability and Accountability Act of 1996 (known as HIPAA releases) and living wills. HIPAA releases permit confidential medical records and information to be disclosed to those person(s) identified on the release form.

For a $45 yearly fee ($145 for a five year subscription), Docubank will make these important legal documents available to health care providers anywhere in the world, on a 24 hour basis.

How does it work? Docubank will fax these records to anyone requesting this information. The access codes are found on the Docubank membership card. The client is instructed to have this card in his or her possession at all times.

How this type of information can be quickly obtained is a constant, frequent issue which arises with my estate planning clients. My readers might consider the Docubank service as part of their estate plans.

Saturday, May 24, 2008

How to Give? Ideas from the Rich, and Near Rich

There are a myriad of ways to give, if you are so inclined. Some give directly to institutions (such as qualified charities) while others create trusts for this purpose.

Giving through a trust can be complex, and might involve (for example) setting up a Charitable Remainder Trust (called a CRT in estate planning circles), where income is paid for a lifetime or a certain number of years to a non-charitable beneficiary, with the charity receiving what is left afterwards (which is called the "remainder interest"). Another popular category of trust is a Charitable Lead Trust, where the charity receives the initial interest and the remainder interest going to non-charitable beneficiaries. The Charitable Lead Trust is abbreviated a "CLT."

Depending upon the method of giving, you as a taxpayer might be entitled to an income, gift, or estate tax deduction. But how do those wealthy enough to file an estate tax return give?

A recent IRS report written by Brian G. Raub shows how those with estates in excess of $1.5 million gave in 2004. That report broke down the giving patterns of the wealthy and near-wealthy.

The report shows that those with gross estates between $1.5 million and $3.5 million gave the most to educational institutions (28.7%), with the smallest percentage going to "animal related activities" (1.6%). Religious and spiritual giving among this near-but-not-quite-rich category was in second place, with 18.5%.

On the other hand, those with large estates of $5 million or more gave significantly the most to "philanthropy and volunteerism" -- 70.2%. Of this wealthy category of taxpayer, educational institutions were in distant second place (10.5%) with religious and spiritual giving receiving a paltry 3.2%.

By the way: The wealthy gave only 1.1% to animal related activities.

But don't be fooled by these low percentages. The amount of money involved is still significant. For instance, even the minuscule 3.2% given to religious and spiritual organizations by the wealthy (those with estates exceeding $5 million) totalled $443,482,000. The total of all charitable giving by all 2004 estate tax return filers (i.e., those with gross estates exceeding $1.5 million) totalled $17.8 billion dollars. Remember that this only relates to what was reported in estate tax returns. It does not include the giving recorded in income tax returns.

Of course, you don't need to be rich to give. Giving can be a part of any estate and/or financial plan -- along with beneficial tax deductions as a side benefit. Your financial and/or estate plan advisor can help you factor giving as part of your estate and financial plans.

(My thanks to Professor Caron of the TaxProf Blog for making me aware of this report)

Sunday, May 18, 2008

Thoughts on Planning for College

What are the best ways to plan for college? And what should you expect to pay for college?

According to a recent U.S. News and World Report article written by Kim Clark, yearly college costs, without grants, vary from $4,552 for community college, to over $35,000 for private universities. Of course, grants reduce the family burden -- when they are available.

Most families use a combination of debt and savings, and sometimes grants and scholarships to pay tuition. But there are a number of useful guidelines when saving for college. Consider the following:

Save early and often: Start when your children are young, if possible. In fact, if you plan on having children, there is no need to wait until they are born. Consider setting aside money even before the birth of your first child.

Don't worry about the amount: Are you falling short of your goal? Probably. But, who doesn't?

First, you will never have enough. Certainly, it's best to stretch your finances now as much as possible. You will thank yourself later.

But, second, do not give up if you cannot meet your contribution goal in any given month. If your finances are tight, contributing (for instance) $50 instead of the usual $300 is better than nothing. If you contribute that $50 in a mutual fund which grows at an annual rate of 8% over 16 years, that single contribution will be worth almost $180 when withdrawn. This is enough for a few college-priced text books. The lesson: Even a little helps. Just do the best that you can, and relax about it.

Don't be afraid of account volatility if your children are young: If your children are young, remember that several economic cycles will pass before they enter their first year of college. Thus, even if the market suffers a downturn (a likely scenario), contributing to a college account with growth potential -- such as in a mutual fund investing in growth stocks -- will provide a much greater potential for appreciation than a simple savings account. Of course, there are risks. However, placing even a portion of college funds in equity mutual funds will allow for growth.

Reduce exposure as your children approach college age. It is also wise to reduce risk as your children age. While youngsters will live through several economic cycles before college, your account will not recover from a devastating market downturn suffered as they approach their college years.

Be realistic about your little darlings. We all hope for the best for our children. However, contributing all or a significant portion of college funds to a Uniform Gifts to Minors Account (UGMA) or to a Uniform Transfers to Minors Account (UTMA) may not be the best choice. Your little darlings will own that account when they become adults; there is no guarantee that at the age of 18 they will use the funds for college. Busting your budget today, only to finance a beer party 16 years later is probably not what you had in mind. There are plenty of financial vehicles available which will give you control in later years.

I will discuss some of the best and most used investment vehicles in a later post.

Saturday, May 3, 2008

The Use of Insurance

Insurance is an important part of any estate plan. Those with small to medium sized estates, a life insurance policy is an important part of a financial or estate plan