Americans are some of the most generous people in the world. Although one might have expected charitable giving to have decreased in uncertain times during a global pandemic, Americans donated a record $471 billion dollars to charity in 2020, according to a recent report in Giving USA.

Making substantial gifts may involve some uncertainty in how they could affect the families' wealth management plans in the long term. That risk can be mitigated when using a trust to implement that plan. Should you have greatly appreciated assets, that planning can have important tax advantages to leverage your giving. 

One wealth management strategy is known as the Charitable Remainder Trust. With a charitable remainder trust, you retain the right to receive income from the trust for life, or for a period of not more than 20 years. Or, you can make another family member the income beneficiary. You give the charity that you have designated the right to receive the assets remaining in the trust once the income payments have been completed. The trust will be either a charitable remainder unitrust or a charitable remainder annuity trust.

The unitrust pays the income beneficiary a fixed percentage of its assets, determined each year. If the trust grows in value, the income payments go up. The annuity trust, in contrast, pays a fixed dollar amount each year regardless of the trust's investment performance.

Charitable remainder annuity trusts provide greater certainty than unitrusts, but do not protect against inflation. The donor knows exactly how much the trust will pay each year, unlike unitrust payments that fluctuate with market conditions. Still, in the long run most of the fluctuations should be upward, creating a growing income flow that helps the donor keep up with a rising cost of living.

While I am discussing charitable giving, I should also mention Private Foundations. Setting up a private foundation during your lifetime lets you play an active role in managing your philanthropy as well as giving you the opportunity to observe the results of your generosity. A foundation lets you make gifts privately and anonymously and can act as a shelter from a barrage of solicitations.

There also may be financial and emotional rewards for yourself and your family. For instance, members of your family may be appointed to the foundation's board of directors. A foundation funded with a major donation may be large enough to provide compensation for family members who carry out administrative functions or serve on the board of directors. Parents, children, brothers and sisters may become closer as they work together in their charitable endeavors to improve the world.

These strategies are meant to provide steps that link philanthropic intentions with reducing potential conflicts with other wealth management goals.
FAMOUS WILL FOR THE MONTH JERRY GARCIA
CLICK THE NAME TO READ
CLICK THE NAME TO READ
Jerome John Garcia (better known as "Jerry Garcia") was the founder and the undisputed leader of the band, the "Grateful Dead," which performed for over 30 years at the time of his death. 

In the Informational Article, The Social Security COLA, read how the benefit increase for 2022 will be the largest in many years. Also read, Estate Planning For Cryptocurrency as Cryptocurrency owners may need to put extra instructions into their testamentary planning documents. 

Ever wonder what the best-behaved dog breeds you can own are? Or, for those of you who watch Diners, Drive-Ins and Dives on the Food Network like I do, there is a listing of the places Guy Fieri has visited in each state in the Of Interest links.

By the time you are reading this newsletter Veteran's Day will have come and gone. All of us at Garden State Trust Company want to take this moment to give special thanks to our courageous armed forces and our beloved veterans for placing service above self so that ALL of us may continue to enjoy the freedoms we often take for granted as citizens of this wonderful country.

In the same spirit of gratitude and with Thanksgiving approaching, we want to give special thanks to all of our clients, colleagues, family and friends. We extend to all of you and your loved ones our best wishes for a warm and enjoyable Thanksgiving Day. 

Sincerely,
Ira J. Brower, Founder
Social Security COLA for 2022
The Social Security Administration has announced a 5.9% benefit increase for 2022, based upon inflation for the twelve months ending September 30, 2021. It's the biggest cost of living adjustment (COLA) in 39 years. For the average worker, the increase comes to about $92 per month. For the average retired couple, the increase is projected at $154, and so their combined monthly benefit will grow to $2,753.

With the increase in average wages comes an increase in the wage base for those who are still working. It goes from $142,800 in 2021 to $147,000 in 2022.

There are 64 million Social Security beneficiaries. The Social Security Administration did not project the total value of the COLA expense for 2022. A rough calculation would be $70.656 billion (64 million recipients x $92/month x 12 months). The increased expense will be offset by the additional 15.3% in Social Security taxes (employee plus employer share) on the $4,200 increase in the wage base (that comes to $627.30 in tax revenue per affected taxpayer). Hopefully the Social Security tax revenue will also increase as unemployment falls and labor force participation increases as the pandemic declines.

(November 2021)
© 2021 M.A. Co. All rights reserved.
Estate Planning for Cryptocurrency
Digital currencies (or cryptocurrencies) such as bitcoin are not just a fad. They are resources with potentially significant value, which is why the IRS is increasingly focusing enforcement efforts on collecting data in this area. 
In 2014 the IRS ruled that cryptocurrency is "property" rather than currency. Accordingly, cryptocurrency is subject to capital gains tax rules. The fair market value of cryptocurrency is to be calculated "by converting the virtual currency into U.S. dollars...at the exchange rate, in a reasonable manner that is consistently applied." There are sources that keep historical records of the value of a cryptocurrency as of a certain date, such as Poloniex and Coinmarketcap.com. These resources enable users to access cryptocurrency records much as they can access historical records of stock.

Cryptocurrency owners need to keep detailed records of the date of each virtual currency purchase and the amount, so that capital gains income tax planning can be accomplished effectively, such as (1) selling and paying the tax (or taking a loss) now, (2) gifting with a carry over basis, or (3) allowing it to pass at death to give the beneficiary a stepped-up basis.

Digital currencies have value, and so when someone dies owning cryptocurrency it must be reported in the valuation of an estate.

If the cryptocurrency is stored in a software wallet not connected to an exchange, arrangements should be made to protect and then transfer the private key or seed phrase for unlocking access to the person will own the virtual currency after the owner's death. Storing the key or phrase in a safe-deposit box is a frequently used technique. If the owner has cryptocurrency stored on an exchange, then protection, storage, and transfer of the user name, password, and security question information are needed. In addition, some exchanges use two-factor authentication. For example, after entering the user name and password on the exchange's website log-in page, the exchange may send a numerical code to the owner's cell phone, which the user must then enter to access the owner's account. If this is the case, the cell phone itself and how to access it also must be protected for the beneficiary. 

If someone owns cryptocurrency stored on a hardware wallet (flash drive), arrangements to reveal to the intended beneficiary both the drive's location and the keys, phrases, or codes needed to access it must be made. As with software wallets, keeping the device and phrase in a safe-deposit box is often an effective protection method.

Will there be a specific gift of any cryptocurrency upon death (either to a person or to a trust) or will the cryptocurrency become part of the decedent's general estate? If a specific gift is intended, the gift provision needs to be drafted carefully so as to transfer the cryptocurrency but not contain the private key, seed phrase, password, or other access information. Instead, the will should describe how the beneficiary (or trustee, if the transfer is to a trust) may obtain this information.

After a person has died, the executor of the estate will need to search diligently for the existence of digital currency. If the decedent used an exchange to purchase the cryptocurrency, the exchange account typically will be linked to a bank account or credit card, so the decedent's bank records or emails may provide a clue that the account exists. Signs of cryptocurrency also can be spotted on the decedent's phone, tablet, or computer, if a mobile wallet or offline wallet were used. 

If cryptocurrency is located, the executor or administrator will need to deal with it appropriately. The property is just like any other estate asset. It needs to be preserved as much as possible if it is subject to a specific bequest in the decedent's will. If it is not, the personal representative will need to decide whether to retain the cryptocurrency or liquidate it for United States currency. This will require the executor or administrator to act as a reasonably prudent investor.

(November 2021)
© 2021 M.A. Co. All rights reserved.
Surprising Retirement News
The Washington Post reports that for the period ending in September 2021, the number of retirements among workers age 65 to 69 rose 5%, based upon Bureau of Labor Statistics data. Yet the Social Security Administration reported that the number of workers starting their Social Security benefits fell by 5% during the same period. It was the largest annual drop in 20 years.

Apparently more and more people are retiring but delaying their benefits. The Post article suggests that several factors may contribute to the trend:

  • federal stimulus checks and expanded unemployment benefits allowed retirees to meet financial obligations in the short term;
  • pandemic-related restrictions at Social Security field offices around the country reduced access to in-person assistance in getting benefits started; and
  • soaring stock market and home prices may have enabled more people to defer starting their benefits.

Delaying the benefit start will result in a permanent increase in monthly benefits for the rest of the retiree's life. For those born after 1943 the increase is 8% per year of delay beyond normal retirement age, until age 70 is reached. Normal retirement age for the 1943 - 1954 age bracket is 66, so a full delay will increase benefits to 132% of the benefit at normal retirement age. For someone born in 1960 or later, normal retirement age is 67, so the benefit increase is 124% (three years of deferral instead of four to reach age 70). 

A discussion of the impact of delaying Social Security benefits may be found on the agency's website, "How You Can Grow Your Social Security Benefits Beyond Retirement Age"

(November 2021)
© 2021 M.A. Co. All rights reserved.
Articles of Interest
All dogs are good. That's a fact. But it's also true that some breeds are naughtier than others. Read More



Consider this your roadmap to Flavortown. Read More


Don't fret about this Thankgiving day task. Carving a turkey is easy when you take it step-by-step. Read More
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2021. All rights reserved.