Several years ago, Merrill Anderson and Co. published an article with valuable information about investment management using a revocable living trust that I think bears repeating because it is just as relevant today as it was then. Developing a sound investment management strategy is more than allocating assets and diversifying among the various asset classes. It is also about attaining your financial goals in life. The long-term security of your family is likely to be a key goal. To reach it, you want to ensure that your assets will continue to grow--providing the income that your loved ones will need to live comfortably, should you not be able to provide for them. And one of the most valuable resources available to help you achieve that goal of long-term financial security is a revocable living trust. 

A revocable living trust allows you to arrange for the management of your assets both while you are alive and after you are gone. By establishing your trust now, you may be able to reduce the stresses and strains that your family may experience when they are forced to make difficult financial and investment decisions after you're gone.

Think of a trust as a container, a place where you can transfer your securities, real estate or other property. This transfer is accomplished by making the trust the new owner of your assets. Keep in mind, you retain control while you are competent, and you direct what happens to the assets after you are gone or are unable to make the necessary decisions about their management. These instructions are contained in a trust agreement that will be implemented and administered by the trustee that you name to oversee the trust.

Neither the instructions in the trust agreement nor the trust itself needs to be permanent. Since the trust is revocable, during your lifetime you have the power to alter the directions in the trust as you deem necessary to meet your specific changing circumstances. If necessary, the trust itself can be revoked and your assets transferred back to you.
Your trustee will serve as the manager of the trust's investments. When you name a corporate trustee, such as Garden State Trust Company, we can assist you in developing the strategy that will best serve you and your family, based upon your personal circumstances. 

When we assist you in formulating and developing an investment management strategy, you may delegate to us in the trust agreement the authority to make all of the investment decisions. However, if you want to retain more control, you can require us to submit recommendations for your approval before making changes to your trust investments. In all cases, as trustee, we will be responsible for all the paperwork and tasks associated with the management of your assets.

If you haven't yet made the decision to integrate an "active" living trust into your current financial plans, you may want to look at an alternative--a standby trust. A standby living trust offers you the opportunity to achieve a high degree of protection for yourself and your family should you become ill or incapacitated but allows you to maintain total control of your investments. The trust is activated only when you are unable to manage your investments, and only for as long as necessary.

In addition, the trustee can be directed to use the trust's assets to pay household bills and taxes, for example. At a time when your loved ones are apt to be burdened by concerns other than financial ones, they will have the confidence of knowing that professionals are managing the family's finances in your absence.

A living trust can operate as a highly efficient organizational tool, providing a unified approach to the management of your assets today and tomorrow.
Introducing the Garden State Trust Company Tool Kit

We are always striving to improve our website for visitors to use as both an informational and a learning tool. To that end, I want to share with you that we just added a Tool Kit https://gstrustco.com/resources/learning/ to our website. The Tool Kit contains a Required Minimum Distribution (RMD) Calculator. RMDs are withdrawals you have to make from most retirement plans (excluding Roth IRAs) when you reach the age of 72 (or 70.5 if you were born before July 1, 1949). For those of you involved with or interested in estate planning, we are pleased to provide a Charitable Remainder Trust Gift Calculator. Go ahead, give the CRT Gift Calculator a try!
FAMOUS WILL FOR THE MONTH JOHN LENNON
CLICK THE NAME TO READ
CLICK THE NAME TO READ
The Last Will and Testament of John Lennon left almost all of his estate to his wife, Yoko Ono. It is interesting to note, however, that he created a revocable living trust during his lifetime and his Last Will and Testament "pours-over" the bulk of his probate estate to his living trust. 

In the Informational Article, IRAs in 2021 and 2022 see how Contribution limits are unchanged, but inflation adjustments have been made to the phase-out ranges. Read in Planned Giving in 2022 how by taking tax consequences into account, one may be able to enlarge philanthropic support without compromising family financial security.

We hope that you enjoy reading our monthly newsletter.

Sincerely,
Ira J. Brower, Founder
When Should You Consider a Living Trust?
Living trusts are flexible, versatile, asset-management tools that can offer long-range value in a variety of financial and family circumstances. But they aren't for everyone. We would be pleased to answer any questions about what, specifically, a living trust might accomplish for you and your family. For starters, you should find this introduction helpful. 

To create a trust, you, the grantor, transfer cash, securities or other assets to a trustee. You give the trustee--us, we'll assume--legal ownership of the assets in the trust while retaining the beneficial interest for yourself or others.

A trust agreement, prepared according to your direction, provides us with instructions about how we are to manage the trust's assets and how you wish the income from the assets and the assets themselves to be distributed. The agreement can be changed in any way that you wish, at any time, and the trust itself can be cancelled if you find it necessary (hence, its formal name, the revocable living trust.)

That's the basic blueprint. Now let's look at why you might want to establish a living trust.

1. When you are looking for professional portfolio management 
The information age has not made the job of investment management any easier. We are living in a time in which conventional wisdom can turn on a dime; last year's hot tips might be this year's losers; and the uncertainties of tax and regulatory changes cast an ambiguous shadow over the best-laid plans.

A living trust allows you to delegate the important job of managing your investments to professionals who have made a full-time career of portfolio supervision for accounts of all sizes.

2. When you need a contingency plan
Should you become ill or incapacitated, either temporarily or permanently, the trustee of your living trust can step into your shoes, managing your portfolio as you yourself would. And the trust agreement can call on us to do much more than manage your investments. A trustee can be directed to use assets to pay household bills and taxes, for example. In a time when your loved ones are apt to be burdened by concerns other than financial ones, they will have the confidence of knowing that professionals are managing the family's finances in your absence.

3. When you want to avoid unwanted scrutiny
A will offers no degree of privacy. It is a matter of public record. Because a trust is a private document it may be able to escape public scrutiny. (Assets in a trust also may avoid the delays and costs associated with probate proceedings.)

The privacy aspect of a living trust is especially comforting when an individual becomes incapable of managing his or her financial affairs. The publicity, time and expense of a formal conservatorship proceeding are avoided when a living trust has been put in place.

But a living trust is not a complete substitute for a will. In almost all cases, there will be some property that you own that you will need to leave to your heirs by will. 

Our promise to you
We will give you the information that you need to make an informed decision about how a trust arrangement can be tailored to meet you and your family's needs. When you name us to serve as the trustee of your trust, we will use our knowledge and experience to make certain that the directions you provide are carried out exactly as you tell us, in an objective and unbiased manner.

We look forward to telling you more about the role that a living trust can play in your family's financial security today, and in the future.

(January 2022)
© 2022 M.A. Co. All rights reserved.
Planned Giving for 2022
The idea of "planning" a gift to charity may not spring as readily to mind as investment or retirement planning. Yet there are many ways to give, and many kinds of gifts to consider, especially when philanthropy is one of your core values. 

Initial steps
Of course, the very first step in your planning is to identify the object of your philanthropy. Then consider what you intend your gift to accomplish: how you would like your gift to make a difference both in general and specific terms. At this point you probably will make contact with the director of development at your chosen charitable organization to discuss your gift.

With the procedural steps out of the way, creativity begins. How can you shape your gift? For instance, your gift need not be cash (except that non-cash gifts do have a lower deduction limit). You may own certain assets that you may want to donate, and your charity will be more than glad to receive. 

Qualified Charitable Distributions
Those who are 701/2 or older may direct up to $100,000 from an IRA to a qualified charity (a Qualified Charitable Distribution, or QCD). The QCD will qualify as a Required Minimum Distribution (RMD), which is mandated for those over age 72. The QCD may be a good choice for the charitably minded, because the amounts so transferred are not included in income, and that can have other tax benefits.

Gifts of property
Generally, your federal income tax deduction for your gifts to charity is the fair market value of the transfer. There's a tax bonus when you make a gift of a long-term capital asset that has appreciated in value during the time that you owned it. 

Here's how it works: You plan a substantial gift and are considering selling some securities that you have owned for years which have grown significantly as the means to fund the gift. You'll pay a long-term capital gain tax on the sale and then can pay what's left over to your charity. If you make a gift of the securities themselves, you will pay no capital gain tax. The charity can sell the securities without incurring any tax. You also will be entitled to an income tax deduction for the fair market value of the gift of securities (limited to 60% of AGI).

Another creative approach is to make a gift of personal property, such as a work of art or valuable collectibles. You can deduct the current market value of a gift of appreciated personal property, but there is an important caveat: If the contributed property is related to the exempt purpose of the organization--rare books to a library, for instance--the full deduction is available. However, if the property is unrelated to the charity's purpose--the books to a hospital to sell and use the proceeds--your deduction is limited to the property's cost basis. 

Gifts of real estate
For some people a gift of a parcel of land held for many years that has appreciated significantly in value may be an especially attractive candidate for a gift to charity.

As with other appreciated property, you will have the opportunity to take an income tax deduction for your charitable contribution equal to 100% of the property's fair market value, which, if you have held the property for some time, may be substantial. In addition, you pay no capital gain tax on the past appreciation. An added bonus: You are reducing your taxable estate by the value of your gift.

If you would rather take a "wait-and-see" approach, you can make the real estate gift as a bequest in your will. Although you receive no current income tax deduction, your estate receives a full deduction for the real estate's fair market value at your death.

Gifts in trust
Fashioning your gift in trust adds a great deal of flexibility to your gift giving. 

There are many ways to establish your trust. For example, you may set up your trust during your lifetime or through provisions in your will. You can arrange for the trust to provide you with income from the trust for your life, or income for someone whom you name in the trust document. You can provide for the gift of income to yourself or the named beneficiary or beneficiaries for a period of time or for life, followed by a transfer to the charity (a charitable remainder annuity trust, or charitable remainder unitrust); or the reverse--a gift of income to the charity followed by a transfer of assets to the named beneficiary (a charitable lead trust).

You may fund your trust with cash or be more creative by using the aforementioned appreciated securities, real estate, or perhaps a life insurance policy. When your donation is placed in the trust, you receive an income tax deduction for the charitable part of the gift. 

You'll need to cross all the "t's" and dot all the "i's" in order to reap all the possible tax benefits from a charitable gift in trust. Be sure to confer with your attorney, trust consultant, and the charity itself when considering any of these creative ways of giving.

(January 2022)
© 2022 M.A. Co. All rights reserved.
IRAs for 2021 and 2022
In 2019 Congress revisited the rules for qualified retirement plans and IRAs, with an eye toward boosting retirement savings. To that end, the age limit of 701/2 for making a contribution to a traditional, deductible IRA was eliminated. However, one still must have "earned" income to make any IRA contribution--income from investments, pensions, gifts, and Social Security benefits does not count. 

The amount that may be contributed to traditional and Roth IRAs has not changed, 6,000 for 2022, as it was in 2021. Those 50 and older may make an additional $1,000 "catch-up" contribution. IRA contributions for the 2021 tax year are permitted until the tax filing deadline. 

A contribution is one thing, the deduction is something else. Those who have no employer retirement coverage are permitted a full deduction for IRA contributions, regardless of income. Those who have such coverage will find the deduction phases out as their modified adjusted gross income (MAGI) grows, as shown in the table below. A person whose spouse has an employer-provided retirement plan also has limits on the deduction.

The Roth IRA should be considered, especially by those whose income exceeds the deductibility threshold. There is no deduction for the contribution, but there is the possibility of complete tax freedom for all distributions. Income limits apply to Roth IRAs as well, but those limits are higher than for deductible IRAs.

Key IRA boundaries
Source: Internal Revenue Code; M.A. Co.
 
(January 2022)
© 2022 M.A. Co. All rights reserved.
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