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MARCH 2023
Most people are not familiar with an estate planning tool referred to as a CRT, which stands for Charitable Remainder Trust. Don’t let the name fool you — most people who use this vehicle don’t use it because they are charitably minded (although some are). They use it because it keeps a lot more money in the family and away from the IRS. Due to major changes recently in the withdrawal requirements for retirement accounts, CRTs have become extremely popular. Here’s what happened. Prior to 2020, a beneficiary of a retirement account, such as an IRA or 401(k), had the option to withdraw the funds from the inherited retirement account over their life expectancy. This would allow the income taxes to be deferred for many years. The compounding growth that could occur in the retirement account was nothing short of phenomenal. In 2020, the government, recognizing a lot of income tax revenue was lost, passed the SECURE Act. This changed the withdrawal requirements for inherited retirement accounts from the beneficiary’s life expectancy to 10 years. There are some exceptions for certain beneficiaries, such as the surviving spouse of the decedent and a permanently disabled beneficiary, to name a couple. However, for the most part, the 10-year withdrawal requirement applies to most beneficiaries. This new law gave rise to a sudden interest in a relatively old planning tool known as the Charitable Remainder Trust. Traditionally, there are two primary reasons why a person or couple creates a CRT: 1) to avoid the capital gains tax when selling an asset that has substantially appreciated, and 2) to receive a stream of income for the person’s or couple’s lifetime. Can You Make Money by Giving It Away? The CRT Has Become an Amazing Estate Planning Tool for Retirement Plans
for the rest of their life. Typical percentages range between 5% and 7%. Then, the appreciated asset or assets are transferred to the CRT. Because the CRT is treated like a charity, transfers to the CRT are considered a charitable donation, and a charitable deduction can be taken on the donor’s tax return. Next, the asset (or assets) is sold, and because the CRT is treated like a charity, there is no tax due on the capital gains. Now that the asset is liquidated (cash or securities), the donor begins to receive a distribution from the CRT every year based on the predetermined percentage. For example, if the value of the CRT principal is $1,000,000 and the predetermined percentage is 5%, the beneficiary will receive a distribution of $50,000 for the first year ($1,000,000 x 5%), leaving $950,000 in the CRT. If we assume the assets grew by 8% (less than the average of the S&P 500 in the last 20 years), the value of the assets in the CRT the following year would be $1,026,000 ($950,000 + 8%), and the beneficiary would receive a distribution of $51,300 ($1,026,000 x 5%). This distribution will continue for the lifetime of the donor. In the case of a married couple, the distribution continues for the lifetime of both spouses. With a few exceptions, after the donors pass away, the assets in the CRT will transfer to the designated charity. This was a win-win situation for the parents and the charity, but not, unfortunately, for the children. There are complicated methods of Continued on Pg. 3 ...
The first step is to create the CRT, which includes deciding what percentage of the principal the donor wants to receive every year
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It’s All About Healthy Aging! FUELING YOUR BODY IN YOUR 50S AND 60S
50th birthdays are often filled with mixed feelings about aging, wisdom, experiences, and pride. Many are thrilled to be close to retirement, becoming grandparents, and entering a new stage of life. However, as we age, our bodies change, and it’s essential to focus on properly nourishing that changing body. Here are some dietary tips to ensure your body gets all the nutrition it needs to flourish and thrive in your 50s and 60s! Consume ample protein. Protein is vital for building and maintaining lean muscle mass, which supports metabolism, boosts immunity, and keeps your body strong. While lean meats, fish, and poultry are excellent protein sources, remember that protein is also present in
eggs, tofu, lentils, beans, seeds, nuts, and dairy products.
milk, yogurt, cheese, leafy greens, and soy products are chock-full of calcium, a critical nutrient that supports bone development and health. Stick to whole foods. Processed foods, which are linked to weight gain, health complications, and heart disease, are usually high in sodium, saturated fats, and calories and lack beneficial nutrients, vitamins, and minerals. Opt for fresh and frozen vegetables, whole grains, meats, and healthy fats to promote optimal health. Opt for water. Sugary drinks and juices wreak havoc on your waistline and can lead to diabetes and other health conditions. Water is the best way to maintain hydration and fuel your body’s daily functions properly!
Don’t skimp on fish. Chronic diseases such as dementia, strokes, heart disease, and diabetes become more common in our later years. Healthy omega-3 fatty acids are essential to combat these issues and reduce inflammation in our bodies. Fish is high in these nutrients, but if you aren’t a fan of fish, you can also find these healthy fats in walnuts, chia seeds, hemp seeds, and supplements. Best of all, omega-3 fatty acids are proven to lower the rate of mental deterioration! Include calcium. As we age, our bones become increasingly prone to osteoporosis, a decrease in bone mass. High-calcium foods such as
What Is Healthspan?
AND HOW CAN YOU IMPROVE IT If you’re retired or about to retire, you have a new and exciting life ahead of you. You may plan to travel the world, start a home project, or adopt a pet. Whatever you decide to do in your retirement, it’s essential to ensure you have as much time to enjoy it as possible. So, how do you make it last? The best way to ensure you get the most out of your life after retiring is to focus on improving your healthspan. While your lifespan is how long you live, your healthspan is how long you can do things independently with complete physical and cognitive ability. Your healthspan also impacts the quality of life in your lifespan, and the more you invest in it, the more you can enjoy your sunset years to their fullest.
flexibility, and cardio. You can accomplish this through any activity, but ensure that your weekly exercises are well- rounded and include at least one exercise in each category.
How much you invest matters. We all get busy, that much is true, but how
much time you invest in your health makes a difference in how much you get on the return. Ideally, you want to exercise in one of the above categories for 30 minutes daily. If your schedule is slammed, and exercise seems impossible to fit in, try to exercise at a higher intensity (at a level where you cannot hold a conversation during it) for at least 15 minutes a day for roughly the same results. Investing in a well-rounded exercise routine with consistent time durations can improve your healthspan for many years. While the amount of time you have left is important, the quality of that time undoubtedly matters too. When you invest in your healthspan, you’re investing in your independence!
Here’s what you can do to invest in your health now to get the highest return in the future.
Invest in all aspects of your fitness. Exercise is always an excellent investment for a healthier life, but to increase your healthspan, you’ll need to invest in all facets of your fitness, not just cardio. To diversify your health investments, focus on strength, power (how much energy you can output in a short time), balance,
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solving the loss of inheritance to the children, but that discussion is beyond the scope of this article.
Now, let’s look at the same scenario using the retirement accounts to fund the CRT. Instead of transferring an asset to the CRT while you are living, you name the CRT as the beneficiary of your retirement account, which would take place after you (and your spouse if you’re married) have passed away. When that transfer takes place, it is considered a charitable deduction. That means the value of the retirement account is not considered part of your estate for Federal Estate Tax purposes. Also, the 10-year withdrawal requirement is no longer applicable because all the funds in the retirement account(s) are transferred tax-free to the CRT. The children (or whomever you want) can be named as the beneficiary of the CRT, and they can receive a distribution annually, based on the same predetermined percentage discussed earlier. So, as an example, if we use the same numbers as mentioned above and if the children are named as the beneficiary of the CRT, the payment to the children would be an amount equal to 5% of the principal value of the assets every year for the rest of their lives. At first glance, this doesn’t seem like a big deal, but let’s look at the numbers. If a $1,000,000 inherited retirement account is paid out over 10 years, and each of the children has a combined (federal and state) income tax bracket of 30%, and we assume the same growth rate of 8%, the total amount that the children would receive, after taxes, would be $1,083,671. However, if the same $1,000,000 is transferred from the retirement account to the CRT upon your passing, and the distribution takes place over the lifetime of a 48-year-old child (same tax bracket, same rate of return), the amount paid out would be $6,905,224! That’s a difference of $5,821,553. Then, after the children die, the charity receives $5,143,134. This truly is a win-win-win. The owner of the retirement account doesn’t give up any benefits of the account, since the required minimum distributions stay exactly the same during their lifetime. The children receive over $5,000,000 more than they would have received had they withdrawn the funds over the 10-year period, and the charity receives over $5,000,000. The numbers provided are for illustrative purposes only, and your situation may be different (your situation could be better). If you would like us to run the numbers for you and compare naming a CRT against your current beneficiary designation, we would be happy to calculate the numbers for you at no charge. – John Preston
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Apple Tart With Rosemary and Honey Syrup Inspired by Delicious.com
Ingredients
• • • • • • • •
Frozen puff pastry, thawed
3 1/2 tbsp unsalted butter, softened
1 egg yolk
1/3 cup almond meal 1 tsp vanilla bean paste
3/4 cup runny honey, divided
2 pink lady apples, very thinly sliced 1 rosemary sprig, leaves picked
Directions
1. Preheat oven to 400 F. 2. Roll pastry to a 12-inch-diameter circle, 1/8 inch thick. Place on a tray lined with baking paper. 3. In a bowl, place butter, egg yolk, almond meal, vanilla, and 1/4 cup honey. Beat with a wooden spoon until smooth. 4. Spread over pastry and arrange apple slices on top. Drizzle with 1/4 cup honey. Bake for 20 minutes, until golden and crisp. 5. In a pan over low heat, place rosemary and remaining 1/4 cup honey. Swirl to melt honey. Pour over tart, and enjoy!
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Get the Scoop on CRTs
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Properly Fuel Your Body
The Investment You Can’t Afford to Skip
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Apple Tart With Rosemary and Honey Syrup
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The Best St. Patrick’s Day Celebrations in America
Feeling the Luck of the Irish? Check Out America’s Best St. Patrick’s Day Celebrations
As we inch closer to the beginning of spring, nature around us is coming back to life. Soon, the grass and trees will return to their typical green hue if they haven’t already. Luckily, you don’t need to wait until April to see an abundance of green again. On March 17, we celebrate St. Patrick’s Day, and people across the country will dress in green to honor the occasion. Certain cities in the U.S. go big for St. Patrick’s Day. If you’ve never attended a St. Patrick’s Day parade or celebration, maybe this is the year. Here are three cities with St. Patrick’s Day celebrations worth checking out. Chicago, IL Nobody does St. Patrick’s Day quite like Chicago, Illinois. The entire city gets a makeover! This year, on March 11, Chicago will host its St. Patrick’s Day parade, which includes dyeing the Chicago River a beautiful shade of emerald green. They’ll start tinting the river around 9 a.m., and the color will fade within six hours, so make sure you get there early! Chicago’s
St. Patrick’s Day Parade is also one of the biggest in the country. You’ll see floats, Irish step dancers, and much more.
New Orleans, LA Once Mardi Gras concludes, all eyes are on St. Patrick’s Day in New Orleans, Louisiana. The city hosts a parade on March 11, and it’s always quite a spectacle. You’ll see the makings of Irish tradition everywhere, including cabbage, onions, and potatoes, so keep your head on a swivel. You can also head to the Irish Channel neighborhood on March 11 to attend an all-day block party. Plenty of green beer will be available at this event, so come ready to celebrate! New London, WI Let’s say you want to do something slightly toned down but still exciting for St. Patrick’s Day. Then, you’ll want to check out New London, Wisconsin, for one of the country’s most unique St. Paddy’s Day celebrations. Leprechauns will change the city signs from New London to New Dublin. The city also puts on an Irish funeral parody in its annual downtown parade.
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