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Insights In Estate and Financial Planning

Winter 2010-2011

A Parent’s Journey Our second son was born with autism. It  was a life-changing event: an unknown path, anguish, discrimination, fear and pain. But it also brought us a deeper love and a broader understanding, humility, compassion and a sense of mission toward all who are born with a disability that makes the journey through life much more difficult. Although in our son’s journey there were many helping hands, many hearts full of sympathy and understanding and love, the first 18 years were very taxing for us. Soon we realized that he was going to need help not only short-term but for life. So, when he was accepted at PARC, we agreed, not without some anguish and tribulation.   In PARC, our son expanded his universe many times over. With plenty of love,

understanding and patience coupled with excellent medical and behavioral care, he blossomed in ways we did not dream. PARC proved to be a house of love that enabled our son to hold a job according to his capabilities and gave us the ability to focus on other undertakings. It took over for us the responsibility of being caretakers 24 hours a day, seven days a week, allowing us to dedicate our lives to the betterment of this wonderful organization. We are sure that our experience reflects the great majority of the people and families who are being served by PARC. There is no better way to memorialize a life than to give the fruits of our labor to this organization that makes love palpable and hope a reality. Gratefully, A father and a mother

Planning for Charitable Bequests If you plan to include PARC in your will, it is important to give some thought to what kind of assets you bequeath, since a well-planned charitable bequest also can have favorable income tax and estate tax consequences. Charitable bequests are 100% deductible for estate tax purposes, regardless of what kind of assets you leave. But organizations such as ours are also tax exempt. This means that it makes good sense to bequeath assets that might cause income tax problems for your other beneficiaries.


Estate Planning – With or Without Taxes Estate planning is much more than just tax planning. Millions of people whose estates are below the estate tax threshold still need wills and living trusts to address a variety of family and personal needs. For example: n A widower may want the bulk of his estate to assist his disabled son through a special needs trust. n A bride in her 60s wants her estate to be available to her husband, but at his death have the assets pass to the children of her first marriage. n Parents with minor children want to name a guardian and establish a trust to administer their estate in the event they die in the same accident. n A couple with no children wants their assets divided equally between their families if they should die within a short time of each other.

n A friend wishes to leave any assets remaining in his IRA at death for our benefit in memory of his parents. All of these situations involve people who might not be subject to the estate tax but nevertheless have concerns that can only be addressed through thoughtful estate planning. For some, a simple will is sufficient; others may need a living trust in addition to a will. If you don’t already have a will, see an attorney about having one drafted. If you have a will, take it out today and review the provisions to ensure that they still reflect your wishes for the disposition of your estate. And if your estate is likely to be subject to federal or state taxes, ask your attorney to review your estate plan to see that it takes advantage of opportunities to reduce or eliminate taxes. We also hope you’ll consider including a charitable bequest for our future.

What Your Tax Return Can Teach You Taxpayers will soon be gathering information to prepare their 2010 income tax returns. It may not be a joyful activity, but important lessons can be learned from a Form 1040. Here are a few suggestions: n Will you be receiving a large refund for 2010? If so, you made an interest-free loan to the IRS. Ask your tax adviser to calculate the amount you’ll need to pay in withholding and/or estimated payments for 2011 to avoid an underwithholding penalty. This won’t reduce your tax bill for 2011, but it will allow you to earn interest on your money for a longer time. n Do you have significant capital gain income? Every investor has winners and losers. Offset some capital gains by selling shares that have dropped in value. If you own shares in the same stock purchased at different times, sell the shares with the highest purchase price to reduce the capital gains. And remember, you

can give us appreciated stock held more than one year and avoid all capital gain, while also receiving an income tax charitable deduction. n Should you add municipal bonds to your portfolio? Although the return on municipal bonds is generally lower than that on commercial bonds, the tax-free income may make them an attractive investment, particularly if you are in a high tax bracket. For example, a municipal bond paying 3% is equivalent to a 4.48% taxable return for a taxpayer in the 33% tax bracket. State income tax savings may also be available. n Are investments producing more income than you need or want? By making a gift of income-producing assets early in the year, you can shift the income to family members in lower tax brackets. You can give up to $13,000 free of gift tax this year ($26,000 for married couples) to as many people as you choose. Gifts may also reduce future estate taxes.


Five Financial Guidelines to Consider 1. Plan to spend both interest and principal from your retirement savings. The chart on the right shows how long $100,000 of savings will last at various interest rates and monthly withdrawals. 2. Don’t tie up all your investments in one company, mutual fund or even industry. Diversify your investments, allocating among stock or stock funds, bonds, tax-exempts, CDs or other investments. Consider annuities that provide income for life. Review your mix periodically to make sure it’s still appropriate for your age, financial situation and risk tolerance. Check to see whether movements in the financial markets have thrown your allocation out of balance. What Annual Investments of $1,000 Will Grow to Over Time* Years 3% 1 $1,030 2 2,091 3 3,184 4 4,309 5 5,468 6 6,662 7 7,892 8 9,159 9 10,464 10 11,808 11 13,192 12 14,618 13 16,068 14 17,599 15 19,157 16 20,762 17 22,414 18 24,117 19 25,870 20 27,676 21 29,537 22 31,453 23 33,426 24 35,459 25 37,553 26 39,710 27 41,931 28 44,219 29 46,575 30 49,003

4% $1,040 2,122 3,246 4,416 5,633 6,898 8,214 9,583 11,006 12,486 14,026 15,627 17,292 19,024 20,825 22,698 24,645 26,671 28,778 30,969 33,248 35,618 38,083 40,646 43,312 46,084 48,968 51,966 55,085 58,328

5% 6% 8% $1,050 $1,060 $1,080 2,153 2,184 2,246 3,310 3,375 3,506 4,526 4,637 4,867 5,802 5,975 6,336 7,142 7,394 7,923 8,549 8,897 9,637 10,027 10,491 11,488 11,578 12,181 13,487 13,207 13,972 15,645 14,917 15,870 17,977 16,713 17,882 20,495 18,599 20,015 23,215 20,579 22,276 26,152 22,657 24,673 29,324 24,840 27,213 32,750 27,132 29,906 36,450 29,539 32,760 40,446 32,066 35,786 44,762 34,719 38,993 49,423 37,505 42,392 54,457 40,430 45,996 59,893 43,502 49,816 65,765 46,727 53,864 72,106 50,113 58,156 78,954 53,669 62,706 86,351 57,403 67,528 94,339 61,323 72,640 102,966 65,439 78,058 112,283 69,761 83,802 122,346

* Assuming tax-free growth of principal with investments made at the start of each year.

Years Until Exhaustion of $100,000 in Retirement Savings Monthly Withdrawal $ 400 500 600 700 800 900 1,000 1,200 1,400 1,600

3% 32 23 18 14 12 10 9 7 6 5

4% 43 27 20 16 13 11 10 8 6 5

Interest Rate on Savings 5% 6% 7% 8% * * * * 34 62 * * 23 29 * * 18 20 25 * 14 16 18 22 12 13 14 16 10 11 12 13 8 9 9 10 7 7 7 8 6 6 6 6

9% * * * * 30 19 15 10 9 7

10% * * * * * 26 17 11 9 7

* The asterisk shows withdrawals that can be made without time limitation.

3. Save early and often. The earlier you start saving, the longer compounding has time to work its magic. Make regular investments each paycheck or each month. The chart on the left shows what annual investments of $1,000 will grow to, assuming various interest rates over time. 4. The Rule of 72. You can determine how fast the value of your investments will double by dividing the number 72 by the annual interest rate earned. For example, if your investments earn 4%, they will double in value every 18 years. 5. If you are still employed, obtain disability insurance coverage equal to about 60% of income. You may be able to reduce this percentage if your spouse works or if you have sufficient savings to fall back on. Or your employer may provide some disability coverage.

Noteworthy Numbers Charitable contributions are estimated to have increased in 2009 for human services (2.3%), health (3.8%), international affairs (6.2%) and environment/animal-related organizations (2.3%). While individual giving fell slightly by .4%, corporate giving rose 5.5%. Source: Giving USA 2010, published by Giving USA Foundation.


BOARD OF DIRECTORS Johnnie N. Guest CHAIRMAN Elliott M. Ross CHAIR ELECT Frank Farkas, DC TREASURER/SECRETARY Constantine “Tino” E. Mastry PAST CHAIRMAN John Bilchak Anne F. Borghetti, Esq. Mary L. Tyus Brown Douglas E. Carlan, M.D. Michelle Clower Lyman L. Dukes III, Ph.D Roger Edelman Marcos E. Hasbun, Esq. Douglas J. Hicks W. Gregory Holden David Joffe, BSPharm, CDE, FACA Kevin G. Kelso Keith M. Lawless Fay Lazaris Robert J. Lombardo, P.E. Paul A. Manfrey Reginald V. Mesimer, P.E. Judy Owen Nancy Plants Ross D. Preville Mark P. Rankin, Esq. Jerry Wunsch Sue Buchholtz PRESIDENT & CEO Supported by Agency for Persons with Disabilities Coordinated Child Care of Pinellas, Inc. and Early Learning Coalition of Pinellas County Department of Education Division of Vocational Rehabilitation

A New Era of Estate Planning Even if estate taxes seem unlikely to affect your family, do you still need estate planning? Estate planning has always meant more than just estate tax planning. Estate planning also includes estate building – putting together a comprehensive plan for obtaining maximum spendable income during your life and ensuring conservation and growth of your personal assets. It includes planning for a thoughtful disposition of your assets at death. It means providing for the personal needs of your beneficiaries, both now and in the future, through trusts, life insurance, investments and business planning. And, for many people, it means carefully planned support for a worthwhile cause or institution, such as PARC. Everyone has certain basic estate planning needs. A Will. You need a will, quite simply, to ensure that your property is distributed exactly as you see fit – not according to

the impersonal state laws that divide the property of those who die without wills. Some people may also need a living trust – augmented by a will that covers assets not placed in trust. And you need a will if you want to make a bequest to PARC. Estate Liquidity. Be sure that your estate has enough cash or liquid assets to cover expenses of administration and state death taxes. Without a ready pool of cash to draw from, your personal representative might be forced into an untimely sale of your assets. PARC has a publication – Estate Planning for the 21st Century – that explains all phases of estate planning, including the federal estate tax. We urge you to send for this booklet as a first step toward an effective estate plan . . . a plan that will accomplish all your family objectives. There is, of course, no obligation.

Department of Health Children’s Medical Services Juvenile Welfare Board Children’s Services Council of Pinellas County United Way of Tampa Bay

Our Mission is to provide opportunities for children and adults with developmental disabilities to exercise their independence and experience life to the fullest.

Elliott Rakofsky, Vice-President of Development 3190 Tyrone Blvd. North • St. Petersburg, FL 33710 (727) 341-6929 • erakofsky@parc-fl.org • www.parc-fl.org This publication is prepared exclusively for the information of our friends and donors. Its purpose is to point out current tax developments which may be helpful in your tax and financial planning. This material is based on recent court decisions and current laws and regulations. You should, of course, consult your own legal, tax or financial planner as to the applicability of any item to your own situation.


Insights - In Estate and Financial Planning