Information on Tax and Estate Planning from the Masonic Charities of the Grand Lodge of Pennsylvania
Tax Changes Are Coming (Maybe)! Over the years, I have resisted commenting on prospective tax legislation since it is just speculation like buying Dogecoin. However, so many people have contacted me on this topic in the past several months, I feel compelled to at least give an overview on what the landscape could be for estate and capital gains taxes in the upcoming 18 months based upon the recently published Treasury Green Book. So, here we go: 1. Capital Gains Tax Increases Right now, most individuals pay 15% on realized capital gains and 20% if you earn over $445,850 per year ($501,600 for a couple filing jointly). The proposed Biden tax change would increase the tax rate to 39.6%, but only for those earning over $1 million per year. This represents only 2.7% of those filing tax returns, but 62% of all taxes paid on capital gains. If you are lucky enough to be in the 2.7% group, please call me for a free charitable planning interview. For everyone else, just relax.
2. Tax on Unrealized Gains for Gifts and at Death This is the proposed change that received the most attention. Many donors I work with are what we call “capital gains poor.” They have a lot of appreciated stock like Apple which they have held in their brokerage account for years, and they don’t want to sell it because they would get hit with a huge capital gains tax. But if they hold it until they die, it goes to the estate or heirs at the date of death cost value, thereby wiping out all the capital gains before death (called the step-up in basis). This is a nice gift to the heirs, but not for Uncle Sam who loses the tax money. The proposed tax change would require any unrealized gains to trigger capital gains tax when given away to a recipient other than charity at the owner’s death. There would be a $1 million per-person exemption, plus existing exclusions for residences. There are a lot of frugal people who may be impacted by this tax and a lot of unhappy heirs as a result, BUT a lot of happy lawyers and accountants which advise their wealthy clients. According to The Wall Street Journal, however, only 3% of all families have unrealized gains over the million-dollar threshold, so unless you are one of those unlucky 3%, it is not as bad as it seems. One bright spot for charities is that the proposed change says the unrealized gains are NOT taxed if they go to charity. In conclusion, we are a long way off from either of these proposals becoming law, and for most of us, it will not matter anyway. I wouldn’t have sleepless nights about these proposed changes or plan any radical moves at this time. I will keep you posted going forward.
Choosing a Power of Attorney A Personal View
Several years ago, I agreed to serve as both medical and financial agent for a close friend. He is now 97, and I found myself grappling to handle all the calls due to his declining health and cognitive abilities. I finally relented and worked with him to find an alternative person as his agent. I felt bad, but I realized it was in his best interest since my travel schedule prohibits me from devoting the attention he needs at this stage in his life, and I lived a 90-minute drive from his house. It was a lesson learned. I want to share some of my thoughts on what you need to consider when choosing an agent. You will need to choose an agent to handle your financial affairs and another agent to handle your medical affairs. They can be the same person, but usually are appointed in separate documents. Choosing your spouse, if competent, is a simple choice, but it gets more complicated from there. Many individuals don’t realize the time and effort involved in handling someone’s affairs. I personally found that trusting someone with adequate time to assist you and being physically close (unless you live at a place like Masonic Villages where staff can attend to many of your needs without the agent nearby) are probably the two most significant factors in picking an agent. Talk to the person you choose about serving and make sure they are comfortable in taking on this role. When I tried to pick a close acquaintance for my 97-year-old friend to replace me as agent, she refused citing her discomfort with taking on this role despite her deep concern for his well-being. If you are asked to serve as an agent, be aware of the expected duties and liability that come with serving in this role. I would highly recommend an attorney be actively involved in the process,
and you keep the attorney abreast of what you are doing. Always advise the attorney of the person for whom you are an agent of any large gifts that are to be made. I have seen several occasions where an agent has developed a close relationship with the individual and then becomes the new “owner” of the checking account or beneficiary under the Will. This can happen with relatives or friends. The Masonic Children’s Home almost lost a $4 million estate gift to an agent who tried to have the Will of a 96-yearold widower changed in her favor. Luckily, his counsel interceded to stop the process. For those without anyone to appoint as your agent, I suggest reaching out to the local Area on Aging Office for assistance. They helped me find a person to serve as my 97-year-old friend’s agent for a reasonable fee, and he lived one mile from my friend’s home. I felt much better knowing he was a competent professional who lived close. There are also professional agencies that will serve as your agent. The fees vary widely and may require an up-front payment for service. If you live in Pennsylvania, you can contact our office for more information on an agency provider. I close with these words: make sure you have a current financial and medical power of attorney in your possession, especially if one of the agents you selected passed or is unable to serve as your agent. The alternative is a court appointed guardian. You may have little control over the selection, and it could be a costly drawn-out process. If you live long enough, there will probably come a day when you will need your power of attorney.
Neither Masonic Charities of the Grand Lodge of Pennsylvania, nor Alvin H. Blitz, Esq. provide legal, financial or tax advice. None of the information in The Blitz should be deemed legal, financial or tax advice or acted upon by any person without prior consultation with appropriate professional advisors.
Valuable Estate and Charitable Planning Materials Available The Office of Mission Advancement and Development (formerly Office of Gift Planning) has many materials available to help you in your journey to prepare your own estate plan. Please consider contacting us by phone at 800-599-6454 or via email at email@example.com for any of the materials below: 1. Estate Planning Guide - a guide to providing for your family and supporting the causes you care about 2. QCD Kit - a guide to requesting a qualified charitable distribution from your IRA for your favorite charities 3. Income for Life Trust Guide - a presentation outlining the benefits of leaving your IRA to a trust at your passing to provide for your loved ones 4. Charitable Gift Annuity Illustration - a personalized illustration on the benefits of receiving fixed income for life from the Masonic Charities 5. Masonic Charities Mission Kit - an overview of the many activities of the Masonic Charities in fulfilling its mission to assist Masons, their families and their communities 6. Using your IRA to Benefit Charity Guide a presentation on how designating your IRA to your favorite charities could benefit your loved ones For additional information about how the Masonic Charities can assist you in your estate and charitable planning, please visit us at www.MasonicCharitiesLegacy.org.
I'm Back! Join Me for Lunch I’m back to traveling! Please see the dates below where I will be holding “Welcome” Luncheons during the remainder of 2021.
Upcoming Trips: Nashville, TN/Charlotte, NC July 11 – 16 Atlanta, GA Aug. 1 – 4 San Diego/San Jose, CA Aug. 20 – 28 Dallas/San Antonio, TX Sept. 26 – Oct. 1 Daytona Beach/West Palm, FL Oct. 17 – 22 Tampa, FL Nov. 7 – 13 Fort Myers, FL Nov. 29 – Dec. 4
1-800-599-6454 | MasonicCharitiesPa.org
Masonic Charities One Masonic Drive Elizabethtown, PA 17022
As Chief Gift Planning Officer, Alvin H. Blitz, Esq., serves the Masonic Charities of the R.W. Grand Lodge of Pennsylvania, which consists of the Masonic Villages, the Masonic Children's Home, the Pennsylvania Masonic Youth Foundation, the Masonic Library and Museum of Pennsylvania and the Grand Lodge of Pennsylvania Charity Foundation. Alvin holds a Bachelor of Science degree from the University of Scranton, a Master of Arts degree from Fairleigh Dickinson University and a Juris Doctorate from Dickinson School of Law. He has given estate planning seminars throughout the country and is a member of Carlisle Lodge No. 260, Carlisle, Pa. CONTACT ALVIN BLITZ: 1-800-599-6454 or ABlitz@masonicvillages.org