Planning Potpourri

"Live long and prosper" is said after a Vulcan salute, but all you Tax Trekkies knew that! But did Spock or Mrs. Spock actually first stay it? Estate planners typically represent the family so that coordinated and better results can be achieved. But if women outlive men on average by six years who should be calling the final shots? Is the female living long but not prospering because the shorter lived male pushes estate and gift planning? Perhaps dad is feeling more generous about gifts for the grandkids ‘cause dad won’t be around to need the money, but mom might be left trying to make ends meet. Six years is a long time. Just a thought.

Is 4% the Magic Number: Some folks test your ability to retire by estimating 3-5% of your investable assets and then comparing it to your budget. Not a bad rule of thumb for a preliminary chat before you crunch the real numbers with your CPA or financial planner. But is that budget number really right? Many magazines and financial gurus espouse that you should “need” say 75% of your pre retirement income to support your post-retirement lifestyle. But according to a recent article in Investment Advisor magazine quoting researcher Dan Ariely folks “want” a lifestyle that might require 130% of pre-retirement salary. So it’s not only teenagers who confuse “need” and “want.” But think about the implications to retirement planning! Think about the implications of estate planning, especially gifts and other wealth transfers! What numbers must remain for the female of the couple (+ 6 years) to have the lifestyle she “wants” before gifts can be made? Are estate planners pushing clients to make tax advantaged wealth transfers before reviewing stress tested numbers with the client’s wealth manager? Are advisers reasonably assuring that their client/parents have economic security first? The answer in too many cases is negative. The reluctant planning client may be the prudent client. Just a thought.

Trustees of Insurance Trusts: Watch your fiduciary back! If an insurance policy will be replaced have an independent insurance consultant, in addition to the broker, provide a written analysis confirming the advisability of the change. Cochran v. Keybank, 901 NE2nd 1128 (Ind. App. 2009).

Low Interest Rates: Great for GRATs, lousy for CRATs. Charitable Remainder Annuity Trusts don’t work well when interest rates are low because the value of what the charity gets when the CRAT ends is low and the requirement that the charity get 10% of the value of the property given to the CRAT is tough to meet. A taxpayer recently missed the mark and the IRS permitted the CRAT to be rescinded and the property returned to the taxpayer. PLR 201040021. Sometimes “backsies” is allowed! But to get this result the taxpayer had to obtain the consent of the charity, the trustee and the state’s attorney general.

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