Making Your Dollars Make Sense
Estate Planning Can Be Taxing
By Warren Sinsheimer
There are multiple goals for estate planning, chief among them to provide for your loved ones and protect your heirs from unnecessary estate taxes.
For those committed to the transformative value of education, it can also be an important opportunity to plan a gift to Cal Poly – to enhance the institution, support the next generation of students and perpetuate Cal Poly’s “learn by doing” credo into the future.
Warren Sinsheimer
Even in the best of times, estate planning can be a challenge. When tax laws have changed, and indecision and uncertainty reign on Capitol Hill, it can be truly taxing.
The good news is that combining estate planning with proactive financial management can help defray current tax liabilities.
One of the significant changes in tax law relates to Roth IRAs. Contributions are made with after-tax funds, so after five years and a minimum age of 59½, investors can withdraw both the capital and appreciated assets tax-free.
This year, and possibly only this year, Congress eliminated income ceilings that prevented people with higher incomes from participating. Through the end of the year at least, any investor can convert a traditional IRA to a Roth IRA.
The downside of converting an existing IRA is that the investor will have to pay regular income tax on the amount being converted. That can be a costly undertaking for anyone, especially those in higher tax brackets.
Despite the tax hit, investors are taking a close look at this opportunity. Before acting, though, it’s a good idea to take a comprehensive review of long-term goals. For those who want to remember Cal Poly in their estate plans, it might actually be more tax efficient to name Cal Poly as a beneficiary of the existing IRA (or a portion of it), rather than convert it to a Roth and incur the tax liability.
For those who have a longer horizon before retirement, there may be a bigger benefit to the conversion. If so, there are giving vehicles that help offset the tax liability. For instance, a Charitable Gift Annuity may provide some immediate tax savings, as well as tax-advantaged retirement income and ongoing support for Cal Poly.
This confluence of factors presents an unusual opportunity to confer with your financial advisers and the planned giving professionals at Cal Poly to determine an optimal strategy for your particular situation.
For more information, contact the Planned Giving Department at 805-756-7125 or email us at plannedgiving@calpoly.edu.
Warren Sinsheimer specializes in trust and estate planning and administration, taxation, fiduciary litigation and charitable giving with the law offices of Sinsheimer Juhnke Lebens & McIvor. A past president of the San Luis Obispo County Bar Association, Sinsheimer was President of the Foundation for the Performing Arts Center from its inception in 1986 until 1996 and currently serves as a director on the Cal Poly Foundation.
