Rollins Financial evaluates clients’ financial health holistically, with an eye towards achieving their specific financial goals. We are not attorneys, but we can advise you on which issues you might want to consider when crafting your estate plan or trust with an estate planner.
We have experts in estate and tax planning involving trust accounts. We’ll help you figure out whether a trust is right for you and help you set it up. We can guide you through each decision to ensure your needs are met, goals are achieved and legal responsibilities are complied with. No matter who you want to receive assets and when you want them to receive them, we can establish a process to guarantee your directives are carried out. If you do not currently have a lawyer helping with your estate, we will be glad to provide several introductions for you to choose from.
We believe financial advisors should be fiduciaries for their clients. There should never be a financial conflict of interest between clients and the people who are giving them advice. Legally, a fiduciary duty is the highest standard of care for clients. We will never take a commission from any financial product offered to you, and it is our legal and ethical responsibility to pursue your financial best interest in good faith.
Tax codes are complicated and can vary greatly from state to state. You should rely on experts who understand gift taxes, estate taxes, transfer taxes, and income taxes; and know strategies for legitimately minimizing tax liability. Trusts can be a very effective means of doing so.
A trust is a legal arrangement that allows you to attach specific conditions to the transfer of your assets. It allows a third party to manage a portion of your assets on behalf of one or more beneficiaries.
Trusts can be used for a variety of reasons: You might give your beneficiaries an incentive to achieve certain goals before they can take advantage of the gifts you’ve provided. Or, in cases involving your estate, you may wish to avoid probate and minimize the number of legal hurdles your inheritors have to negotiate in order to gain access to your assets.
A variety of trust types are available for different financial purposes. Revocable trusts, or living trusts, can be very helpful in avoiding the probate process. They allow the trustee, usually the person who established the trust, to remove property from the trust while they are alive. Upon the death of the person who established the trust, it becomes irrevocable. Living trusts do not fully protect property from creditors – if you can retrieve assets from a trust they remain part of your estate - but they can greatly simplify the process of transferring them to your heirs.
Irrevocable trusts are commonly used due to estate tax considerations. Once assets are placed in an irrevocable trust they no longer belong to you. They belong to the trust and are not subject to estate taxes upon your death. If assets are determined to be “gifts in contemplation of death” because they were placed in a trust too recently, they may still be subject to death taxes. Rollins Financial can guide you through the process.
Spendthrift trusts are often used to protect beneficiaries from themselves. Money in the trust is protected from creditors so that the beneficiary cannot use the trust fund as collateral. Spendthrift trusts are overseen by a trustee who determines what payments are to be made, and when. They can ensure distribution of money in fixed amounts over long periods of time.
Special Needs trusts are a way to ensure that a beneficiary suffering from a disability is taken care of without undue interference with the beneficiary’s public benefits. They are commonly used to transfer an inheritance or legal settlement to a minor or a person with a disability.
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Probate is the legal process necessary to transfer assets to inheritors after someone has died. An executor named in a will – or appointed by a judge if no executor has been named – carries out the legal tasks. They must prove that a will is valid, identify and inventory the assets of the person who has died, have property appraised, pay all debts and taxes, liquidating assets if necessary, and finally distribute the remaining assets as directed by the will or state law.
You want your inheritors, not estate lawyers, to get as much benefit as possible from the assets you bequeath to them upon your death. Probate can be very expensive, involving significant paperwork and court appearances. All these expenses come out of the estate and reduce the benefit to inheritors.
Probate also takes time and is generally a public process. For a variety of reasons, it may be desirable for the distribution of an estate to be done privately and as quickly as possible. Probate can tie up property that could be helping your inheritors for months or years at a time. Even when a will is uncontested, the process can be lengthy and expensive. Trusts can be a good strategy to reduce the amount of property which will be subject to the probate process, or eliminate it altogether.
The skilled financial advisors and estate planning experts at Rollins Financial can help you decide whether a trust is right for your family.
Planning for Higher Education
Planning for higher education can be daunting. It is one of the largest expenses that a family must save for, and those expenses continue to increase at a rate greater than inflation. There are tools at your disposal, though, and Rollins Financial, Inc. can help your family find its way.
There are many different kinds of education savings plans that can help you set aside money for college or other education for your children, your grandchildren, or yourself. Educational savings accounts offer differing levels of flexibility and tax benefits. Your family may consider 529 plans, educational IRAs, and custodial accounts. No matter what your family’s educational goals, Rollins Financial can help you find the plan that best suits your needs.
The most popular strategy to save for college is a 529 plan, named after the section of the Internal Revenue Code which authorized them in 1996. Savings in 529s are tax-deferred and distributions are not taxed when used for qualifying higher education purposes. The Internal Revenue Code was modified in 2015 to allow more education-related expenses such as the purchase of computers and up to $10,000 annually in K-12 tuition.
Participation in 529 plans has grown exponentially over the past couple of decades. Their tax advantages at both the federal and state level make them a very attractive option for families planning for their children’s higher education pursuits. They tend to be easy to maintain with automatic investments and account management handled by the program manager chosen by the treasurer’s office of the state offering the plan.
529 plans are extremely flexible investment vehicles. They usually have lifetime contribution limits and you may contribute up to $75,000 per beneficiary ($150,000 for a married couple) in a single year without the money being subject to the federal gift tax. There are no restrictions on the income of the participating family or the age of the beneficiary. Contributions need not be listed on your federal tax return and deposits of up to $15,000 annually qualify for the gift tax exclusion.
529 plans function similarly to a Roth IRA or Roth 401(k). You invest after-tax contributions in an array of options, often mutual funds, offered by the fund. Performance of your investment options will determine the value of your 529 account. When distributions are made for a qualifying educational expense, investment growth within the account is free from tax upon withdrawal.
Prepaid tuition plans are a second type of 529 plan. Participants can pay all or part of the costs of an in-state college education in advance. Individual colleges and universities can offer prepaid tuition plans as an incentive to prospective students who are focused on a particular institution. Additionally, a group of 250 private colleges sponsors the Private College 529 plan to allow more families the tax advantages of saving for higher education through 529s.
Some families are deterred from utilizing 529s due to uncertainty about educational choices in the future. While it is true that you may have to pay income tax and a penalty on the accrued earnings of a non-qualifying withdrawal, participants have several strategies to avoid this even if the educational opportunity they have been saving for does not materialize.
Non-qualifying withdrawal penalties are waived if the beneficiary earns a tax-exempt scholarship, attends a U.S. Military Academy, dies or becomes disabled. You can change the beneficiary to another family member. This even applies to a parent, who may choose to go back to school. Funds may also be rolled over to a 529 ABLE account for people living with disabilities. In short, there are many benefits to 529s and Rollins Financial can help you with strategies to mitigate the limitations of the plans.
Nearly every U.S. state now offers a 529 college savings plan to residents. Most of them allow non-residents to sign up for their plan, though non-residents may not be eligible for all the same tax benefits as residents.
Custodial accounts are created for minor children and managed by parents. They are an effective strategy for families to take advantage of the gift tax exclusion. Parents have complete control over how money in the account is invested and distributed while the child is still a minor. Because the money is considered a gift, however, once the child reaches adulthood, or the age of majority stipulated by your state, they take control of the assets and parents can no longer dictate how they are used.
Custodial accounts may be used to plan for expenses not covered by an ESA or a 529 plan - a car purchase or summer vacations - for example. They also may be a good option for high earners; unlike 529 plans they do not carry lifetime contribution limits.
Educational IRAs, also called Coverdell Education Savings Accounts, function in much the same way as a Roth IRA. As with a 529 plan, you make after-tax contributions and all capital gains in the account accumulate tax-deferred. So long as the eventual withdrawals are used to finance higher education expenses such as tuition, fees, materials, room and board, or computers there is no tax liability.
Coverdell ESAs have more restrictions than 529 plans. The total annual contribution for a single beneficiary is capped at $2000, and may be further limited for high earners. Age limits also apply. The beneficiary must be 17 or younger to receive contributions and must make all withdrawals before turning 30.
Coverdell ESAs, though, do offer a couple of distinct advantages over 529 plans. The funds may be used to pay for private K-12 education and the fund managers are not chosen by the state offering the product. Because of this, there are typically many more investment options within a Coverdell ESA.
Start working today to ensure that your children don’t miss out on educational opportunities or be burdened by excessive student loans in the future. The experts at Rollins Financial, Inc. can help guide you through all of the educational savings choices available to your family.