DRC Can Assist You in Developing a Plan

Through DRC's dedicated financial planning specialists, it is able to help its clients create a personalized financial outline of a comprehensive plan. By utilizing the strengths of DRC's Comprehensive Planning along with that of a Certified Estate Planner, DRC can help the client develop a financial plan that is geared towards the client's specific goals. The plan that DRC develops is based on the following ten factors which will allow the client to have a complete understanding of its future commitment and goals.

Funding Your Retirement

When clients provides DRC with basic, confidential questionnaire information such as his/her projected retirement age, his/her lifestyle goals and their tolerance for risk, DRC can create an analysis for the client that covers key areas of planning. The personalized report generated will include the following analyses:

• Projection of the growth of liquid assets and savings between now and retirement.

• Illustration of how well the client projected retirement assets will provide desired retirements income based on expected retirement age, retirement income goals and anticipated sources of income at retirement.

• Discussion of distribution options including Required Minimum Distribution, IRA rollover, and early distributions.

DRC Comprehensive Planning

Professionals and business assistance in planning and strategizing for the future. Estate planning can provide a means of transition and continuity when passing on the clients assets after the client's death. Estate planning also deals with current issues such as healthcare directives and durable powers of attorney. There are several basic estate documents that the client should consider. As part of DRC Comprehensive Planning, the client's DRC Financial Advisor and DRC Certified Estate Planner can work with the client and the client's advisors to review the client's estate planning needs.

Revocable Trust

It is important to have a revocable living trust, because it allows the assets held in trust to pass directly to beneficiaries without going through probate, subsequently reducing the time and costs involved and keeping the transfer of property private. Because the client keeps complete control over the trust and its assets – the property held in the trust is included in the client's gross estate. As a client, your biggest concern will be naming a successor trustee to provide for a smooth transition and continuity in management of assets at the client's passing, making sure that the client's investment philosophy continues after the client's death. Naming a family member who knows the client's financial advisor or using one of DRC's Trust Groups will help ensure the continuity of the trust.

Estate Planning Analysis

• Comparison of tax savings by utilizing a credit shelter trust versus a life insurance trust as part of an estate plan.

• Discussion of other effective estate planning techniques.

Financial Planning is an Ongoing Process

To reach his/her financial goals, the client needs a detailed plan. DRC's Comprehensive Planning process is designed to ensure that the client develops a plan that encourages a client to set goals. Through periodic reviews with the client's DRC Certified Estate Planner, the client will ensure that his/her plan is still appropriate given the client's changing life circumstances.

Private Foundations

A Private Foundation is a charitable entity that is exempt from income tax under IRC S 501 (c)(3). By establishing such a foundation, an individual (or family) will be able to create a charitable legacy that could last for many generations.

Why a Private Foundation?

Private Foundations offer an opportunity to introduce and/or involve family members in charitable activities. The founder of such an organization is able to educate younger generations in the value of charitable giving and provide the means by which a family's charitable visions can grow.

Members of the family can serve on the board of directors of the foundation, thus helping to determine what programs the foundation will establish or which grants the foundation will make. It also allows the opportunity to oversee a younger generation's development of its own charitable traditions as the family grows and evolves.

When the founder is satisfied with the judgment and activities of the younger generation, he or she can pass control of the board to those individuals. Until that time, the founder can retain control.

By establishing a Private Foundation, the founder retains greater control over the contributed assets, and the charitable purposes to which they are applied, than if the assets were contributed to a public charity. For example, the Mandy A. Craft Foundation was establish programs within the community for education, scholarships, after school programs, the arts, etc., rather than merely making contributions to other charitable organizations. This retained control also allows for considerable flexibility. Specifically, unless restrictions are placed within the original organizational documents, a Private Foundation can change the focus of its charitable activities as times change. Thus, if in the future the family decides that its charitable activities should focus upon a different area (e.g., medical research as opposed to the arts) the board of the Private Foundation can vote upon and approve such a change.

An added benefit of a Private Foundation is that the assets in the foundation grow free of income tax since such foundations enjoy tax-exempt status (although, as noted below, an excise tax is imposed on certain investment income). This allows an even greater opportunity for charitable giving.

Distribution and Estate Planning for Retirement Benefits

Estate Taxation: Estate tax laws formerly provided a complete exclusion of certain retirement benefits from a participant's gross estate. Unfortunately, Congress whittled away at these laws over the years. Now, the value of the participant's interest in his or her retirement benefits is included in the gross estate (with exceptions for participants who were in pay status prior to some of the law changes.) Retirement benefits included in a descendant's gross estate are subject to estate taxation, unless either:

• They are deducted from the gross estate. A deduction is usually accomplished for married taxpayers through the unlimited marital deduction that allows an unlimited amount of property to pass from the deceased spouse to the surviving spouse without estate taxation at the first death. Property must be transferred to the surviving spouse either outright or in a special trust (qualified terminable interest property, or QTIP).

• OR:

• They are covered by the $600,000 exemption equivalent that allows a total of $600,000 of property to be transferred during the decedent's life and at death without gift or estate taxation. If more than $600,000 of property passes to beneficiaries other than the surviving spouse, it is generally subject to estate taxation.

Beneficiary Designation: Keeping the above in mind, you must decide whom to name as the beneficiary(ies) of your retirement benefits. Events become even more complicated with the vagaries of your particular situation. What does my surviving spouse need to live on? Will my new spouse take care of my children from my first marriage? Do I really want my beach bum child to get all those benefits?

Generally, the preferred approach for a married participant is to name the spouse as the primary beneficiary with either the children or a trust as the contingent beneficiary(ies). This approach offers the capability to defer both income and excise taxes and to avoid estate taxes. It also offers flexibility since the surviving spouse can disclaim his or her interest in the retirement plan death benefits, thereby passing those benefits to the children or trust. If you want further details about the pros and cons of any of the approaches, please contact our office.

What To Do: We hope that this article will motivate participants and their advisers to carefully consider the importance of proper income and estate tax planning for retirement plan benefits and for coordinating these benefits with the rest of their planning. Make certain that your income and estate planning team contains competent professionals who are familiar with the complicated rules that govern retirement benefits so you and your heirs will receive as much as possible of your retirement plan benefits.