Louisiana Estate Planning and Successions

Gianfranco Ferre´ Dies at 62

I hear you. "So what? Who is he and why should I care?"

Ferre´was a famous Italian designer whose peers may be more familiar to you - Armani and Valentino. He died somewhat suddenly of stroke at age 62. The CEO of his company, Massimo Macchi was interviewed last month and remarked that it was critical to the company's image that Ferre´ still created designs for the brand. Macchi added that the company expected Ferre´ to continue designing for many years and that the company had not yet planned on how to replace him.

Whether you are a top fashion designer or a restaurant owner, your personality, talent and vision are critical to your business. That's why it is important to plan now for a day when you unable to direct the day-to-day operations of your business. Business succession planning now can prevent a disruption in the business and help preserve it for your family. Read more about the basics of business succession planning here.

Source for post: Wall Street Journal, June 18, 2007, Page B4

Trust Basics

Trusts are a popular and very flexible estate planning tool, but many don't understand basic trust concepts. Here is a simple discussion.

What is it? A trust is an agreement between the person who creates the trust (called donor, settlor or grantor) and a person that manages the assets in the trust (the trustee) for the benefit of a third party (the beneficiary).

Trust Assets The trust can contain almost any type of asset such as cash, stocks, bonds and real estate. Assets are transfered "into the trust", which basically means that the ownership of the assets changes to the trustee. Assets may be transfered by way of deeds (in the case of real estate) or registering the account in the name of the trustee (in the case of bank account).

What does the trustee do? The terms of the trust will detail the powers and duties of the trustee, but generally the trustee's duty is to manage the assets for the benefit of the beneficiary. For example, the trustee might make investment decisions on behalf of the beneficiary.

Types of Trusts
Trusts fall into two main categories: revocable and irrevocable. A revocable trust can be changed or revoked by the settlor; whereas an irrevocable trust cannot be modified or revoked. Within those broad categories, there are many types of trusts. A few examples:

• Living Trust - created while the settlor is alive
• Testamentary Trust - created in the settlor's will and effective upon her death
• Special Needs Trust - created for to provide for supplemental needs of a disabled person
• Charitable Trust - allows the settlor flexibility in making donations to charity

Why Use a Trust?

• You have young children and don't want them to squander their inheritance. A trustee can manage the assets for your children, paying school tuition, etc. until they are old enough to manage the assets themselves. You decide at what age they get the assets.
• Your spouse is not a sophisticated business person and you are afraid for them to manage the assets on their own.
• You have a disabled child currently receiving government benefits. You want your child to continue getting benefits, but would like to provide the child with extras such as additional therapy, a vehicle or a computer system.

Trade the Desk Calendar for a Check

Instead of getting another coffee mug or desk calendar in exchange for your charitable contribution, how about collecting a check? It's possible with something called a charitable gift annuity. The annuities are offered by nonprofit organizations such as charities and universities. You (the "donor") make a donation of cash, stock or real estate and the organization promises to pay you a fixed sum on a regular basis (annually, quarterly, etc.). The amount of the payment depends on the amount of the donation and the interest rate offered by the organization. Most organizations use rates approved by the American Council on Gift Annuities.

Charitable gift annuities can be attractive for many reasons, including:

• Declining interest rates on CDs and other fixed income investments
• The donor has stock that has appreciated in value and would like to reinvest to obtain an income stream, but doesn't want to sell because of the capital gains tax
• The donor wants to contribute, but doesn't have enough money to justify the costs associated with charitable trusts

Charitable gift annuities come in a variety of structures, depending on state law. You may be able to structure payments over your life and that of your spouse in case you die first. You may also have the option of having the payment to go someone else. Annuity payments can be started immediately or deferred to a later date.

For more information, visit American Council on Gift Annuities or contact your financial advisor.

Source for Post: Wallstreet Journal, Weekend Edition, May 12-13, 2007, Page R4.

Business Succession Planning 101

You've spent years and a good deal of money to get your business off the ground and to grow it into a successful enterprise. But have you thought about who will take over when you die or retire? Most business owners think they are too busy in day-to-day operations to answer the question, but it should be a priority.

Often the stock answer is the kids, but statistics show this option is rarely successful. The U.S. Small Business Administration reports that two-thirds of family run businesses fail to make a successful transition to the second generation. Less than 15% survive to the third generation.

Here are steps you can take now to help make a smooth transition:

• Identify your replacement team and start grooming the new managers. Evaluate your current managers, including family to determine who are the most capable candidates.
• Communicate with candidates to ensure that they have the desire to take over the business.
• Analyze the business. Determine how and why the business works. If your role is critical, pay special attention to the talents of the person you have identified to fill it.
• Place a value on the business by enlisting the help of a valuation professional to determine what your business is worth. There are several valuation methods such as discounted cash flow, book value or hiring a professional appriser.
• Draft a buy-sell agreement, which details the terms of transfer between you and your successors or partners.

The best time to start working on a business succession plan is now, while things are going well.

Help for Medicare Coverage Issues

Often spouses qualify for medicare at different times and face complicated coverage issues. It can be difficult to make decisions on the right package of private and government-provided benefits. Luckily, there are several sources of help:

• The State Health Insurance Assistance Program (SHIP) is available in all states and offers free assistance with Medicare questions. The official Medicare site has a list of contact information for all states. For Louisiana, call 1-800-259-5301or click here.
• If you are looking for a financial planner with insurance expertise, the Financial Planning Association's online directory (PlannerSearch.org) allows you to search by specialty.
• Increasingly, people are looking to geriatric care managers to assist with insurance coverage and other issues. Check out the National Association of Professional Geriatric Care Mangers.
• The National Academy of Elder Law Attorneys maintains a database of lawyers that is searchable by experience in Medicare and disability benefits.

Source for Post: Wall Street Journal Online (subscription required)

Charitable Gifts: How You Can Make a Difference

Oseola McCarty made her living washing and ironing other people's clothes. At one time, she charged $2 a bundle of clothes, later increasing her price to $10. Miss McCarty never married, dropped out of school in the sixth grade, never owned a car or had central air conditioning. Yet, she donated $150,000 to the University of Southern Mississippi because as she said " I just want the scholarship to go to some child who needs it, to whoever is not able to help their children."

Don't assume you can't give to a charity in your estate plan because you're not wealthy.

Ask yourself a few questions:

1. What charities have I supported in the past? Why?
2. What gifts meant the most to me? Why?
3. What are my values and how would I like to see them supported?
4. What are the major challenges in my community? How could I support change?
5. What do I want to teach my family about charitable giving?

Consider including charitable giving in your estate plan. Options exist for a variety of gift types at all dollar levels. Like an acorn to an oak, gifts that start out small can make a big difference!

To learn more about Miss McCarty and her gift, click here.

Paying Your Granchild's Tuition

In the past, many grandparents used a bank or brokerage account to accumulate funds for their grandchildren's tuition. But those options meant paying taxes on the investment income, leaving less money for college. Now, most turn to 529 college savings plans. The 529 plan allows you to invest free from federal tax (and sometimes state tax) if the money is used for higher-education expenses such as tuition, books and housing. Most plans offer an age-based fund option which contains aggressive growth stocks early on to increase returns and then shifts to more conservative investments closer to the time the money is needed. This relieves the grandparent from having to make investment decisions.

To find out more about 529 plans and compare the options, check out morningstar.com, collegesavings.org or savingforcollege.com.

Source for post: Wall Street Journal Online (subscription required)

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