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Conflicting Advice? Not

Question: A couple of days ago, in response to a questioner's inquiry about some ideas which had been presented to his mother at a seminar, you dismissed charitable remainder trusts as one of several risky and wacko investing ideas. Yesterday, you suggested that they were a legit combination of charity and retirement planning. A number of years ago I purchased an annuity which combined life insurance with a traditional annuity, which I don't believe can be gotten today. After several years (required to hold for at least 7 years), I cashed it in, taking a 20 year payout at guaranteed interest, eventual payout to exceed my then current value of 25% appreciation, with the balance to be paid to my beneficiary. It seems that a charitable remainder trust combines this sort of annuity with a donation. Why is it not a good idea? Your advice seems conflicted. I had been considering changing my will to create a CRT for the small amount of giving which I feel I can afford, as it seemed to be a valid combination of giving and investment. Nick, Glover, VT

Answer: I'm a fan of charitable remainder trusts. The same goes for charitable gift annuities. In both cases, you support a charity. You get some nice tax breaks. And you can set up a steady stream of income for life. In answering the question where I made some negative remarks it was about the kind of financial conference where lots of high-fee high-cost peddlers of products get together to hawk their wares to unsuspecting and unsophisticated families. .

So, to be clear, products like charitable gift annuities can be a critical part of smart estate planning. However, there are a number of financial and emotional factors to consider before buying a charitable gift annuity and similar financial arrangements (such as a charitable remainder trust and a charitable lead trust). Top of the list are the many estate planning issues to think through, from your income stream to your children's inheritance. It's also important to realize that the decision is irrevocable. You can't wake up one morning and say to yourself, oops, I made a mistake. That's why in most cases sensible philanthropic financial planning requires professional guidance.

Still, the time spent researching the product and seeking out professional advice can be worth it. Seems to me you made a good move.

04/09/08 by Chris Farrell

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A Will: A Lawyer or Do-It-Youself Online?

Question: I know that my husband and I need to have a will, especially now that we are the parents of a 20-month old. We have a good referral to a local lawyer from my parents; however, the cost is a bit of concern. How much should we expect to pay for having a general will and living wills written? I did a search on the MarketPlace website and found an article about on-line wills. Are these services reliable and useful in all states? Chandler, Gate City VA.

Answer: Congratulations on pulling together a will. Everyone needs one, especially families with children. A will is also the foundation of all financial planning for families.

There are a number of good "do-it-yourself" products on the market. They are legitimate, and the price range seems to be in the $20 and $120 range. I used one of these products in a pinch. It was a will form created by Nolo Press, a long-time publisher of consumer-oriented self-help legal guides (www.nolo.com). Nolo offers several will writing products. I found the directions comprehensive and easy to follow for the one I used.

I haven't personally spent much time with other well-known do-it-yourself will products, such as legalzoom at www.legalzoom.com and buildawill at www.buildawill.com. But I do believe that all of these products work best for very simple estates.

Still, I remain a fan of hiring a lawyer to do a will. I think its worth the several hundred dollars they'll charge for their services--especially when children are involved. The reason is that a will is a critical foundation for any personal financial plan. You want to make sure you get it right, that you address all contingencies, and that you get any questions you may have answered by a professional.

So, while I have nothing against the do-it yourself wills, in many cases prudence dictates hiring a competent attorney.

06/13/08 by Chris Farrell

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