When making financial decisions, it seems like it would be nice to be able to see into the future and know what it holds. If we knew now what our future financial needs would be, it would be easier to make decisions about saving, giving, and distributing our estates when our earthly needs are done.
But we do not know, and we must plan as best we can. Consider the following three options.
Option one: complete availability of assets
This option focuses on keeping all assets available to meet emergency needs through certificates of deposit, mutual funds, and other investments that can be easily liquidated to pay expenses.
On the surface, this makes sense. But what happens if medical expenses or nursing home care use up all of the assets and life continues?
Option two: complete unavailability of funds
The other extreme is to set aside all of our funds so that they cannot be used for emergency expenses. Irrevocable trusts, annuities, and life estate agreements may protect funds.
This may also seem like a good idea. But what if we change our minds? Some agreements do not allow for a change in use or alteration in beneficiary designations.
Option three: combination of availability
Good financial planning would probably say that a combination of the first two options is best. We should keep a percentage of our assets available and set aside a percentage in order to guarantee income for life—regardless of the cost of medical bills or nursing home care.
The truth is, we are always going to need some income. But what percentage should be set aside to guarantee income? If you have a financial adviser, she or he can help you decide how much should be guaranteed and the form of that guarantee. It is important that you be comfortable with your plan.
Charitable gifts and lifetime income
In many situations, your charitable giving can be combined with your desire to secure lifetime income.
A Charitable Income Agreement can accomplish multiple goals. It can increase your cash flow in retirement years by providing tax-free income. It can provide tax advantages such as helping you avoid capital gains tax or giving you a charitable deduction to offset other income taxes you may be paying. This kind of agreement can also provide income for a surviving spouse. Finally, if you employ a Charitable Income Agreement as part of your financial planning, the gift that you intend for your charitable organization will be guaranteed.
If you’d like to learn more about Charitable Income Agreements, email us at contactcenter@cdfcapital.org or call us at 888-540-7112. We are glad to help.
