Playing the Game by Paul Remack

Author:Paul Remack [Paul Remack]
Language: eng
Format: epub
Publisher: Morgan James Publishing
Published: 2018-04-14T23:00:00+00:00

Chapter 7

Playing Defense

Prologue

Making sure that our efforts achieve our goals is critical in the game of Wealth Transfer and Distribution; no one wants to expend time and money only to fail. For this reason, playing defense is one of the keystones of success. It is necessary to think defensively in order to ensure that our careful planning produces the intended result, to anticipate and prepare for unexpected catastrophes, and to change our course when we see something going in the wrong direction. Playing defense takes many forms, some simple and some complex, and these forms can be best illustrated with a series of examples:

Margie decides to send $100 checks to each of five charities. Four of these charities respond quickly by sending her letters of gratitude and receipts for her donations. The fifth charity doesn’t respond with any acknowledgment or receipt. Margie knows that deducting her gifts for tax purposes requires a receipt from the charity. It isn’t enough to have a record of the donation, or even her cancelled check. To be protected, she needs formal acknowledgment. Accordingly, she calls the charity to make sure that she gets the necessary receipt.1

Eric wants to help his three grandchildren with their college costs. He knows that he can fund a 529 plan (which is essentially a tax shelter designed for funds that have been earmarked for college education), but he wants to make a larger gift than $14,000 to each grandchild and isn’t quite sure how to do it. He asks his accountant, Ralph, how to make two years’ gifts at once. Ralph tells Eric that he can donate $28,000 to each grandchild in year one by using the 529 plan to “frontload” two years’ worth of gifts into a single year. Once he does this, however, he won’t be able to make any other gifts to these grandchildren for the next two years without exceeding his annual gifting allowance.2 To make sure that Eric remembers this, Ralph takes the extra step of sending Eric reminders around the Christmas holidays and the grandchildren’s birthdays to avoid additional gifts. Finally, after two years have passed, Ralph sends Eric one more note, advising him that he can once again make gifts to his grandchildren if he wants.

Delores is a widow who has always been very independent, but she is now concerned that if she were to fall seriously ill, no one would know how to help her. She decides to review her financial relationship with Hal, who has been her financial advisor for years, and give him her financial power of attorney.3 Delores entrusts Hal with this power in order to ensure that, should she ever become incapacitated by accident or sudden illness, there would be no disruption to her lifestyle or to Hal’s ability to act on her behalf. While she is healthy, however, Delores retains absolute authority over her financial affairs; Hal’s assumption of this power would be triggered only by Delores’s incapacity (for example, if she were to sustain a head injury and fall into a coma).

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