Planning Potpourri

◙
Sell
your CRT Interest:

So you’re charitable and sent up a charitable remainder
trust (CRT). You get an annuity payment for life, then your favorite charity
gets the remainder. Times are tough. Consider selling your CRT interest. You
can get a lump sum now, it might even exceed the present value of the annuity
stream you might get for life. Terms of the trust and state law must be
considered.

◙
Family
Loans:

If you’re loaning your brother-in-law money to get through tough
times have a formal signed note evidencing the loan, and get collateral.
Insisting he sign a note and give you a second mortgage on his home isn’t a sign
of your mistrusting him, but gives you better standing ahead of other creditors
if he is forced to bankruptcy. You’re preserving family money, not being tough
on him.

◙
Review
your Divorce Agreement:

Divorce agreements might mandate insurance
coverage, contributions to 529 college savings plans, and more. How the recent
economic turmoil affects your divorce might hinge on the wording used. If you
were required to maintain a target level of funds in a 529 plan when a child
attained a certain age or started college, the decline in the value of 529
investments might require additional contributions you had not planned on. If
you and your ex were each required to contribute specified amounts, will that
be enough to fund college if the value of the funds saved just plummeted by ½?
Be proactive, review the agreement and consult with your matrimonial attorney
and come up with an alternate plan before the fund is depleted on tuition. If your
ex has insurance obligations, get proof of insurance to make sure that the ex
didn’t cancel the coverage because of economic problems, and that the policy
and insurer remain viable (not assured after recent developments).

◙ Ordinary Not Capital Loss.
If stock
in a C or S corporation is sold at a loss, that loss will be subject to severe
restrictions on deducting capital losses ($3,000 above capital gains). However,
if your stock qualifies as “Section 1244 stock” the loss might be deductible as
an ordinary loss without the restrictions. ►The corporation must be a domestic
C or S corporation.  ►The total
money and property contributed to the corporation for stock must not exceed $1
million. ► The stock must be issued in exchange for cash or other property, not
for services. ►The stock must be issued directly to the original owner who is an
individual or a partnership. ► Stock can be either common or preferred (if issued
after 7/18/84). ► For the 5 years before the loss, the corporation must have
derived more than 50% of its gross receipts from other than royalties, rents,
dividends, interest, annuities and gains from sales and trades of stocks or
securities. ► The amount of ordinary loss that you can claim on Section 1244
stock in any year is $50,000, and for married taxpayers filing joint returns $100,000.