Estate Planning as an Expression of Love

Why do people create wills and other estate plans?  Almost always it’s because of family, friends and the charities they support.  Most people who plan their estates have specific goals in mind, including:

  • Providing security for a surviving spouse, family member or other dependent;
  • Minimizing taxes and other costs payable after death;
  • Designating an executor, guardian or trustee;
  • Leaving a lasting legacy that will continue the support provided during lifetime.

Remember that your estate plan can be both practical and personally satisfying.  For example, your will could provide a family member or friend with income for life and a thoughtful gift to charity.  You may want to establish a memorial in honor of your loved ones.  Many of our friends find it only natural to continue their lifetime generosity with a bequest that helps carry on our work.


How Can I Include Charity in My Estate Plan?

Q. I’ve found that I can increase my support for charity by directly contributing appreciated stocks.  Are there similar assets that I can leave to charity in my will?

A. Yes.  Common examples include U.S. savings bonds and retirement accounts.  At death, these tax-burdened assets may result in additional income taxes for the individual beneficiaries who receive them.  However, tax-exempt nonprofit organizations receive the full value of the assets, free of taxes.

Q. I plan to include charity in my will, but I would give more if I knew what my family’s situation would be in the future.  Any suggestions?

A. You might consider making “contingent” bequests.  For example: “I bequeath $25,000 to my sister, Jean, but if she has predeceased me, I direct the $25,000 be paid to charity in her memory.”  Another idea is to give a beneficiary the right to “disclaim” (turn down) part or all of a bequest and state that such amounts would then pass to a named charity.

Q. Many years ago, I made a will that left a small gift to charity.  Now, I’d like to enlarge my gift.  Do I need to make a new will?

A. You might consider asking your attorney about making a change to your will (called a codicil), but other alternatives are also available.  For example, you could make charity a beneficiary of your life insurance or retirement account.  You could also make a “payable on death” (POD) beneficiary designation on most bank accounts and certificates of deposits.

Q. I have a brother and two sisters, all in their 70s, who may need financial assistance after I’m gone.  Is there a way to help them and charity at the same time?

A. Yes.  You could establish a charitable gift annuity in your will or revocable living trust that will provide lifetime payments to a surviving spouse, family member or close friend.  Your gift provides future benefits to charity.


Retirement Fund Gifts and Other Beneficiary Designations

An IRA, 401(k) plan, 403(b) plan or other retirement account may be the ideal vehicle for a tax-wise legacy to charity.  The reason is simple: State and federal income taxes otherwise may diminish the account before it reaches loved ones.  Gifts from these plans to charity, on the other hand, pass free of all taxes.

It’s simple to make an estate gift from an IRA or other retirement account.  Just ask the custodian or trustee of your account for a form to include charity as a beneficiary.  Please note that, except for IRA funds, a consent is required if accounts pass to anyone other than the surviving spouse.

At the very least, consider giving your heirs the right to “disclaim” (decline) retirement plan benefits, with charity as the alternative beneficiary.  Heirs who understand the severity of taxes may consider it best to have retirement assets pass to support vital charitable programs.

In addition to gifts from qualified plans, beneficiary designations can be made from bank and brokerage accounts you may own.  This in no way interferes with your use of the funds during your lifetime.  Simply request a form from your fund manager.


The High Cost of Not Planning Your Estate

“I don’t need estate planning; I’m not rich enough to own an estate.  Besides, I don’t want to pay a lot of legal fees.”

If this sounds like you—or someone you know—it’s important to realize that anyone who has investments, savings, a home or personal possessions, retirement accounts or life insurance needs estate planning.  Not doing so could result in considerable loss from probate costs, taxes, debts and estate expenses.  Although estates up to $11.4 million are sheltered from federal estate tax in 2019, several states impose tax at lower levels, and income taxes may apply to certain assets.

An estate planning attorney can recommend ways to reduce probate costs, including trimming the size of your probate estate so it qualifies for fast-track, low-cost procedures.  With planning, an executor may agree to serve without a fee, and your will can provide for a waiver of any bond requirement.

Additionally, your advisors can estimate your estate settlement costs, including taxes, administration expenses and debts.  Advisors can also help you arrange for cash reserves, life insurance and liquid investments to pay for these expenses.  Doing so could avoid a forced sale of assets to pay any outstanding bills.

Keep in mind that gifts made to charity also can be planned to reduce taxes, during your life and thereafter.

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