Gift and Estate Planning
There are specific times and events in your life when planning your gifts can result in great benefit for both you and your favorite charities. Important events include the sale of appreciated assets, sale of a business, sale of a farm and retirement. All of these are excellent times to consider a Planned Gift.
Planned Gifts may be made either during your lifetime or at death. They usually involve the assistance of professionals such as your accountant, attorney or financial planner.
Estate Planning is not only for the wealthy; it is for everyone. It is simply the process of deciding where your assets should be distributed after your death. The plan is implemented through a Will or Revocable Living Trust.
For many people a Revocable Living Trust is an excellent tool to implement their Estate Plan. Like a Will, a Trust makes provision for the transfer of your assets at death. Unlike a Will, assets in the Trust are not subject to the costs and delays of probate. During your lifetime, it remains completely under your control.
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Estate Planning Checklist
HOW DOES YOUR CHECKLIST LOOK?
One of the many confidential services offered by Barnabas Foundation at no charge or obligation to you is the opportunity to discuss issues relating to your Estate Planning. We have extensive experience in helping families meet a wide variety of other Estate and tax planning needs.
Through this planning process with Barnabas Foundation, you also will discover distinctive ways of supporting your favorite Christian charities during your lifetime and after your death.
First Wills are usually prepared when there are young children in a family whose needs include passing property to the surviving spouse and naming a Guardian/Trustee to care for and protect children. As children reach maturity, different concerns will emerge about one’s Estate. Wills and Estate Plans that were once adequate must be updated to meet new challenges and circumstances.
No "one-size-fits-all" solution meets the planning needs of every Christian. This Planning Guide provides a convenient way to assess your own situation and plan accordingly. (Use it with your own planning advisors to help meet your goals.)
DO I HAVE ...
- An up-to-date Will or Living Trust?
As your planning needs change over the years, your Will should be updated to manage these changes.
A Living Trust disposes of property in much the same way as a Will, while providing other benefits. A Living Trust is a simple and flexible way for you to hold and manage your property. It will also allow for others to act on your behalf at any time it may become necessary. If the Trust contains all your property, then the Estate passes free of probate.
- A Durable Power of Attorney?
Through this document, you appoint a person to manage your property if you become incapacitated. A Power of Attorney applies to property that you have not transferred into a Trust. Formal guardianships on your behalf are normally made unnecessary by this action.
- A Living Will?
Most states now authorize you to make a statement of your desires regarding medical treatment if you become terminally ill. Preferences about the use of "heroic efforts" and artificial life supports are frequently included.
- A Health Care Power of Attorney?
This document allows you to appoint a person to be your representative in making medical decisions for you at any time you are unable to make them yourself.
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Your Estate Planning Questions
We are a member of Barnabas Foundation, an organization that provides Estate Planning and Planned Giving expertise to Christians around the country. As one of our supporters, you have access to their services at no cost and with no obligation.
Barnabas Foundation exists to help individuals exercise good Christian stewardship through thoughtful Estate and Gift Planning. A representative from Barnabas Foundation will be happy to visit with you about your Estate Plan and provide information on specific concerns or questions you may have. They provide confidential, objective Estate Planning at no cost to you.
- Is an Estate Plan the same as having a Will?
A Will is a legal document that describes your plans for your property upon your death. It is the foundational document required for all Estate Plans.
- If my Estate is small, do I need a Will?
If you don't have a Will, the state has one for you. Laws are enacted in each state to determine what will be done with the assets of an individual who dies without a Will (“intestate”). Unfortunately, the state's "Will" does not take into account your personal values, Christian commitment, goals, family situation or needs. A Will enables you to decide who will become the next "steward" of the resources God has entrusted to you.
- How do I provide for my children’s care after I'm gone?
In your Will, you can name the person you would like to be the Guardian of your children. The Guardian has responsibility for the physical care of your children. By naming a Guardian in your Will, you, rather than the local court, can decide who should care for your children if something happens to you. Your children's financial needs can be met by creating a Children's Trust in your Will. It holds all of your assets for your children's benefit until they have reached the level of education you want to provide for them and are mature enough to handle an outright distribution from your Estate. In creating a Trust, you must appoint a person to be in charge of the Trust, called a Trustee. Your Trustee will invest the assets in the Trust and make decisions about their distribution to your children.
- Should I consider a Living Trust?
For many people a Revocable Living Trust is an excellent way to implement their Estate Plan. Like a Will, a Trust makes provision for the transfer of your assets at death. Unlike a Will, assets in the Trust are not subject to the costs and delays of probate. During your lifetime, it remains completely under your control.
If structured and funded properly, the use of a Revocable Living Trust can eliminate court costs (except in an unusual situation); lower the amount of attorney time needed to administer your Estate, thus lowering attorney fees; and avoid time delays. In most situations, the successor Trustee can assume management of the Trust immediately. The payment of final bills, collection of insurance monies, sale of appropriate assets, etc., can be done very quickly. The actual time it takes to "administer the Estate of the decedent" by means of a Living Trust often can be reduced by half, as compared with the probate process.
On the other hand, Trusts are not for everyone. Because of the added initial cost, funding requirements and other issues, some people prefer a Will for their primary Estate Planning document. Even with the Trust, it is recommended that you have a Will, often called a "pour-over" Will to cover any assets not included in the Trust at your death.
- Will Barnabas Foundation do my legal work?
Barnabas Foundation will assist you in producing a plan that you can take to your local attorney to implement. While we assist you with your Estate Plan, we do not provide legal advice. It is important that your own attorney be involved in this planning process.
- What is the Hidden Double Tax?
Hidden double tax refers to the tax liability due on tax-deferred benefits at the time of death. Both income tax and Estate tax may become requirements. Your tax-deferred benefits could be taxed at rates that could total between 15 and 70 percent.
- How Does It Happen?
Almost everyone today has some form of tax-deferred retirement program because of the tax advantages these programs provide. Retirement money is often a combination of employer-provided pension, profit sharing plans, personal IRA's, KEOGH's, annuities, etc.
The problem is that "tax-deferred" means exactly that. The tax is not eliminated; it is merely delayed until the money is withdrawn during your lifetime or by your children after your death.
Any retirement funds remaining at death are included with your other assets for Federal Estate Tax purposes. Retirement fund assets are also subject to income taxes when they are received by your children. For people in the highest tax brackets, the double tax can send more than 70 cents of each dollar to the Federal government! State taxes may further shrink the amount received by your children to about 25 cents on the dollar.
- How Can It Be Eliminated?
There are two ways to eliminate the double tax while assuring that retirement funds will be available for you and your spouse until death:
The most direct method is to change the final beneficiary to a specific Christian charity, after you and your spouse. This means that all funds remaining (tax-deferred assets) after the death of both spouses will go to the charity you have chosen.
The other way is to indicate in your Will or Trust that you wish to leave a portion of your Estate to Christian causes, and that the assets used for this gift should be those that have not previously been subject to income tax (known legally as "Income In Respect Of a Decedent").
Either way, all tax-deferred retirement funds remaining at death can be entirely excluded from both income and Estate taxes. The Will or Trust method, since it is broader in scope, has the added potential to eliminate double taxes on other assets as well.
Neither method is difficult to implement but must be structured properly to maximize the benefits. However, due in part to a lack of information about the benefits of giving tax-deferred assets, many planning professionals are not fully aware of how to apply these advantages to particular Estate Plans. Barnabas Foundation professionals are willing to assist you and your advisors in making sure your plan eliminates the double tax.
Contact Barnabas Foundation to see if you are a candidate for these substantial tax savings by calling 1-888-448-3040.
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Suggestions for Charitable Giving in Estate Plans
- Giving a tithe of your Estate to charity
When planning for the future allocation of your Estate, you can use the occasion to reinforce the importance of the biblical concept of a tithe to your family. For example, if a couple with four children had an Estate of $600,000, a tithe of the Estate would provide $60,000 for charity and $540,000 to their children, or approximately $135,000 for each child.
- “Child Named Charity”
The concept of a “Child Named Charity” actually was presented to Barnabas Foundation by a couple who had lost a child and wanted that child’s share to go to their favorite Christian charities. It has become a popular way for many people to distribute gifts from their Estate.
For example, if a couple has four children and wants to include a “Child Named Charity” in their plans, they would divide their Estate five ways: one-fifth to each child and one-fifth to their favorite Christian organizations. A “Child Named Charity” makes a strong statement to family members about your commitment to Christian causes. At the same time, it still provides a substantial portion of your Estate for your children.
- Zero Tax Plan
Under the current tax law, the Federal government will allow each person to distribute a portion of his or her Estate to their children tax-free. A substantial tax must be paid on anything above that amount. Some Christians decide to give as much to their children as they can without paying taxes up to the limit allowed by law; everything above that amount is donated to their favorite charities.
For example, if a husband and wife with three children have an Estate of $9 million and died in 2009, they could each give $3.5 million to their children, or a total of $7 million tax-free. Anything above that amount would be designated for their favorite Christian charities. If you have established a Zero Tax Plan prior to recent tax law changes, you should review that plan in light of current tax law. Depending on the size of a person’s Estate and applicable tax laws, a Zero Tax Plan bequest could be substantial; however, with changes in the law, the charitable bequest could be eliminated altogether.
- Giving most/all to Christian causes
Sometimes Christians decide to leave most or all of their Estate to Christian charities. In some cases, the children of people who choose this option have substantially more assets than their parents, or they may have made lifestyle or financial choices that would make it undesirable to give them any more assets. Others who do not have children or other family members they wish to remember with a bequest may leave their entire Estate to the charities of their choice.
No matter what type of bequest you choose, we encourage you to notify the charities you have selected to make sure that your gift will be credited and use properly. If a charitable organization knows about your bequest and has made provisions for it, it is more likely that your gift will be handled and acknowledged according to your wishes.
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Giving During Your Lifetime
Barnabas Foundation’s Stewards Fund, a donor-advised fund, is one of the best ways to maximize and simplify charitable giving.
- The Stewards Fund enables a donor to make a one-time gift to Barnabas Foundation and decide later how the gift will be distributed to the donor’s favorite charities.
- The donor receives an immediate tax benefit and has plenty of time to determine which charities to support.
- The Stewards Fund also provides the flexibility to ensure that gifts are applied in the most effective way.
- A donor can give appreciated assets, like stock; arrange for the sale of a business; or use the Fund as an alternative to a family foundation.
- The Stewards Fund accommodates many charitable gift opportunities, and also allows the donor to designate multiple charities from a single gift.
- A Stewards Fund account can be established by contributing a number of different types of assets. There is no set-up fee for this account and individuals may gain tax benefits as well, depending on the asset(s) they contribute.
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Glossary of Estate Planning and Planned Giving Terms
Estate Planning is part of our spiritual responsibility for the assets God has entrusted to us. When we realize that everything we own actually belongs to God and we are simply His caretakers or stewards, we understand the importance of making sure that those assets are passed on in a way that honors God and furthers His kingdom.
Property to which a value can be assigned; the property owned by a person or organization. In legal terms, the property of a person that can be taken by law for the settlement of debts or that forms part of a person's Estate
An individual designated to receive benefits or funds under a Will or Trust, or other contract, such as an insurance policy, Trust or retirement plan.
To give or leave something by Will or Trust; typically personal property, cash or other assets.
Capital Gain Tax
A separate tax charged on the profit from the sale of an asset that was purchased at a lower price. For instance, if an individual purchases stock for $100, then sells that stock for $500, he or she will pay capital gain tax on the profit of $400. Capital gain tax rates are usually different than income tax rates.
Charitable Remainder Trust
A Trust created by a donor that makes payments to the individual(s) for life or a period of years. At the end of the Trust term, the remaining balance in the Trust is distributed to charity. The donor receives a charitable tax deduction at the time of the gift to the Trust.
A Trust generally established at death through a Will or Trust. This type of Trust often has “rules” for how and when Trust proceeds will be distributed to children. A typical Children’s Trust will distribute as much money as necessary for the care, support and education of the children. Often, when the children reach a certain age, the balance of the Trust assets are distributed to them for their personal use.
An institution that acts for the benefit of another. One example is a bank acting as Trustee.
Double Tax Asset
Many people have retirement assets such as an IRA or 401(k). The withdrawal from these accounts is subject to income tax. If such an asset is left to loved ones, they too will pay income tax on the amounts they withdraw from the accounts. If the Estate is large enough that it is subject to Estate tax upon death, the retirement assets will be taxed twice – once upon death and again when funds are withdrawn. If retirement assets are used to satisfy charitable bequests, both income tax and Estate tax will be eliminated on these assets.
A tax imposed at one’s death on the transfer of property.
Executor (or Personal Representative)
The person named in a Will to manage one’s Estate after death. This person will collect the property, pay any debt and distribute property or assets according to the Will.
A person or institution legally responsible for the management, investment and distribution of funds. Examples include Trustees, executors and administrators.
A contract between a donor and a charity that provides the donor with guaranteed fixed payments for life. The donor receives a charitable deduction at the time of funding the Gift Annuity, and the annual payment percentage is based on the donor’s age at the time the gift is made. In addition, a portion of each payment is tax-free. Upon the death of the donor, the charity receives the balance of the annuity.
Tax on gifts generally paid by the person making the gift rather than the recipient.
An individual legally appointed to manage the rights and/or property of a person incapable of taking care of his or her own affairs.
Income In Respect Of a Decedent
The portion of your Estate designated for Christian causes where the assets used for the charitable gift should be those that have not previously been subject to income tax.
A person who dies intestate has no Will, and the State then designates how personal property and assets will be distributed.
The ownership of property by two or more people, often with the right of survivorship. The survivor thus ends up owning the property outright upon the death of the other party.
A Living Will is a document that allows a person to explain the type of medical treatment that they wish to receive in the event of a terminal illness where death is imminent. A Living Will often indicates when life support, hydration or nutrition may be removed. Laws governing Living Wills vary by state.
A deduction allowing for the unlimited transfer of any or all property from one spouse to the other, generally free of Estate and gift taxes.
Power of Attorney for Health Care
A document that authorizes another person (an advocate) to make health care decisions for an individual if he or she is incapable of making their own decisions.
Power of Attorney for Property
A document that authorizes a person (described as the agent) to conduct financial transactions for another individual. The agent’s power can be restricted within the document. A Durable Power of Attorney for Property is valid even if the individual becomes incapacitated.
Probate is the legal process of settling a person’s Estate, specifically to resolve all claims and distribute the person's property under the valid Will. Probate protects the individual’s instructions, confirms the executor as the personal representative of the Estate, protects the interests of family members who may have claims against the Estate, and protects the executor against claims and law suits.
Revocable Living Trust
An Estate Planning tool that provides for the convenient administration of the assets in an individual’s Estate without the necessity of court supervision. When assets are transferred into a Revocable Living Trust (a process called “funding”), the Trustee can manage the assets in the event of the individual’s incapacity or death. This type of Trust is often used to avoid the probate court process and can also be used to provide ongoing management of assets after one’s death. A Revocable Living Trust can be amended or revoked until such time as the individual is incapacitated or deceased.
A Trust that is created upon death by the terms of a person’s Will.
The individual or institution entrusted with the duty of managing property placed in the Trust. A “co-trustee” serves as trustee with another. A “contingent trustee” becomes Trustee upon the occurrence of a specified future event.
Often referred to as a “Last Will and Testament,” a Will is a final statement of one’s wishes regarding the assets in one’s Estate. A Will does not eliminate the need for probate court intervention, as many people mistakenly believe, but it gives the probate court direction as to how the assets should be distributed. In most states, a Will is the document used to name guardians of minor children.
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IRS Information - Helpful Links to Forms and Publications for Individuals and Charitable Organizations
Forms and Instructions:
Special IRS Publication 1771 - Charitable Contributions:
Substantiation and Disclosure Requirements explains the federal law for organizations such as charities and churches who receive tax-deductible charitable contributions and for taxpayers who make contributions.
The Internal Revenue Service recently released "Tax Guide for Churches and Religious Organizations," IRS Publication 1828.
The guide explains the benefits and responsibilities under the Federal tax system of churches and other religious organizations. Topics include tax-exempt status (and jeopardizing same) and issues of unrelated business income and political campaign involvement, to name a few.
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Calculators for Your Plan
We welcome you to determine the income and tax benefits of charitable arrangements you may be considering. With these calculators, you'll receive an easy-to-understand gift illustration. It will help you select the best gift opportunity for your personal situation. You should always consult your professional advisor prior to finalizing your plan.
View the calculators here.
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