/ GIFT & 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.
Estate Planning Questions
Is an Estate Plan the same as 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 or visiting their website.
/ 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.
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.gift will be handled and acknowledged according to your wishes.
/ 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.