Estate Planning Newsletter Spring 2011
Do you have a current will? If so, you are among only thirty percent of Americans who do.
We have been inspired in recent months by some of the wealthiest people in America, led by the example of Warren Buffett and Bill and Melinda Gates, who have taken a pledge to commit 50% of their fortunes to philanthropic causes. Estate planning however, is not only for the wealthy; it is also for persons of average means who have accumulated assets and property over the years—especially those with young children. Good stewardship requires careful planning. As individual and family net worth and circumstances change, the greater the necessity for careful estate and financial planning.
Much of what we, as individuals, are able to do for our families and charitable institutions during our lifetime is the result of good stewardship of what we earn and accumulate. It is equally important to be good stewards of our resources when we no longer need them. A comprehensive estate plan is necessary to make certain that our resources will be distributed to family members and to charitable organizations that we supported during our lifetime.
Ensuring the Future
The most fundamental way individuals help to ensure the future of Trinity Lutheran Seminary is to make provision in their wills directing a percentage or specific amount of their estate to the seminary. However, as important as it is to have a valid will, many people neglect to prepare one. This issue of the Estate Planning Newsletter will describe the reasons for having a valid will – and keeping it current – and how to make a bequest to Trinity Lutheran Seminary.
Estate Planning Begins With a Will
The most basic component of any estate plan is having a valid will. Preparing a will should be done carefully and with the help of an attorney who has the experience and expertise to help you carry out your wishes. It is your attorney’s job to keep abreast of current estate tax law and guide you through the process of constructing your will, so that you accomplish your objectives and avoid needless complications for your loved ones. If you do not prepare a valid will, the laws of the state in which you reside will prescribe how your estate is distributed. Unless you are in agreement with the formula for distribution used by the state, it is imperative that you prepare your own valid will to insure that your wishes are carried out.
In addition to creating a will, many individuals also create a revocable “living” trust, which is an instrument that contains provisions of the individual’s estate plan and specifies how the individual’s assets will be distributed at death. The individual creating the trust (the trust “grantor”) often serves as trustee of the trust during his or her lifetime. There can be advantages to setting up a living trust, including protecting the grantor’s privacy and the avoidance of probate court proceedings at the grantor’s death for assets that the grantor has transferred to the trust during his or her lifetime. This process also avoids proceedings to appoint a guardian to take over the grantor’s assets during the grantor’s life if the grantor becomes incapacitated. For purposes of this discussion, references to a “will” also include a living trust.
Once your will is made, it should be considered a living document. Many factors can have a bearing on your will and may necessitate adjustments. It is wise, in fact, to review your will at least once a year. Federal tax laws which affect wills and estates have been changed frequently in the past and will likely change in the future. The state in which you live may have additional legislation which affects your will and your ultimate estate plans. Also, the value and form of the assets which you plan to distribute in your estate may have changed since you prepared your will. You may, for example, have engaged in a business enterprise which has substantially increased your estate. You may have had a significant increase or decrease in the value of your real estate holdings. You may have accumulated substantial assets in your IRA, 403(b), 401(k), or other retirement plan which has significant tax implications at your death. You may have received a large inheritance. Conversely, you may have made some lifetime gifts to relatives or to charity that you had earlier planned to make through your will. In addition, circumstances related to your heirs may have changed, resulting in your desire to include them for a greater or lesser portion of your estate. These and other factors make it extremely important that you and your attorney monitor your changing situation to make certain that your will is up-to-date.
The First Step in Making a Will – Determine Your Objectives
Before you talk with your attorney concerning your will, it is important to think seriously about what you want to accomplish through the distribution of your estate. If you are married, you and your spouse will each need a separate will, and together, the two of you will want to discuss your estate planning objectives. For some people, a primary objective is to pass assets to the surviving spouse and then to children and grandchildren. Other objectives may include bequests to organizations whose missions and purposes are extensions of your lifelong beliefs and values. Therefore, it is also advisable to discuss your charitable intentions with the chief executive or development staff members at those charitable institutions which you wish to include in your will. These representatives can often provide insights into the best strategies for accomplishing both your objectives of passing wealth to family members and making an estate gift to one or more non-profit institutions. We at Trinity Lutheran Seminary are regularly consulted in such matters.
In addition to clarifying the objectives of your estate plan, it is helpful to make an assessment or inventory of your estate. Your attorney can be more helpful to you, and the process of making your estate plans will go much more quickly, if you have done this in advance of your first appointment. The process will also give you a much better understanding of your own assets. The enclosed form will help you organize your thinking and provide your attorney with the information that is needed to help you meet your estate objectives. Even if you have inventoried your holdings in the past, it is a good idea to do an annual review. If you have a will, but have not examined it in some time, the form could also be useful to you in bringing your current assets and liabilities into clearer focus. The process may suggest that a more thorough review of your estate plan is needed. Also remember that life insurance and retirement accounts may not be distributed by your will. Instead, these particular types of accounts must name a specific beneficiary or beneficiaries. Therefore, these items also need to be kept current.
Making a Charitable Bequest By Will
A number of individuals have directed resources to Trinity Lutheran Seminary over the years by making a specific bequest through their wills. Funds have been directed to establish endowments which memorialize the donors themselves, their parents, or other family members. The income from these endowments has been used for a variety of purposes, including scholarships, faculty chairs, programming, student awards, and for general purpose (unrestricted) use. At times, bequests Trinity has received have been in a form other than cash, such as real estate, tangible personal property, stocks and bonds. In most cases these have been liquidated, and the funds placed in our endowment portfolio to generate income for the purposes the donor intended.
There are several ways to include a bequest to Trinity in your will. While you will need the assistance of your attorney in determining which way best fits your particular circumstances, the following are some methods used in making a gift by will.
Outright Gifts – A gift made by bequest can be an outright gift of a percentage of your estate, a specific sum of money, a specific piece of personal property, or it can be a share of such property. For example, a donor could, following the example of the Gates and Buffett, designate by will as much as 50% of their estate or a more modest percentage. Sometimes 2% or 3% can make a real difference to the institution without significantly impacting your heirs. Alternatively, one could designate a specific sum, such as $50,000 or all of your shares of XYZ Corporation stock, to Trinity Lutheran Seminary. Another option would be for the donor to give one-half of his or her shares in ABC Corporation stock to Trinity.
Residual Gift – What is left in your estate after all outright, specific and other similar gifts have been made is called the residuary estate. You may direct in your will that this residuary estate be transferred to specific persons, or you can have your residuary estate (or a portion thereof) pass to a charitable institution such as Trinity Lutheran Seminary. For example, a donor’s will could provide that one-fifth of his or her residuary estate will be transferred to Trinity, and the other four-fifths of the residuary estate will either be transferred outright to family members or held in trust for their benefit.
Gift of Real Estate – A gift of real estate may be made entirely to one person, such as one’s spouse, or to an institution. Or the real estate might be given to one’s spouse for use during the spouse’s lifetime, with the property then passing to another person or to Trinity Lutheran Seminary. For example, a donor may want to give the family home to the surviving spouse for the spouse’s specific lifetime use and then have the will provide that the home will transfer to Trinity.
Contingent Beneficiary – A donor may wish to consider naming Trinity Lutheran Seminary as the contingent beneficiary of his or her will. This means that Trinity would benefit only if the beneficiaries named in the will are not living when the donor dies. In the event that all of one’s beneficiaries are deceased when that person’s will takes effect, and there are no other close relatives, it is possible that the estate could pass to distant, and possibly unknown, relatives by default. Often this involves expensive litigation. If no relatives can be found, the entire estate could pass to the state. By naming the seminary as contingent beneficiary, the individual prevents this from happening.
Gifts in Trust – You may establish one or more trusts in your will that benefit family members or other persons as well as Trinity. One way is to designate that the earnings from the trust property be paid to your spouse for his or her lifetime, with the trust property then transferring to the seminary. There are many trust variations, and it is essential to consult an experienced attorney in drawing up such a trust, so as to comply with complex Federal regulations and qualify for the allowable estate and income tax charitable deductions.
Codicil – If a gift to Trinity Lutheran Seminary is not now included in your will and you wish to make such a gift, you can do so through execution of a codicil (amendment) to your will. Your attorney should be consulted to draw up the codicil. This is often relatively simple and inexpensive.
Ways to Make a Bequest by Will
There are a number of ways to include a bequest to Trinity in your will. The following are samples of possible wording for a charitable bequest which you may review with your attorney:
1. Unrestricted Bequest: I give to Trinity Lutheran Seminary, Columbus, OH,
% of my adjusted gross estate, or, [the sum of $_______] for its general purposes.
2. Restricted Bequest: I give to Trinity Lutheran Seminary, Columbus, OH, % of my adjusted gross estate, or, [the sum of $ ] to be used for . If the seminaries Board of Trustees at any time determines, however, that the seminaries purposes would be better served by using a portion or all of such sum for the seminaries general purposes, such portion or all may then be used for such general purposes.
The “Living Will”
The purpose of estate planning is to make decisions not only about our tangible resources, but also about our health and well being. How we wish to be cared for when we are incapacitated and whether we wish to be kept alive by mechanical means are issues that should be determined in advance. Leaving these matters to a distraught spouse and/or other family members during a health crisis may lead to hasty or ill advised decision-making.
In many states it is possible to execute a “living will” and/or a health care power of attorney. A living will is an instrument that states how you wish your care and treatment to be handled. A health care power of attorney is an instrument by which you name a person to make decisions that affect your health care if you are unable to do so because you are incapacitated. This assures that you maintain control of your life and relieves your family of making life choices for you. Your attorney can advise you of your options in your state of residence.
Conclusion
Having a current and valid will should be a high priority for each of us. Through it, we can make certain that our estate is distributed according to our wishes, not according to a state imposed formula. In this way we are able to continue to support those persons and causes which have been so important to us during our lives.
As you work with your attorney in drafting or revising your will, we hope you will consider making a bequest to Trinity Lutheran Seminary to further our work. If you have questions, or would like additional information about our mission and programs, please contact: Jane Kirchhoff, Director of Development, 2199 E. Main St., Columbus, OH 43209, by e-mail, or by phone (614)235-4136.
In an effort to help you begin and navigate your estate planning, The Will and Trust Workbook from
the ELCA Foundation is a very helpful tool.
