Estate Planning Practice Blog

Leave a Lasting Impression.

One of the facets of estate planning is the opportunity to make a difference in the lives of your loved ones and support the causes you most care about. You may also have the ability to leave a legacy after you pass away.

Some things to think about when it comes to legacy planning:

1.     Think about charities and causes that are important to you. Describe which ones you would like to support with financial resources before or after you pass away.

2.     How would you like to be remembered by your family and friends?

3.     Personally imagine some of the ways you can leave a lasting impression. Write down your thoughts.

4.     Suppose you had $1 million to give upon your death, how would you allocate this money?

Your thoughts, answers and questions would be the basis of a good discussion with your estate planning attorney to see how an effective estate plan can achieve your objectives and leave a lasting impression.

Naming Charities In Your Estate Plan.

Ever watch a telethon on public broadcasting television like PBS or KCET? Ever hear a pitch from a local hospital about leaving a legacy? Charitable giving is something you can pursue with your estate planning attorney and the charity to leave a gift of your choosing.

The easiest way to implement charitable giving as part of your estate plan is a charitable bequest.

Charitable bequests are testamentary gifts made through a will or other estate planning device like a trust. This planning may provide significant estate and gift tax benefits. Charitable bequests take on many forms depending on the intent of the donor.

The most common form is an outright bequest of virtually all kinds of property (stocks, bonds, real property, and royalties) listed in an estate plan to be given upon the death to the charitable organizations of your choosing.

Other strategies for charitable bequests can take many forms including these described below.

Percentage bequest used to carry out decedent’s wishes. Say you have a current estate of $1,000,000. Rather than a dollar amount, a percentage bequest, say 30%, would allow for participation in estate growth or depletion.

Specific bequest for a particular item or items of property. "I bequeath 1,000 shares of IBM stock to my Hospital."

Conditional bequest is where “I give X, providing the Hospital builds a building with my name on it.” This type of gift may cause problems. They are deductible only if, at the time of the decedent’s death, "the possibility that the bequest will fail is so remote as to be negligible."

Quick Notes: Summary of Charitable Giving.

Over the past week, I've written four posts about different kinds of charitable giving.  And as such, you can donate various kinds of property including cash, stocks, real estate and life insurance to charitable organizations of your choosing.

Benefits include tax advantages for you and supporting causes that you care about.

Here's a summary of those posts in case you are interested in learning more.

1. Charitable Bequests: Making a gift of cash or property at your death to a charity. This is done by a Will, Trust or other written bequest.

2. Charitable Remainder Trusts:  Creating an irrevocable trust and transferring assets to the trust for benefit of the charity. You make annual payments to yourself for a term of years and at the end of the annual payment period, the charity keeps the remaining trust assets.

3. Charitable Lead Trusts: Creating an irrevocable trust and transferring assets to the trust for benefit of the charity. Fixed payments paid to you or other beneficiaries for a term. After the term, the donor or other non-charity beneficiaries receive the remaining trust assets.

4. Donor-Advised Fund: Basically setting up a private foundation with a charity of your choice for charitable giving defined by your parameters with tax advantages.

Quick Notes: Donor-Advised Fund and Estate Planning.

A quick tidbit on Donor-Advised Fund as part of estate planning...

You can donate various kinds of property including cash and property to charitable organizations of your choice.

A Donor-Advised Fund is when you want to donate cash or property to a charitable fund administered by a public charity.  Fidelity has a nice explanation and chart on Donor-Advised Fund on their website. Many charities have information about Donor-Advised Fund on their websites as well.  Here is such a webpage from California Community Foundation.

Basically a Donor-Advised Fund is akin to setting up a private foundation to manage your charitable giving with tax advantages.

Donations are invested according to donor's advice and grants made to qualified public charities according to donor's recommendations, subject to approval of the administering charity. Donors can choose successors to advise on investments and recommend grants after donor's death.

The contribution limits are typically between $10,000 to $25,000 for the first contribution and $5,000 for additional contributions.

The level of complexity is low.

There may be administrative and investment management fees incurred.

Contact your investment company or charity of your choice to learn more information.

Quick Notes: Charitable Lead Trusts and Estate Planning.

A quick tidbit on Charitable Lead Trusts (CLTs) as part of estate planning...

You can donate various kinds of property including cash, stocks, real estate and life insurance to charitable organizations of your choice.

One way to do this is to set up a Charitable Lead Trust (CLT). This is different from a Charitable Remainder Trust (CRTs) as discussed in this post.

A CLT is when cash or property is donated to an irrevocable trust.  The irrevocable trust makes a fixed payment (at least annually) to you (the donor) and/or other beneficiaries for her/his/their life or lives or a specified term of years.

The amount of the annual payment can be either (1) the same each year based on an fixed percentage of the initial value of the trust assets or (2) a variable based on a fixed percentage of the trust assets computed each year.

The donor or other non-charitable beneficiaries receive any  remaining trust assets at the end of the payment term.

So the biggest difference between a CLT and a CRT is this:

• In a CLT the donor or beneficiaries receive the trust assets at the end of the term.
• In a CRT the charity receive the trust assets at the end of the term.

A CLT is an irrevocable trust meaning that you give up all ownership and control over the property in the trust.

There are no contribution limits.

The level of complexity to set up a CLT is high.

There may be annual fees involved including trustee, investment, management, administration and tax preparation fees in maintaining the CLT.

For more information, consult with an estate planning attorney.

Quick Notes: Charitable Remainder Trusts and Estate Planning.

A quick tidbit on Charitable Remainder Trusts (CRTs) as part of estate planning...

You can donate various kinds of property including cash, stocks, real estate and life insurance to charitable organizations of your choice.

One way to do this is to set up a Charitable Remainder Trust (CRT).

A CRT is when cash or property is donated during your life or at death to an irrevocable trust.  The irrevocable trust makes a fixed payment (at least annually) to you (the donor) and/or other beneficiaries for her/his/their life or lives or a specified term of not more than 20 years.

The amount of the annual payment can be either (1) the same each year based on an fixed percentage of the initial value of the trust assets or (2) a variable based on a fixed percentage of the trust assets computed each year. There are minimum payment rates to be concerned with.

The charity or charities will receive any remaining trust assets at the end of the payment term.

So, in other words, you set up a CRT and designate your favorite charity. You transfer ownership of your property to this trust. You decide on annual payments in a fixed amount for 10 years based on the earnings of your property (could be cash or real estate or...).  Then at the end of 10 year period, the charity will have complete ownership of the property to do as they wish.

A CRT is an irrevocable trust meaning that you give up all ownership and control over the property in the trust.

There are no contribution limits.

The level of complexity to set up a CRT is high.

There may be annual fees involved including trustee, investment, management, administration and tax preparation fees in maintaining the CRT.

For more information, consult with an estate planning attorney.

Quick Notes: Charitable Bequests and Estate Planning.

A quick tidbit on charitable bequests as a form of charitable giving...

You can donate various kinds of property including cash, stocks, real estate and life insurance to name a few when you pass away.

A charitable bequest is cash or property donated at your death to a 501(c)(3) tax-exempt organization. You can make such a charitable bequest through a Will, Trust or beneficiary designation.

There are no contribution limits with this type of charitable giving.

For example, you can set up a Living Trust to give a portion of your estate to your loved ones and the remainder to be divided among the charities you would like to support.

Charitable giving after you pass away can reduce the size of your estate and lower the estate tax liability. See this Congressional Budget Office pamphlet on Charitable Giving for more information.