Frequently Asked Questions

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I have a will. Do I need anything else?

In addition to a will, most experts recommend that you have a durable power of attorney, which allows another person to act on your behalf should you become incapacitated. Also, a living will is helpful to your heirs in that it directs at which point you do not want your life artificially supported.

Can bequests be handled in a living trust?

Certainly. You may wish to consider a living trust as an estate-planning tool. More information is available. Living trusts may be either revocable or irrevocable, and there are advantages and disadvantages to consider in both.

What happens to my personal possessions?

Personal possessions are best distributed through a tangible personal property memo in which you list the personal items you wish to give to specific people. Your will must mention the existence of this memo, and you should keep a copy of it with your will.

If a trust agreement is established as irrevocable, it means that it can't be revoked (broken) except under unusual circumstances. Why would anyone want an irrevocable trust?

There are always specific reasons for making an irrevocable trust agreement. Perhaps it involves a family business where some of the family members are getting on in years and the family wants to make certain that management continues to run smoothly even if hindrances, such as senility, enter the picture.

Many times the reasons for an irrevocable trust involve estate and/or income tax avoidance. In order to be successful in such avoidance, the trustor must not have any direct or indirect power or control over the trust property or income. The Internal Revenue Code and the accompanying Regulations should be carefully followed when considering irrevocable trusts.

What is the difference between a charitable remainder unitrust and a charitable remainder annuity trust?

The major difference is in the valuation of the assets of the trust, which establishes part of the calculation for the determination of the amount of income received by the income beneficiary(-ies). The annuity assets are valued at the time the assets are placed in the trust and are never revalued. Annual payments remain the same, whether the assets appreciate (increase in value) or decline (lose value).

The assets in the unitrust are revalued annually. If the trust assets appreciate, the payment to the income beneficiary(-ies) will increase. If the trust assets depreciate, the payment will decrease.

What happens to my assets in a trust for a charity if the charity goes out of business before the expiration of the trust?

Your trustee is authorized to name a substitute, if that is the sole charity.

Should I name a charity as trustee of my charitable remainder trust?

This is often done if the organization is qualified to so act under local law. The organization's representatives can satisfy you in that regard. Often they will serve without fee, which is an additional incentive.

How often should I update my will or trust?

These documents should be updated any time your financial or your family circumstances change. As laws vary from state to state, if you move, you should have an attorney licensed in and familiar with the new state's laws review your will or trust agreement. It is always wise, even if there are not any significant changes in your circumstances, to periodically review these important documents. A good rule of thumb is to review your will every three years. You should also review your will if there are any significant changes in law.

Can I use my insurance to benefit charitable organizations?

Yes. This is an area overlooked by many. You can name one or more charities as alternate or as primary beneficiary. Furthermore, if you no longer need the policy proceeds in your estate for use now, you can transfer ownership of the policy to the charity or charities. If the policy has cash loan value, the charity can draw this out and use it. In this case, you not only receive a charitable gift deduction, but any additional premiums you pay are tax deductible for you now. And, on your death, the charity receives the balance of the policy proceeds and none of it is included in your estate for tax purposes.

How can I fund a charitable gift annuity and how is my income calculated?

The usual funding sources for a charitable gift annuity are cash and marketable securities. There can be tax benefits associated with the gift of appreciated securities (the current market value exceeds the cost or basis value). As a gift annuity is considered partially a gift and partially an annuity, part of the gift avoids capital gain tax entirely. Real estate and other marketable assets may also be used, but in many cases acceptance of these kinds of assets is often on a case-by-case basis. Generally, the charity will convert the assets to cash to fund the annuity.

The income provided you by the annuity is determined by your age and the age of any additional beneficiary and is calculated using tables established and filed with regulatory agencies under which the charity operates its annuity program.

Can I set up a charitable gift annuity and delay the start of the income until I will more likely need it, such as at my retirement, when my income is lower?

Yes, the flexibility associated with establishing charitable gift annuities makes them a popular and effective retirement-planning vehicle. Using a deferred gift annuity, the annuity earnings accumulate on a tax-deferred basis. Thus, the deferred payment annuity accomplishes several things. First, the donor receives a tax deduction in the year the annuity is established, which is usually when the donor is in a higher tax bracket. Secondly, the gift to the charity becomes larger as the deferred earnings increase the annuity's principal. Finally, since the deferred payment annuity grows in size while income is deferred, the ultimate income will be more per year.