Frequently Asked
Questions
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
regulations on this subject, set out in the
Internal Revenue Code, must be carefully followed.
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.
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 are 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
would in theory be 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.
Please
note, individual financial circumstances will vary. The information
on this site does not constitute legal or tax advice. Donor
stories and photographs are for purposes of illustration only.
As with all tax and estate planning, please consult your attorney
or estate specialist. All material is copyrighted and is for
viewing purposes only. Use of this site signifies your agreement
with the terms of use. The content
in this Planned Giving section has been developed for Self Regional
Healthcare by Future Focus.
Please report any problems to webmaster.
Revised:
July 10, 2008 15:53
.