Often, we don’t like to talk about death or money. Warning: this article talks about both! It’s important to discuss this difficult subject because by planning today, we might be able to extend our love, care and generosity to family and friends beyond our lifetime. If you are charitably inclined, future gifting is also a tax-efficient way to support the organizations you care about.
Outlining how you want your assets to be gifted after you are gone can be achieved through drafting a will. After you are gone, a will goes through public probate court with an executor, which can be expensive and take about a year to complete. However, if you complete both a will and a trust in combination, assets held in trust titling can pass directly to beneficiaries privately, bypassing court involvement. Together, these estate planning documents can help you achieve the following:
- Names the executor or personal representative of your estate
- Gives your property to those you choose, including gifts to nonprofit organizations
- Saves on taxes if assets are left to qualified charitable organizations n
- Provides financial management through a trustee
- Names a guardian for minor children, or caregivers for pets
- Ensures financial security for a child with a disability
- Sets guidelines for distributions if you and your spouse die at the same time
You can also leave assets to nonprofit organizations after you are gone. Charitable gifting in your estate plan can accomplish these goals:
- Estate Tax Reduction – Donations are fully deductible from your taxable estate
- Income Tax Relief – Donating taxable items like IRAs or 401k’s allows you to fulfill your charitable intent and the gift goes tax-free to qualified nonprofit organizations. If such assets went to your heirs, they would pay income tax.
- Legacy – You can retain these assets during your lifetime but leave a lasting legacy after you are gone.
If you die without a will and trust, your estate will be considered intestate, meaning state law will decide who inherits your assets. The settlement of your estate could be long and expensive, and your personal wishes might not be followed. A better solution might be to reach out to an estate planning attorney to ensure the people you care about receive the gifts you intend.
Be sure to give your Certified Financial Planner™ or CPA Personal Financial Specialist a copy of your will and trust when you complete it, so this can be integrated into your financial plan and investment account titling. We’re here to support you today, and for the next generation to come.