Our community is blessed with wonderful religious leaders. Leaders who help others grow in their faith and assist them in navigating the difficult circumstances that life may throw their way. It is important that you also take care of your affairs, however. A financial and estate planning team can help you create a plan that will protect you today and tomorrow so you can better serve your community and provide for those who count on you. Below are some important considerations for you to be aware of as you begin your planning journey.
If your benefits package includes a retirement account, this valuable and sometimes complex account must be planned for and managed properly. One thing that makes a retirement account attractive is that you can name a beneficiary to receive ownership of the account when you pass away without court involvement. However, for this to work, you must complete the appropriate beneficiary designation forms. If you do not list a beneficiary, you risk the account having to go through the time-consuming and costly process known as probate and being given to the person that the state designates, not the person you would have chosen. Depending on your circumstances, the state’s choice could be the last person you would want to receive such a potentially large account.
If you have already designated someone as the beneficiary of your account, when was the last time you reviewed the designation? Is this still the same person you would like to leave the account to? There are several reasons why you might reconsider your beneficiary designation. It is possible that the individual has passed away, has become disabled and needs to maintain eligibility for government assistance (in which receiving a large retirement account could disqualify them), or is someone with whom you have had a falling out. Or there may be some other individual or charitable entity that you would rather leave the account to now. As with many steps in the estate planning process, completing the beneficiary designation is not just a one-and-done task.
As with so many other areas of life, it is always good to have a backup plan. Your retirement account is no exception. After you have decided on a beneficiary or reviewed your beneficiary designation, you must name a backup beneficiary (also known as a contingent beneficiary). This will ensure that your account goes to the person you have chosen and not someone the state has chosen in the event that your original beneficiary is deceased or decides that they do not want the retirement account.
If you find that deciding on a beneficiary or backup beneficiary for your retirement account is difficult, we can assist you. Due to recent changes in the rules governing retirement accounts, some beneficiaries may benefit more from receiving a retirement account than others. We can help you navigate the sometimes complex rules and design a plan that leaves the account to who you want, the way you want.
Just like with a retirement account, if you do not have an estate plan, your money and property will be given to those individuals that the state dictates in its intestacy laws. The exact amounts and order of who will receive your money and property are determined by these state laws, but in general, your money and property will go first to your surviving spouse, then to your descendants (children or grandchildren), then to your parents, then to your siblings, and then to your siblings’ children, depending on who survives you. If you are not close to these individuals, this could be the last thing you want to happen.
Choosing beneficiaries can be a major roadblock for many people but it does not have to be for you. As part of the estate planning process, we can work with you to do some soul searching to determine the legacy that you want to leave behind. Are there individuals you are particularly close to, regardless of blood relationship, that could benefit from additional money or property from you? Do you have a pet that needs to be provided for at your passing? (No one said your beneficiary had to be human.) Is there a cause important to you that you would like to see furthered by a charitable contribution? No matter your answer, proper estate planning must be in place to get your money and property into someone else’s hands.
If you are considering donating money to your favorite charitable organization either during your lifetime or at death, here are a couple of questions you need to ask yourself before moving forward.
- If you plan to make gifts during your lifetime, can you afford to donate? It is important to spend your money wisely, especially if you are nearing retirement, have already retired, or are on a fixed income. While a cause or organization may be near and dear to your heart, you still need to have money available to meet your living expenses. Consider making smaller donations during your lifetime and including the charitable organization in your estate plan as a beneficiary, allowing you to give a larger amount of money when you no longer need it.
- How much should you donate? This is a great opportunity for you to identify your charitable goals and work with us to craft a plan that will leave a lasting legacy. Is there a specific project you want to help fund (e.g., the construction of a new library) where a large lump sum might be more useful to the charitable organization? Or would you rather provide continuous financial support to an organization? That decision would make a stream of income a better option. The choice is yours.
- Are there any tax benefits to donating? While not all giving is motivated by tax considerations, you may want to check with your tax professional to see if your good deed can also generate a tax deduction for you.
Once you consider these questions and decide to move forward with making a charitable gift, there are a variety of ways you can do so during your lifetime and at your death.
During your lifetime:
- Lump sum. If there is a specific project that you would like your money to go towards, providing the charitable organization with a lump sum may be the best option so the money is readily available to complete the project.
- Over a period of time. If there is an ongoing cause that you would like to help fund, smaller gifts over time may help you better accomplish this—for instance, if you would like to provide a certain amount each year to fund a scholarship or sponsor a young adult on a mission trip.
At your death:
- Last will and testament. Also known as a will, you can use this document to leave money or property to your desired charitable organization. With a will, you can determine which organization receives the money, how much the organization will receive, and how the organization will receive it (one lump sum or several gifts over a period of time). An important thing to remember is that by using a will, your loved ones will have to go through the probate process to get the money and property to the charitable organization at your death. If you want the charitable organization to receive money over a period of time, court oversight may continue until the last amounts are paid to the charitable organization.
- Revocable living trust. This document also allows you to determine which organization receives the money, how much the organization will receive, and how the organization will receive it (one lump sum or several gifts over a period of time); however, this can all be handled privately without the involvement of the probate court.
Choosing Trusted Decision Makers
Another important estate planning consideration is who you should choose to make important decisions on your behalf. These are people that will either communicate or make decisions for you when you cannot due to incapacity or death. The following are some important roles that will need to be filled:
- Personal representative. This trusted individual is appointed in your last will and testament and is responsible for collecting all of your accounts and property, paying your outstanding debts, and distributing your money and property to those you have named. This person is tasked with “winding up” your affairs.
- Trustee. This trusted individual has similar duties and responsibilities as the personal representative but without the close supervision of the probate court. The trustee must follow the instructions set forth in your revocable living trust document, collecting and protecting property, identifying and paying creditors, filing and paying any taxes due, and, finally, distributing the trust’s money and property to the beneficiaries you have chosen.
- Agent under a financial power of attorney. This individual carries out financial transactions (such as signing a check or opening a bank account) on your behalf. The duration and scope of the agent’s authority is laid out in the financial power of attorney.
- Agent under a medical power of attorney. If you cannot communicate or make medical decisions, someone else will have to do it for you. By properly naming this person, you retain control over who is making medical decisions on your behalf instead of allowing a judge to make those decisions.
We Are Here to Serve You
These can be very overwhelming decisions to make on your own, but you are not alone. We are here to walk you through the process, answer your questions, and help you design a plan that protects you and your loved ones and leaves a lasting legacy you can be proud of. We are available for in-person and virtual consultations, whichever is more convenient for you.