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Frequently Asked Questions
What
Is A Bequest? Bequests
are the actual gift disbursals that result, upon one's passing, from a
specifically worded commitment in a will or trust agreement. Bequests
are unlike any other gifts we receive because they represent individuals'
final statements about what is most important to them. Every bequest is
a powerful expression of loyalty, good will, and faith in the future of
us and our mission.
I'm
Not Wealthy, Can My Bequest Still Make A Difference? You
do not have to be wealthy to create a legacy. A bequest of any size can
be significant in helping to preserve our mission and our reach. If a
trust agreement is established as irrevocable, it means that it can't
be revoked (broken) except under unusual circumstances.
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 gains tax entirely. Real estate and other
marketable assets may also be used. 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,
there is flexibility in the establishing of charitable gift annuities
that make 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 Gift Planning section has been developed
for Admiral Nimitz Foundation by Future
Focus. Please report any problems to section
webmaster. Revised:
April 29, 2007 16:19.
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