The What, Why, When, and How of Planned Giving
This one-hour recorded webinar was first presented on October 14, 2022 by Glaucoma Research Foundation.
Learn how you can ensure the future of glaucoma research through planned giving.
This webinar was moderated by Morgan Velarde, Director of Philanthropic Communications and Engagement at GRF and includes a presentation by Lynn Gaumer, JD, Senior Gift Planning Consultant for The Stelter Company. Lynn has over twenty-five years of experience helping individuals with their estate and charitable planning.
In this informative webinar, you will hear tips for putting together your estate plan and learn common mistakes people can make.
Hear more about various ways you can make a charitable gift, such as gifts of stock, IRA giving and Donor Advised Funds, and the tax implications that are associated with each option.
Video Transcript
Morgan Velarde:
Good afternoon. Welcome to our webinar, the what, when, why, and how of planned giving. My name is Morgan Velarde and I am the director of Philanthropic Engagement and Communications at Glaucoma Research Foundation. Now, you may not know that October is Estate Planning Month and October 17th through the 23rd is Estate Planning Week. Each October across the United States, individuals and families are reminded of the importance of creating and or maintaining an estate plan.
Today we have a very special guest for you to talk a bit more about estate planning. Dr. Lynn Gaumer, the senior gift planning consultant for the Stelter Company. Lynn received her law degree from the University of South Dakota School of Law and worked as an associate attorney for 10 years specializing in estate and charitable planning. Lynn has over 25 years of experience helping individuals with their estate and charitable planning and has been with Stelter for over 10 years. It is my honor to welcome Lynn Gaumer.
Lynn Gaumer:
Okay. Thank you so much, Morgan. I appreciate that. Welcome to Estate Planning Week. We have a full schedule pack today, so we are going to go ahead and get started. First of all, we are going to talk about some estate planning basics and honor of Estate Planning Week and Estate Planning Month, and then we’re going to go into some of the most popular and easy ways to leave a legacy. And then we’re going to go over just some next steps that you can take in order to either create an estate plan, update your estate plan, or some more ways to leave a legacy. So let’s get started.
I wanted to get everyone on board here just so that everyone understands what some of the basic estate planning terms are. So most of you will know what a will is. A will is really your cornerstone of your estate plan. Everybody should have a will regardless of your wealth, if you’re 18 or over. And it outlines how your assets would like to be distributed, it puts in place executor or personal representative. Those are the people you would nominate inside your will to take care of your estate once you pass away. You can nominate a guardian. A guardian is somebody who would take care of maybe a minor child or a special needs or other dependent child or adult. So you can put all these aspects within your will and make sure that your wishes are formalized.
A beneficiary is somebody who would inherit property, so whether that’s personal property or other assets. And then there’s probate. Probate is the court process where a will is reviewed by the court. The court oversees an administration process and ultimately the distribution out to beneficiaries and then a trust. One of the questions I get is, do I need a will or a trust? A trust is a little bit more formal arrangement for estate planning. We’re going to go over some more reasons if you would need a trust or not, but it’s for financial management. In the event of incapacity, you can set up a trust for your children. You could set up a trust really just almost for any reason and including charitable reasons as well. And then there’s planning for incapacity, and this is part of your estate plan as well. There’s powers of attorney for financial and healthcare and then a living will or advanced directive. Those terms are synonymous depending on the state in which you live. So we’re going to go over all those terms in just a bit here.
Who needs an estate plan? Well, chances are you do. It is not just for the wealthy. If you have a bank account, if you have stocks, if you have a home, 401(k), chances are you have an estate, you need an estate plan. And you not only need an estate plan to plan for after your lifetime but you need to plan for in the event that you’re unable to speak for yourself, in the event that you become incapacitated. And that can strike at any time with maybe a heart attack, a stroke, or a sudden accident, so you need to be prepared. And by having an estate plan in place, it makes your wishes clear and it may help with family disputes with minimizing that or even eliminating that. And it helps preserve assets and provide for loved ones and for charity.
Now, if you have any of these situations, you really, really need to work with an estate planning attorney. So in the event your spouse is not comfortable with financial matters, you can set up a trust for him or her so that a trustee manages those assets and is able to distribute assets to your spouse as the trust dictates. Setting up a trust for a minor child or dependent in your care, minor children they can inherit property, but they cannot manage it. So if you were to leave assets to minor children, for example, a court would need to step in and create a conservatorship for them until they’re 18. So a trust is always most beneficial if you have minor children.
If you have a second marriage or have stepchildren, this is an area where you really need an estate plan to preserve your biological children and assets for your stepchildren. If you have property in more than one state, so let’s say you’re a snowbird and you have property in the Midwest and then you also have property, let’s say down south, one of the things you don’t want to happen is to probate in two states, and that would happen if you don’t have a trust. So definitely something that you would need to work with an estate planning attorney on.
And then if financial privacy is a concern, a trust is a really great way to preserve that privacy. Assets placed in trust do not go through the probate process. So it’s something that many of my clients do like to set up so that their assets do not go through probate, which is a public process. And then if you own your own business, this is where succession planning comes in. You certainly want a succession plan of how that business should be run, how it’s going to be distributed, how it’s going to pass on to that next generation.
Another part of estate planning as I mentioned earlier, is planning for incapacity. And as I mentioned, it can strike anyone at any time. And if you do not plan, chances are a court will come in and appoint a guardian or conservator and that may or may not be the person you would actually appoint in your powers of attorney. So again, I recommend that you implement powers of attorney to prepare for in an event where you would become incapacitated. And if a court comes in and appoints a guardian or conservator on your behalf, they might not be making the decisions that you would want to make, but if you formalize those in your estate planning documents, then your agent would be able to follow your wishes.
There are some other property management tools that you can use as well. Joint ownership is a form of ownership of property. You’re probably familiar with this maybe in a checking account or savings account situation, probably your home as well, where you own it in joint tendency with somebody. And typically that’s in joint tendency with survivorship. So in the event that you pass away, it automatically passes outside the will automatically passes to that surviving person. Now a power of attorney for financial can also help within property management. So this is where you would designate an agent, preferably somebody maybe in your family, somebody you trust to make financial decisions on your behalf.
Now, healthcare directives, there’s a living will or advanced directive. Again, it depends on what your state’s term uses. They are synonymous, but both basically that’s an instruction to your physician and your healthcare agent. In the event that you would be in a terminal condition, there’d be no brain activity, for example. So that would be withdrawing life support. And whether you’re not or you want that, it’s nice to put it in writing so that in the event something happens to you, that they know exactly what your wishes are. A power of attorney for healthcare, similar to a power of attorney for financial reasons but this person will act on your behalf in all matters related to healthcare.
Proper planning will allow you to do what? It’ll allow you to give to whom you want, when you want, and in the way you want. And that way you pay less for court costs, attorney’s fees and taxes. In recognition of Estate Planning Month here, start your planning. Let’s talk about various ways to give and leave that legacy. So we’re going to start with gifts in your will or trust. And this is the most popular form of giving and there’s reasons for that. Let’s first of all take a look at how that works. So if you have a will, you certainly can update that will, and you can include a gift to the Glaucoma Research Foundation or other charities. You can include gifts to loved ones, family, friends, but it really your will, will set forth who you want to your assets to be distributed to. And that could be, like I said, to family members, to friends to charities like the Glaucoma Research Foundation.
Why are these so popular? So about eight or nine out of every 10 gifts to charities are gifts in a will or trust. And they’re so popular because they’re little cost to you. It will not cost you anything extra to ask your attorney to include a provision for charity in your will. They’re very easy to implement and especially now with the economy and inflation, many individuals who are charitable would like to give but they’re little concerned about current finances. And a gift in your will happen of course after your lifetime. So there’s no impact on current finances and it can be changed at any time. When you create a will, it’s revocable, it’s amendable, so you can change that at any time.
Gifts can be made in a new will. So if you do not have an estate plan yet, I encourage you to use Estate Planning Month to kick off and get your estate planning started here and create a new will or a trust depending on your situation. And again, those gifts can be put in really as little as one sentence, a gift to the Glaucoma Research Foundation. Or if you have a will and are thinking, “Gosh, I haven’t included a charity in my will, but that’s something I would really like to do. Or I’m looking at my will right now and I’m saying, Gosh, things have changed and I really need to just update my will.” You can do it. It’s called a codicil. I recommend working with an estate planning attorney and preferably going back to the one who created your will in the first place.
But a codicil would just be an amendment. So you could change a guardian, you could change maybe the executor personal representative, you can add a gift to Glaucoma Research Foundation if you would like. You could add other charities as well. And same with a revocable living trust. You can create a new trust with the help of your estate planning attorney. Or if you already have a trust and are thinking, “Boy, I didn’t include any gifts to charities, maybe that’s something I want to do,” you can certainly do so by amending the trust. The amendment and the codicil are typically two or three pages. They’re very simple and fairly inexpensive to create.
Now if you don’t have a will, and about two-thirds of Americans do not have a will, the state in which you resides dictates who receives your assets. So every state is different. I would say typically it’s everything to the spouse. Then if there’s no spouse, then everything is divided equally to the kids. If there’s no kids, maybe out to siblings. That’s generally how it works. But again, each state is different. So you’d have to look at what your state statutes are. And I will say this there is no state though, however, that provides for gifts for organizations, for charitable organizations like the Glaucoma Research Foundation. So if you are charitably inclined, you really need to have an estate plan in place to make sure that those gifts are made. And if you don’t have a will, there’s no tax saving strategies or administration savings strategies like a trust would be. So your assets would have to go through probate. So definitely make sure that you get in this state plan here.
Types of gifts. There’s various ways that you can leave gifts to not only family members, other loved ones or to charity. You can leave specific dollar amounts. So I leave $250,000 to my daughter, I leave $250,000 to Glaucoma Research Foundation. You can also leave a specific asset. I see shares of stock or maybe a piece of real estate or some common examples. But really the best way to leave gifts to not only family members but to charities as well, is to do a percentage of the estate. And that way your estate’s going to fluctuate over the years and that way the percentage will fluctuate along with that amount. So it stays very proportionate to the estate’s value. That is something I always recommend is to think about your estate and percentages rather than dollar amounts when you are creating an estate plan.
You can also name individuals or charities as a contingent gift as well. And really what a contingent gift is where if I give everything to my spouse, but if my spouse doesn’t survive me, then I give everything to the Glaucoma Research Foundation. So it’s contingent upon my spouse pre-deceasing me. So something you want may might want to think about if you want to take care of family first and then to charity.
Here is an example of Mary who has been a longtime supporter of Glaucoma Research Foundation and she has been an annual giver every year for the last 10 years. She has a strong connection to Glaucoma Research Foundation and their mission. So she’s interested in leaving a gift, but she’s a little bit unsure of how to go ahead and make that happen. So she meets with her attorney and they talk about it and she decides that the best way to do it is to leave a gift in her will of 10% of her estate to support Glaucoma Research Foundations programs. So this way that $10,000 that she’s been giving annually will continue her legacy long after she passes away.
Now let’s look at beneficiary designations. And these are the second most popular gift type. And again, these would happen after your lifetime. With these first two gift types, these are gifts that happen after your lifetime. They do not impact your current finances. If you’re concerned about the economy or maybe that you need your current assets for healthcare or retirement or something like that, these are the gifts you certainly can make that would happen after your lifetime. So let’s think about what types of gifts these are.
Beneficiary designations are associated with retirement plan assets and life insurance are the two most common ones. Commercial annuities, donor advised funds and payable on death and transfer on death accounts are some other ways you can use a beneficiary designation, and we’re going to get to those in a second. But if you recall when you created your life insurance or when you signed up for that retirement plan, you filled out a beneficiary designation form. And if you’re thinking to yourself, “Gosh, I did that. I’m sure I did but I don’t remember what I said on the beneficiary designation form.” It’s estate planning month. So it’s time to take a look at those forms. Who did you nominate to receive those assets upon your death? So take a look at those.
When I talk with clients, a lot of times they’ll look at me and say, “I know I filled one out and I don’t remember who or what I named.” So like I said, it’s a great time to review those assets. They are very simple and fast and convenient. So in the event you’re looking at those retirement plan assets and life insurance specifically, and you say, “I would like to update those.” Oftentimes you can just go online to your administrator’s website and download a form, fill it out and send it back in. You can also call if you’d like. Again, percentages work best. Those account values are going to change over time. So percentages always work best. And you can still name primary versus contingent.
Let’s say you have a life insurance policy, you’d like to name your spouse as the primary, but in the event she does not survive, you can name Glaucoma Research Foundation as the contingent beneficiary. And one thing I always recommend to clients is to notify your beneficiaries, and especially charities of your gift. Charities will not necessarily know that you have named them as a beneficiary. These assets do not go through probate. So a court or an executor is not going to find the charity and make sure that gift is made. And each year billions of dollars are left in life insurance companies funds or retirement plan funds that just never get recognized. So please notify, especially charities like the Glaucoma Research Foundation of your gift, and that way they can use it as you intend.
Let’s go over account designations. The payable on death is something that you would work with your bank. These are for bank accounts. So checking, savings, certificates of deposit where you would go to your bank and say, “I would like a payable and death designation on these accounts.” You could name one or more people, you could name one or more charities. But basically what happens is that you put this designation on, the person who you identify or the charity you identify, they have no right to your funds during your lifetime, but after your lifetime they go outside of probate directly to the individual or to the charity. And it works the same way with the transfer on death investment accounts, except with those accounts, they are investment accounts.
Maybe you have a stock portfolio at Edward Jones or Charles Schwab or Fidelity or somewhere like that, you could do a transfer on death designation where those assets would automatically pass outside the will, outside of probate to that individual or to charities. Now, state laws govern these accounts. I do know that in Louisiana, transfer on death accounts are not allowed. So please just check with either your investment advisor or your personal banker to determine how those laws impact you.
Let’s just take a brief moment and look at an infographic here for those who are more visual. So you could complete a beneficiary designation form with your financial institution. Again, many of those are online and you could download those forms off the internet and that way you fill it out. Percentages work best and they’re typically for IRA accounts, insurance policies, maybe your 401(k), other investment accounts. And then if you do name a charity as a beneficiary, your gift of course will help continue their mission.
So let’s just look at a general donor profile of who would make a gift using a beneficiary designation. Like a gift in the will or trust, they’d rather make the gift after their lifetime instead of now. And they don’t necessarily need or want an income tax deduction. With these types of gifts because they’re revocable and amendable, you do not receive an income tax deduction. And maybe with life insurance, maybe you don’t need that policy anymore. Maybe you took that life insurance policy out while the kids were younger, they’re now past college and financially secure on their own. Maybe naming a nonprofit as a beneficiary would continue your legacy. And then you want your flexibility to change your mind. So in the event that need those assets for whatever reason, whether it’s healthcare, retirement, you can certainly change your mind at any time.
I wanted to point out about what some of the benefits of leaving a charity versus an individual as beneficiary of your retirement plan assets. And what many individuals don’t know is that when those assets pass to a beneficiary, those assets are taxed at the beneficiary’s individual income tax rate. So think about your IRA, think about your 401(k). You saved during your working years that went in tax free. It grew tax free, there were no capital gains or anything like that. But when it comes time to take money out of your IRA or 401(k), that is ordinary income to you. Well, it’s the same thing if somebody inherits an IRA or a 401(k) account. When those assets are distributed, they are taxed.
If you are like Barbara here, let’s just say you’ve got an estate, it’s worth $1.5 million and you’d like to leave half of it to Glaucoma Research Foundation and half of it to Susan and Susan’s your daughter. So a lot of donors will think, “Well, I’ll just divide everything in half. I will give 50% of my IRA to Susan. I’ll give 50% to Glaucoma Research Foundation. All my other assets, I’ll divide 50%.” But look what happens under choice number one, Susan’s going to have to pay $120,000 based on her 32% federal income tax rate.
In reality, Barbara is not treating her daughter and Glaucoma Research Foundation equally. Her daughter’s actually getting a lot less. But let’s say Barbara meets with the awesome staff, plan giving staff at Glaucoma Research Foundation and they say, “Look, Barbara, look what you could do. You can name us as the full beneficiary of your IRA, give Susan everything else and nobody pays the tax because we are tax exempt.” So something you may want to think about, a lot of people don’t realize this. So talk with your tax advisor, talk with the great plan giving staff at Glaucoma Research Foundation and they can help you along with this as well.
Appreciated property. Now this is where if you want to make an impact now, so appreciated property donor advised funds qualify charitable distributions, this is where you can make an impact now. This is giving during your lifetime and there’s tax benefits associated with all three of these gifts. So let’s start with the first one. Appreciated property would be giving maybe appreciated stock, real estate or business interests are probably the most common options. There’s also some people who have cryptocurrency and some other assets. So these are non-cash gift options and they have some additional tax benefits associated with them as opposed to giving a cash or a cheque to Glaucoma Research Foundation.
So not only do you get your income tax deduction if you itemize, but you also bypass any capital gains. So in the event that you have real estate that is appreciated in value or stocks, and if you were to sell those assets, there could be capital gain and then you’d have capital gains taxes. But if you were to give those securities or real estate directly to Glaucoma Research Foundation or other non-profits, they do not pay capital gains taxes. So it’s more beneficial to give that asset to the non-profit as opposed to selling that asset and then giving the cash or writing the cheque.
I have a little example here for you. Here is an example of Sue who who’s thinking about giving $100,000 and should she write a cheque or should she give the securities directly to the nonprofit? So Sue meets with the plan giving professionals at Glaucoma Research Foundation who really walk her through this table. If she sells the securities, she’s going to pay capital gains tax of $6,000 based on between her… She’s got a cost basis which is what she paid for the property or the stock. So she paid 60,000, it grew in value, it’s now $100,000. If she sells it, that’s $40,000 worth of gain. She’s going to have to pay $6,000 in capital gains taxes. But if she gives the securities directly to Glaucoma Research Foundation, she eliminates that $6,000. So it’s more beneficial to give that asset directly to the charity. And again, they can walk you through that and show you the tax benefits on that.
Donor advice funds. You may or may not have heard about these, but these are been growing in popularity. They’re like a charitable savings account and they are… You could open an account and you could typically open an account at a local community foundation. There’s charitable arms to investment firms like Vanguard, Fidelity or Schwab Charitable, those are your bigger commercial donor advice funds. But you open in a savings account there, a donor advice fund account, and you transfer cash stock or other assets. It could be real estate, it could be tangible personal property, and you qualify for an income tax deduction and your account, you can leave that amount in there for as long as you want really.
And many people will leave it and recommend a grant at certain times, maybe at the end of the year or if there’s a campaign or if there’s something going on with the nonprofit like some programs or scholarships or research or anything like that, they will go ahead and make a recommendation to have a dollar amount typically to be distributed out to the non-profit. It’s a great way to keep all of your giving in one place and setting cheques to this non-profit and to that non-profit, you can just simply open one charitable savings account such as a donor advised fund.
Just a little infographic of how it works. For those who are more visual, you make a gift at any time and qualify for an income tax deduction. It goes into that charitable savings account, your gift is invested and it grows tax free. And then when you’re ready, you recommend grants to Glaucoma Research Foundation or other charities and causes at any time. Again, those assets can grow in time. We talked about beneficiary designations. When you open these funds, they will ask you when you pass away how you would like your assets to be distributed. So it would be a great way to say, “Okay. If there’s assets still left in my account when I pass away, I would like the entire account to go to Glaucoma Research Foundation.” If you have children or other loved ones that you’d like to continue on that legacy of giving, you can name them as your successors and they can use that account to make grants as well. So it’s a great way to implement a charitable legacy in your own family as well. So getting them involved in that charitable giving process.
Qualified charitable distributions is another way you can make an impact right now. So let’s take a look. These are gifts available only to those 70 and a half and older. You may have heard of them as an IRA charitable rollover. The media seems to call them different things. So you may hear them as IRA charitable rollover. You may hear them as the qualified charitable distribution. They mean the same thing, but they are fantastic way for those who have an IRA who are 70 and a half and older to make a gift. Why? Because it bypasses the income that would normally be attributed to you and then you would pay the income tax on it. So we’ll get to that in a second. But here are the specifics. The distribution must be made directly to the nonprofit. It can be any amount up to $100,000 per year and it must be made to a qualifying public charity. And the Glaucoma Research Foundation is certainly a qualifying public charity.
Let’s take a look at why this is so beneficial. So think about your IRA, it’s a retirement account. So when you take money out of that account, it’s taxed at your ordinary income tax rate. We saw that in the example earlier. But if you make a gift directly to charity, it does not count as income nor can you take an income tax deduction on it, but it does not count as income. So by pulling money out of that retirement account, it could do a couple things. It could put you in a different higher tax bracket, it could impact your Medicare premiums or social security benefits. So you really need to think about making gifts from your IRA if you are 70 and a half and older. When you turn 72, you are required to take minimum distributions and you can use that required minimum distribution amount, whatever that is to make a gift to non-profits such as the Glaucoma Research Foundation.
So it’s up to $100,000 but I have clients and donors who use their requirement of distributions, they have income coming from other sources, they do not need this particular income from an IRA and they’ll use that required minimum distributions to make all their gifts. And you’re making a gift from your most highly taxed assets. As we talked about earlier, if you gave real estate or securities to your children, they’re not taxed at their ordinary income tax rate. But when you give a retirement plan asset like an IRA, they are going to be taxed when those assets are distributed. So a great, great way… My mom is now doing this, I finally convinced her this is the way to go. And she’s like, “Why didn’t I know about this earlier? It’s so easy?” Once a year, she gives her advisor a list of the non-profits that she would like to benefit. He writes all the cheques out of her IRA, they go directly to the non-profit and it’s just makes life so simple for her. So great way to continue your charitable legacy.
Let’s just take a look at how it works. You avoid taxes on transfers up to $100,000. You can satisfy all or part of your required minimum distribution. You’ll reduce your taxable income even if you do not itemize your deductions. And that gift is not subject to any limits on charitable gifts, which sometimes happens with gifts of assets or cash. And then your gift is used now to support, to support research.
Our last gift type is what I call a little bit in between. So with the first two, you can make a gift after your lifetime just to do a little quick summary here. Gifts after your lifetime, no impact on current finances. The gifts are revocable, they’re amendable. The middle three here, appreciate a property donor advised funds and qualified charitable distributions are ways you can make an impact now to Glaucoma Research Foundation. Just remember, qualified charitable distributions are only for those age 70 and a half and older. And now here’s something for a little bit in between where you can make a gift and get a little something back as well.
Typically, these are available for those 60 and older. So what is a charitable gift annuity? Well, it’s a type of gift where you make a gift of cash or appreciated property to an organization like the Glaucoma Research Foundation. And in exchange you get lifetime payments for you and another person if you choose. No trust is necessary. It’s a simple document, usually about three pages long or so. You don’t need to meet with an attorney of outlining the parameters of this gift. So let’s take a little deeper dive here. So what happens? How does this benefit Glaucoma Research Foundation if you’re getting lifetime payments? Well, typically there’s going to be a balance at the end. So based on actuarial tables and your life expectancy glaucoma Research Foundation is going to receive about 50% of your gift. Now, depending on when you pass away, that could be a little higher, that could be a little lower. But on an average it’s about 50%. So for example, if you make a gift of $20,000 in exchange for gift annuity, you can expect about $10,000 will go back to Glaucoma Research Foundation.
Here’s another little infographic. Let’s say you’re a donor and you’re 75 years old. The current rates just increased and we’re going to go over the current rates in just a bit. But as the rate for a 75 year old is 6%, which is higher than any CD or typically yields on bonds or money markets or dividends. So the rates are really pretty good. So you give cash or maybe other appreciated property in exchange for gift annuity, you get 6% of payment for life. And then after your lifetime the remainder will go to Glaucoma Research Foundation. So let’s take a look at some of the other rates that are available.
So rates are based on your age, and so in the first chart there, you’ve got the one life 60, 65. If you are wanting an illustration of your current age or ages for you and your spouse, please connect with the fundraising staff at Glaucoma Research Foundation. They’d be happy to give you an illustration. There’s also a calculator on their website as well, so please visit that. But here’s just some samples and you’ll see that the rates are really pretty good. This is a recording and these rates will be available through the end of December of 2022. Rates change periodically, so whether in 2023 these rates will change. I don’t know at this time but if you’re viewing a recording of this, please reconnect with the fundraising staff and they’d be happy to get you a current rate.
So a recap on how it works. You transfer assets to the Glaucoma Research Foundation, you qualify for an income tax deduction, you receive lifetime payments. Those payments are partially tax free, which is even better. And if you transfer an appreciated assets, you certainly minimize capital gains taxes. From Glaucoma Research Foundation’s point of view, they will probably most likely sell that donated assets. They will pay no capital gains if it’s an appreciated asset. And then they will pay you a fixed amount annually. These amounts do not fluctuate with the market, with inflation, with anything. So if the markets go down, you do not have to worry about that payment. Typically, people receive them quarterly or annually, so you do not have to worry, that payment will come to you. And then eventually any residual amount after your lifetime will go to the Glaucoma Research Foundation.
What are some of the benefits? Of course, it’s simple to implement. No trust is needed. It’s just a simple agreement. Again, it’s probably about three pages long. You qualify for an income tax deduction. You get steady annuity payments for life. You can never outlive your payment stream and you do not have to worry about market fluctuations or economic downturns. That was one question I got at the start of the pandemic when the stock market took a deep dive. What about my gift annuity payments? And you can rest assured those payments will not fluctuate.
Here’s just an example of Abraham. He is 70 years old. He has a strong connection to Glaucoma Foundation and he would like to be charitable but is concerned about his retirement income. So if this sounds familiar to you, you could pay attention. He donates $50,000 worth of stock and his cost basis or what he originally paid for the stock is $10,000. So he certainly has an appreciated asset here. Based on his age and the amount of the gifts, Abraham will see receive over $2,600 in annual payments from the Glaucoma Research Foundation. And of that amount, $340 is tax free. It’s based on a 5.3% amount that will never change. And he is able to get a charitable deduction of almost $23,000. So definitely something that you may want to think about if you’re 60 and over. Typically, minimum gifts are 10,000 or more depending on the charity that you’re working with. So something that you may want to think about to give a gift and get a little something back.
Let’s start wrapping up here. Some things to think about and next steps. When you’re estate planning, one thing that I always ask my clients is, “What about your pets?” So this is a picture of my dog, Cosmo, he’s on the couch as he usually is. And I’ve made a provision for him in my estate plan. So think about if your current estate plan does not address taking care of your pets, you may want to certainly update that. There are pet trusts that are now available in all 50 states. You could set up a pet trust. There’s a lot of things you can do, but you want to make sure that these little guys are taken care of. In most states, pets are considered personal property which would be similar to a table or furniture or a couch or something. And they probably mean more to you than just furniture in your home. So please make sure that when you’re creating or updating your estate plan, don’t forget about your pets.
So just some estate planning mistakes that I’ve seen over the years in my practice is, I would say for the most part, lack of planning and procrastination are probably the two biggest ones. People will procrastinate sometimes when it’s to a point where sometimes it’s too late, they’re not able to plan anymore, and then their wishes are not formalized. So don’t wait till a health event or anything like that. Use Estate Planning Month and Estate Planning Week to really kick off. And if you have an estate plan, review it and their beneficiary designations, make sure that everything meshes how you want it. If you don’t have an estate plan, use this time and set a goal for yourself. It’s October, maybe you want to set a goal for yourself by the end of the year that you have an estate plan. Make a holiday gift to yourself.
Other things is not coordinating property titles. I talked about that earlier, where assets can pass certain ways depending on how you own that property. Like joint tendency with rights of survivorship like a checking account or home typically that automatically pass to the survivor. So you want to think about who that survivor is. And same with coordinating your beneficiaries of your estate plan. Who are the beneficiaries of your life insurance policies? Who are the beneficiaries of your retirement plan assets? Think about that. And it’s a really a great way to coordinate everything, not only with your will or your trust, but beneficiary designations and property titles as well.
And then I mentioned this earlier, it’s really important to notify your beneficiaries that you’ve named in your life insurance and retirement plan assets, especially if you name non-profits such as the Glaucoma Research Foundation. Otherwise, they may not know that these assets exist. They may know that there’s a life insurance policy but they may not know who it’s with. And you don’t have to give specifics but just maybe say that, “I’ve left a gift to you in my life insurance policy. It’s with this entity or financial firm or this bank,” or same with the retirement plan asset. I have a retirement plan asset and it’s with Fidelity, and I’ve named you as a beneficiary. That way people know. Same with non-profits, given that they may not know that you’ve named them, it would be very difficult, if not impossible to collect any proceeds and use those proceeds to help Glaucoma Research Foundation in this example.
Next steps, I encourage you to go to their website. There’s a whole host of information, including many of the things that we talked about here today. There’s areas where you can even download a lesson book and a record book to get you started. You can contact their office of philanthropy, you can work with an estate planning attorney if you do not know one, friends and coworkers, family members are all great referrals for estate planning attorneys.
And typically, if you do decide to take that route, one of the first steps in meeting with an estate planning attorney is that they will send you an estate planning questionnaire and it will outline all your assets and your loved ones and the charities that you may want to leave a gift to. So it’s a really great way to start thinking about it. And then you send that back to the attorney who will review it. And then the next step would be to meet with them. After you meet with them, they’ll probably create your documents. You can finalize and execute those documents typically in front of two disinterested witnesses and a notary. So that’s just a very high level summary of the estate planning process.
So do I have any questions from the group here? Okay. Not hearing any right now. Just a few closing comments here. Keep your plan up to date. If you haven’t reviewed that plan, I encourage people to do so every two years, especially if there’s a life event, like a birth, a marriage, divorce. Properly document your plan, make sure it’s formalized and so that your wishes can be followed and make sure that formalize your wishes, notify those non-profits, review all your charitable designation, and you really want to make sure that those gifts are go where you intend. So if you wanted to go to a specific program, a specific scholarship, a specific research area, please make sure that meet with the fundraising staff at that nonprofit so that your gift can be put to work in the way you want. And then again, consider sharing your plan with your beneficiaries. With that, I’ll turn it over to Morgan here and she will wrap us up here. Morgan.
Morgan Velarde:
I have a few questions that have been submitted, so I’ll go ahead and start with our first one here. Now, do you absolutely need an attorney for a will? What about using tools like the onlineplatformfreewill.com?
Lynn Gaumer:
Yeah. So there’s certainly online availability through free will, and there’s other online giving options as well. I would say those options are good if you have a very simple estate and some of the complexities are not there. So you have a simple estate, I think some of those online programs are just fine. But if you have assets in, let’s say, real estate in multiple states, if you have step children, if you have business interests, if you have more complex assets, that’s when I would really encourage you to seek the advice of an attorney. But those online programs, they could be very good for those with a simple estate.
Morgan Velarde:
And the next question: is it easy to contest a will? And what can you do so that your will isn’t contested?
Lynn Gaumer:
Well, yeah. So a beneficiary could definitely, or somebody who’s been left out of a will can contest it. When a will goes through probate, they can certainly file an objection and contest the will. They would have to hire their own attorney. So it is a process but they certainly can do it. It can get very expensive with the will. If you are concerned that you have family members, loved ones who may contest your current will, there are provisions that can be added. You can ask your attorney, it’s called a no-contest provision. And basically it says, “This is my will, and if anyone contest it, they’re actually automatically out of the will.” So there’s no contest provisions that you can certainly put in. So there are ways that can mitigate that, but I wouldn’t say it’s difficult to contest a will but it can get expensive as well. So the court would hear evidence and testimony from various parties. Yeah.
Morgan Velarde:
Now, can you explain a little bit, why is it important to let a nonprofit know when you’ve included them as a beneficiary?
Lynn Gaumer:
As I had mentioned before, a lot of the documents that individuals sign to set up accounts like life insurance policies, like 401(k)s and IRAs, there are provisions in there that will say, “We have no duty to locate beneficiaries.” Well, if Charles Schwab or Vanguard or Edward Jones has no duty to locate beneficiaries, how would the non-profit know because don’t forget, it doesn’t go through probate? So the assets are just sitting out there. So that’s why it’s very important to notify. I would say some administrators certainly do notify, and especially with loved ones, if there’s not detailed information about beneficiaries. So for example, if you name John Smith in Dallas, Texas and you don’t give any information, that administrator’s not going to go looking for your loved one. That money’s probably just going to end up sitting in there. So that’s why it’s very important to notify not only nonprofits but loved ones, to make sure that your gift gets recognized. That those are your assets and you want them distributed in certain ways, and you certainly want that followed through after your lifetime.
Morgan Velarde:
Excellent. And last question here, what about a 401(k) beneficiary, if we have one listed is a will needed?
Lynn Gaumer:
So a 401(k) would pass outside the will but think of your other assets then. So think of your home, your bank account. So anything in your individual name will pass through your will. So I would say that more than likely you’ve got more than just a 401(k) plan. You’ve got other assets like a home or bank accounts. So I would say yes, you would need a will, whether that’s a simple will or maybe something more complex, I don’t know. But yeah, I would think that probably have other assets. So the 401(k) will pass outside the will, but what about those other assets? What about your cars? What about your home? Think about things like that, your pets.
Morgan Velarde:
I think those are all the questions that we had.
Lynn Gaumer:
Okay. Well, thank you so much for this opportunity to speak to all of you today. This is a great group. For those who haven’t had an estate plan, really use this time estate planning awareness week and estate planning awareness month to kick that off and maybe get something done by your end.
Morgan Velarde:
Great. Well, thank you, Lynn, once again for taking the time to be with us today and for sharing your expertise. Thank you to our participants for your interest and your support. If we were unable to answer any of your questions today, please visit our website at www.stg-glaucomaresearchfoundation-stg.kinsta.cloud or our many social media platforms for the latest information about Glaucoma and our research. And you can also visit our plan giving page under the Get Involved tab where you’ll find a wealth of information, including sample the quest language, more information on becoming a Blanche Matthias Society member, and you can even download a free personal estate planning kit.
If you have any additional questions or would like to have a further conversation about adding Glaucoma Research Foundation to your estate plans, please feel free to contact me or my colleague, Nancy Graydon. We really thank you once again for being here with us today and for joining us in our bold vision of a future free from Glaucoma. Because of your continued partnership, the cure is truly insight. Have a wonderful afternoon. Thank you.
Posted on October 26, 2022