Most ministries—and non-profit organizations for that matter—encourage their supporters to remember them in their estate plan or with a planned gift.
This is altogether appropriate. Leaving a gift is one way donors can help make sure that the important work they were dedicated to during their lifetime continues on after they are called home.
Like a current “cash” gift, an estate or planned gift is one that is committed to now. The difference is, of course, that it will be received instead in the future (with the date and the dollar amount usually indeterminate).
Have you thought about leaving something to a ministry? In doing so, there may be 10 things to consider in this process. Here are the first five.
- Do you have a heart for the organization or cause?
This is probably a good place to start. In short, has the charity or ministry been doing important, vital work that you have been committed to during your life? Do you want its mission and program to remain in place after you are called home? If so, read on …
- Do you have discretionary assets?
It goes without saying that you must have something in order to leave something. Whether you have “enough” to in turn leave an estate gift is your judgment call. Right now, about six percent of households are designating a future estate gift in their plan. At the same time, we know that only about one in 500 will owe federal estate taxes (at present rates). So, the vast majority of folks designating future gifts do not have a taxable estate (or likely anything close to it).
Of course, you will want to make sure your family is well taken care of after you are gone. One way to do that and still leave a gift is to designate that a percentage of your estate will go to a ministry and the rest (the vast majority) will go to family. For example, some folks compose their will so that, for example, 2%, 5%, or 10% of whatever remains will go to ministry or charity. That means that 98%, 95%, or 90%, respectively, would still be designated for family. Both purposes are, therefore, achieved.
- Do you have an encouraging family?
Speaking of family, I have known several during my years in ministry that I think would have been surprised if their loved ones had not left something for a favorite ministry. In short, these family members knew how important the ministry was to their loved ones during their lifetime and how much they wanted to see their work continue after they had departed. Likewise, if they tithed while they lived, it would only be natural for them to leave 10% (or whatever percentage they gave annually) of their worldly possessions behind for worthy causes.
- Do you understand how estates or planned gifts work?
It’s good to have a basic idea of estate or planned giving options that are available. For example, there are four types of bequests (or designations through a living trust) that can be made:
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Specific percentage of the estate (e.g., 5%, 10%, etc.).
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Specific dollar amount (e.g., $10,000, etc. Note: The dollar amount stays the same if estate size increases or decreases during your lifetime).
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Specific item of property (e.g. real estate, stamp or coin collection, appraised artwork, etc.).
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Contingency (e.g., if in a “worst case scenario” all main beneficiaries should predecease you, this designates how your assets will be distributed).
In addition, you can leave a percentage or specific dollar amount from an IRA or equivalent, life insurance policy, Church Extension Fund, or other account via a Beneficiary Designation. (Feel free to contact me or the holder of your account for more information.)
Last but not least, certain Life Income gifts (irrevocable) can also be put in place which will provide an opportunity to reduce taxes, generate an income for you and/or your loved ones, and leave a future gift to a ministry. For example, Charitable Gift Annuities can be used by those persons who would like to generate an annual income of 5% or more (a significant portion of which is tax free), receive a tax deduction, and leave a cash gift to ministry upon their death.
Likewise, Charitable Remainder Trusts can be established to do basically the same as a Charitable Annuity except there is an option to provide an income stream to loved ones upon your death.
(For more information on any of the above concepts, feel free to contact me.)
- Do you have supportive legal counsel?
Let me speak just for myself on this subject. I could not have written a personal will without an attorney. The attorneys I utilized practiced specifically in the area of estate planning, and they were supportive of the idea that I wished to include estate gifts in my will. If I needed to write a new will tomorrow, I would do things the same way.
- Tax Benefits
In my many years of stewardship work, I’ve never met anyone who wants the government to get any part of their worldly possessions after they die. In short, they don’t want to pay estate or “other” taxes if possible. On this subject, I have good news and good news.
First, the odds that you will owe any estate taxes are very slim. In fact, it is estimated that only 2/10 of 1% of those who passed in 2015 owed estate tax. Why? Because in order to have a taxable estate, an individual must have left $5.4 million or more in assets. (Fortunately, we are looking at similar numbers in 2016.) So, whether you leave an estate gift or not, estate taxes are likely a non-issue for you. (Note: If you are blessed to have a taxable estate that equals or exceeds that amount and would be interested in learning about planned-giving concepts that will reduce your tax and provide additional income for loved ones, feel free to contact me.)
Second, there can be good news also about some of the “other” taxes that may be owed when you are called home (and here charitable estate planning can play an important role). For example, when you die (and your spouse has predeceased you if applicable) if you have left behind monies in an IRA, 401k, 403b, or other tax deferred account, your successors are going to owe ordinary income tax on this type of inheritance. However, if you leave monies from an IRA, etc., to a ministry as an estate gift, no tax will be owed since charities are exempt. So, leaving an estate gift from this type of account is preferable to monies that are clear of income taxes.
To illustrate, here is “The Story of Ruth.” Ruth is 65 and never married. During her lifetime, she has acquired assets totaling $600,000, including a home, life insurance, cash, securities, and an IRA (the latter of which has about $60,000). A lifelong tither, Ruth would like to leave 10% of her estate to be divided between her two favorite ministries. She also doesn’t want any of her estate to be taxed. So, she contacts the holder of her IRA, requests a beneficiary form, receives it, names the two ministries as equal beneficiaries, and mails it back to the company. When she is called home, her IRA will go to charity while the vast majority of her estate will transfer to her loved ones tax free.
- Personal Benefit
Most of the time, the personal benefit of leaving an estate gift to ministry is the joy and satisfaction of knowing that you are helping them in the Lord’s work for many years to come. A more “tangible” benefit from a financial standpoint is tax avoidance (as illustrated earlier).
- Beneficiaries
A couple of things should be looked at here. First, do you (or your attorney) have the proper name, address, etc., of the ministry/charity you are leaving a gift to? This is especially important if the organization not only has a national operation but perhaps state and local ones as well. The best way to make sure is to ask for the “Form of Bequest” the organization uses, which includes the legal name, address, and tax ID number. (For example, Lutherans For Life’s tax ID number is 41-1374293.) Second, make sure the ministry can use the funds in the way you wish. The safest thing to do here is to designate the name of the organization—only. This will give the board of directors the greatest leeway to do what is best at the moment. If you wish to leave a gift for a restricted purpose, make sure it is for something that is already established (e.g., an endowment). If the organization has to implement a new program or activity which may not be viable in the future in order to fulfill the bequest, it can create a difficult and expensive process to change. If you have any doubts or questions about this, it’s a good idea to contact them beforehand to discuss your wishes and confirm that they can be accomplished after you are gone.
- Timing
A will, living trust, or overall estate plan can be changed at any time, as long as the person remains of sound mind. A charitable estate or planned gift can be the driving factor in changing the same (and/or separate beneficiary designations via an insurance policy, IRA, CEF account, etc.). However, most estate gifts are designated as part of the overall process of doing either an initial will or estate plan or revising the same. The latter is often dictated by a change in circumstances, such as the death of a spouse or loved one, moving to a new state, etc. Even if this is not the case, it’s a good idea to review your will every couple of years just to make sure no changes are desired. If need be, a revised one can be completed.
- One More Thing to Consider
And the most important thing is to have the guidance and blessing of the Lord! To sum up, what is His will regarding your earthly blessings and where they go after you are gone? Certainly first (and not last!) on the list is to seek His will through prayer. “Ask and it will be given to you; seek and you will find; knock and the door will be opened to you” (Matthew 7:7 NIV).
If at any time you have any questions about LFL or remembering the ministry in your estate plan, please contact me at 888.364.LIFE or jhawkins@lutheransforlife.org.
Please note this article is not intended as legal or financial advice. For assistance with specific cases, you are encouraged to seek the advice of an attorney or other professional advisor.