The beginning of a new year is always a great time to address your estate planning needs – be it revisions to an existing plan or the creation of a new one. People often equate the term “estate planning” with individuals having a high net worth or those being in a “taxable” position. However, estate planning is pertinent to everyone – especially those who are interested in charitable giving.
An estate plan generally consists of a will, a health care proxy and a power of attorney. If appropriate, it may also be prudent to create a revocable or an irrevocable trust. Your financial and family circumstances at the time your estate plan is created will generally dictate what types of estate planning documents are most appropriate for you. Addressed below are some of the most common questions asked during the estate planning process and how you can incorporate charitable gifts into your estate plan.
Why do I need a will or trust? Creating a will or a trust will enable you to control the disposition of your assets, to appoint fiduciaries (executors, trustees and guardians), to possibly save federal and state estate taxes and to make gifts to your favorite charitable organizations.
How can I best provide for my favorite charities? The beauty of the estate planning process is that you can choose when it is most advantageous for you to make gifts – either during your lifetime or after your death. You can make outright gifts with the use of cash or securities, you can designate your favorite charity as the beneficiary of your IRAs or you can create a charitable remainder or lead trust. You can even consider more complex charitable gifting vehicles, such as creating a private foundation.
Will I save taxes if I gift to a charity? A lifetime gift to a charitable organization will generally enable you to receive an income tax deduction. A gift made in your will or trust will typically provide your estate with an estate tax charitable deduction.
What happens if I do not have a will or trust? If you do not have a will or trust in place when you die, New York State law will dictate how your property will be distributed and who may serve as the administrator of your estate. Additionally, you will lose the ability to create trusts for and to nominate guardians of your minor children. Charitable gifting opportunities may also be lost.
Why should I be concerned about the beneficiary designations of my life insurance policies or retirement plans? A good estate plan should include a comprehensive review of your primary and contingent beneficiaries for all of your life insurance policies and retirement assets in order to ensure that they conform to the plan created in your will or trust agreement. If beneficiary designations are overlooked, your assets could be distributed outright to minors or to individuals for whom you do not wish to provide a bequest. The ability to defer income taxes may also be lost.
I’m finding it difficult to make the appropriate decisions about my estate plan. What do I do? The estate planning process can at times be difficult and overwhelming, so it is not uncommon to encounter issues along the way. It is imperative that you address questions or concerns with your estate planning professionals so that they can help you work through them. Once your estate plan is complete, you can take great satisfaction in knowing that you have taken control over your own affairs by designating individuals to act on your behalf in the event that you become incapacitated during your lifetime, by naming fiduciaries who will administer your affairs when you die, and by leaving your legacy with your loved ones and favorite charitable organizations.
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