Personal Planning Ideas

The Versatile Living Trust

In addition to a will, many people include living trusts in their estate plans. What can a trust do that a will can’t?

Probate costs—Assets passing via trust avoid probate, thereby minimizing probate fees.

Out-of-state real property—You can avoid probate in a second state if the property is held in trust.

Privacy—A will is a public document, but a living trust offers privacy.

Incapacity—In the event of incapacity, a successor trustee can handle financial affairs.

Quicker distributions—Trustees can make distributions without waiting for probate court approval.

One thing a revocable trust can’t do is reduce income or estate taxes. During your lifetime, you continue to be taxed on all income earned on assets in the trust. The value of all trust assets is included in the gross estate.

Having a revocable living trust does not mean you shouldn’t also have a will. The will can name an executor and provide for the distribution of assets not held in trust. The will can simply direct that assets be added to the trust and distributed under its terms (a pour-over will), thereby preserving privacy. A living trust is only effective if you have assets titled in the name of the trustee. This includes real estate, brokerage accounts, bank accounts and other property such as vehicles and business interests. The attorney who drafts the trust can help re-title the assets.

Keep in mind that you can make lifetime gifts and gifts through your estate plan to charity from your living trust.

Don’t Let Your Estate Plan Get a Failing Grade

Failing to have an estate plan—a will and possibly a living trust—is a mistake that can have serious financial and emotional consequences for your family. But even people who have wills can make mistakes, such as:

Failing to have the documents in an easily accessible place—The thoughtful will that you had drafted does no good if it can’t be located when needed. Let loved ones know where it can be found.

Failing to have assets title correctly—If you have a living trust, it’s important to have assets titled in the name of the trust, including new assets you acquire.

Failing to talk with your family—Your will should not be a surprise to your family, especially if you’re not dividing your estate equally. This is also a time to prepare family members for receiving wealth and talk about the important charities in your life.

Failing to coordinate all your assets—Some assets may pass independently of your will or living trust. For example, life insurance and retirement plans generally pass to the named beneficiary, even if someone else is named in a will or trust. Make sure your estate plan takes into account how these assets will pass.

Failing to consider taxes—Very few estates are subject to estate tax (only those in excess of $11.7 million in 2021), but state taxes may be a concern as well as income taxes on certain things you own. Income taxes are due on amounts family members withdraw from an IRA, but if an IRA is left to charity, no income tax is owed.

Failing to review plans regularly—A will or living trust can become “stale” if not updated for new births or deaths in the family, the acquisition of new assets, an increase or decrease in the value of the estate or even a relocation to another state.

Failing to include all necessary documents—In addition to a will and/or living trust, your complete estate plan should include a health care power of attorney, naming someone to make health care decisions if you are unable, and a living will to make known your wishes regarding end-of-life care. You should also consider a letter of instruction that details how certain items of personal property should be distributed.

Failing to remember the important charities in your life—Just as your life has been more meaningful due to your involvement with charities, your estate plan will be meaningful if you provide for continued support.

Sharing Stock Market Success

The good news: Stock market values are up. The bad news: Cashing in on the appreciation means you’ll share some of your gains with the IRS. A better idea might be to use appreciated stock to make charitable gifts and receive a double tax benefit. Donors who give appreciated stock held more than one year can deduct the full fair market value of the investment—not just what they paid originally—and they save again by avoiding all tax on the capital gain.

Take the example of Joyce, age 72, who purchased stock in 2010 for $2,000 that is now worth $10,000. If she gives the stock instead of cash, charity receives a gift of $10,000 and Joyce can claim that amount as a charitable deduction on her next income tax return if she itemizes. In her 24% income tax bracket, the deduction saves Joyce $2,400. In addition, she avoids $1,200 in capital gains tax that she would owe if she sold the stock. After subtracting her tax savings, the $10,000 gift costs Joyce only $6,400.

But if Joyce doesn’t feel she can part with the income generated by her investment, she could instead use the stock to arrange a charitable gift annuity. In exchange for her gift, Joyce would receive $4,900 (4.9%) annually for as long as she lives. A portion of her annual payment would be taxed at favorable capital gains rates for her life expectancy. In addition, she would be entitled to a charitable deduction of $4,256, saving her more than $1,000 in income taxes. These financial and tax benefits are in addition to the satisfaction Joyce receives from making an important contribution to charity.

Endowments: Gifts That Keep On Giving

Charities and their donors have long been attracted to the concept of endowments. For supporters, endowments are gifts that keep on giving. Gift principal generally remains untouched and only the income is used to support worthwhile programs. For charities, endowments create both permanence and financial stability.

Donors can establish endowments through a variety of arrangements, including gifts that occur after one’s lifetime or that provide donors or others with lifetime income.

  • A contribution of stocks, bonds or mutual fund shares can be used as a memorial or tribute to a loved one.

  • An estate plan can provide endowment support through a bequest, life insurance, revocable living trust designation or beneficiary designation in an IRA, retirement plan or other financial account.

  • Charitable remainder trusts allow friends to assist both charity and a family member.

  • Charitable gift annuities provide retirees with the security of fixed payments for life that can be partly tax-free—along with a charitable deduction.
     



Contact Us

For more information about 
Planned Giving, please contact:
Denise L. Bartolotta
Director of Philanthropic Partnerships
Chicago Zoological
Society/Brookfield Zoo
3300 Golf Road
Brookfield, Illinois 60513
EdithRockefellerMcCormickSociety@czs.org
(708) 688-8174
www.czs.org