Estate Planning: Wills, Trusts, Annuities and more
Estate Planning Basics
An estate is the collective assets, large or small, a person owns when he or she dies. A person’s estate is distributed to his or her heirs according to the dictates of a will or trust. If there is no will or trust, then the estate passes according to the laws of the state.
If the estate is distributed by a will or by the laws of the state, it requires a court process called probate. There are several reasons to avoid probate. Probate is a lengthy process which delays the fulfillment of your wishes. It is a matter of public record and the process of estate administration can sometimes result in controversies and litigation that may incur additional expense.
A well-designed estate plan allows you to decide the outcome. It can preserve more of your assets and allow you to pass them to the people and causes you care about most.
Through your estate plan, you can play an instrumental part in ensuring that the ministry of Christian Freedom International will continue well into the future.
Depending on the arrangements you choose, you may also:
• Reduce your income taxes
• Avert capital gains tax
• Increase your current income
• Receive payments for life
Achieve no-cost, worry-free asset management
Estate planning can also reduce costly and lengthy legal proceedings for the division and distribution of assets, but most important, it will ensure that your assets are allocated according to your desires.
A proper estate plan should accomplish the following:
• Express God’s plan for stewardship
• Transfer the assets God has entrusted you to Christian Freedom International or other charities of your choice
• Transfer your estate in a tax-efficient manner with the least possible amount of heartache, cost or delay
Tools that can be used in planning the distribution of your estate include:
• A Will – A legal declaration of your wishes regarding the disposal and distribution of your estate after death.
• A Trust – A legal agreement that allows you to set aside money or property for the benefit of one or more persons or organizations. The legal title of a trust remains with the trustee. There are many types of trusts available, some of which provide income for you or loved ones as well as for the work of the Lord.
• A Charitable Gift Annuity – An annuity that pays out a certain amount to you (or someone you designate) over a lifetime, with the remainder going to Christian Freedom International or another charity upon your death (or the death of the designated annuitant). These can be set up to be immediate, meaning the payments start right away, or deferred, whereby the annuity is set up ahead of time and the payments start later (usually when you reach a certain age).
Leaving Your Assets for God’s Glory
The Will is the most basic part of every estate plan. By definition, it is a legal declaration of a person’s wishes regarding the disposal and distribution of his or her assets after death. The Will is the legal document, drafted during your lifetime, which addresses numerous issues:
• Final testimony of your Christian faith
• Property and asset distribution
• Naming an executor
• Naming a legal guardian for minors
• Reducing estate tax liability
In the absence of a Will, the state will resort to a formula. A judge will name an executor; bond may have to be posted; the court will name a guardian; and a formula will determine asset and property distribution.
Every state has different laws and regulations when it comes to the execution and validity of a Will and they are often strict. Be sure to retain competent legal counsel, familiar with the laws of your state of residence to draft your Will.
A Will is one of the most important documents you will ever prepare. As Christians, we are stewards of the assets God has entrusted to us, and Wills can play a major role in that stewardship.
Wills can be a simple and meaningful way of giving to God’s work through Christian Freedom International. A gift made through your Will provides a legacy, which directs your earthly treasure to produce heavenly treasure in terms of souls reached for Christ. Without a Will, state law dictates who receives your assets and who becomes guardian of your minor children. Your foresight now can result in many people entering into the joy of our Lord long after you have entered in yourself.
You can make an estate gift by having an attorney write a new or replacement Will, or by simply adding a paragraph (codicil) to your existing Will. A codicil can specify that a dollar amount, a percentage, the remainder of an estate, or a property be given to CFI after your death. Adding a codicil gift to your existing Will is easy and inexpensive.
When creating a bequest to Christian Freedom International in your Will, or in a codicil to your Will, it is important that your attorney have our EIN#: 52-1283394.
To give a fixed dollar amount, you may use wording such as:
I give and bequeath to Christian Freedom International, Inc., 215 Ashmun Street, Sault Ste. Marie, MI 49783, EIN# 52-1283394, the sum of _______________ dollars ($_____________).
To give a percentage of your estate after all bills and obligations have been paid:
I give and bequeath to Christian Freedom International, Inc., 215 Ashmun Street, Sault Ste. Marie, MI 49783, EIN# 52-1283394, ________ percent (______%) of my residuary estate.
To give the rest of your estate after all bills and other obligations and bequests have been paid:
I give and bequeath to Christian Freedom International, Inc., 215 Ashmun Street, Sault Ste. Marie, MI 49783, EIN# 52-1283394, all (or _____% of) the rest, residue and remainder of my estate.
To give property:
I give and bequeath to Christian Freedom International, Inc., 215 Ashmun Street, Sault Ste. Marie, MI 49783, EIN# 52-1283394, _________________________________________ from my estate.
Be sure to provide description and location of property, and location of title.
For a contingent bequest:
• If any of the named beneficiaries should predecease me, or in the case of failure or lapse of any legacy, I hereby bequeath his/her share to Christian Freedom International, Inc., 215 Ashmun Street, Sault Ste. Marie, MI 49783, EIN# 52-1283394
• An attorney can be a great help in the preparation of a will or other estate-planning document. State law controls probate, so it is advisable to consult an attorney who knows the laws of the state where you live or where your property is located.
• If you have already remembered the ministry of Christian Freedom International in your will, please let us know. We would like to thank you, and include you on a special list so that we will be sure to notify you to inform your attorney of any change of address we may have in the future.
If you have any questions or to start the process for your gift please contact CFI at 800-323-2273.
Preserving Assets, Planning for the Future
A trust is a very personal and carefully designed document. It may be the best solution for addressing the complexities associated with preserving assets while providing for the future benefit of your heirs and furthering God’s work through Christian Freedom International.
There are two broad types of trusts. A living trust takes effect during the owner’s lifetime and a testamentary trust takes effect upon the owner’s death.
Under certain circumstances, a trust can help you:
• Take advantage of tax credits available to you, your estate, and your beneficiaries
• Maximize the assets available for distribution to your beneficiaries
• Direct the distribution of assets to specified individuals or ministries like Christian Freedom International
• Secure the continued care and financial support of loved ones who are elderly, disabled, or financially inexperienced
• Provide for loved ones in a way which reduces complexity and cost to them
• Minimize court and legal involvement
• Ensure ongoing management of assets should you become unable to do so
• Maintain privacy
• Achieve giving goals to further the Lord’s work
Living Trust The Revocable Living Trust (RLT) contains language to distribute assets at death just like a will. An RLT, though, is set up during your lifetime, and essentially, all of your assets are transferred into the trust. These assets are then managed and controlled by you. As in a will, the RLT can contain language to set up other trusts should these be desired. The Revocable Living Trust has many advantages over a will, however. The most notable would probably be that it allows you to avoid probate.
The Revocable Living Trust also has the advantage of being private-none of it is subject to public record. In addition, it is much harder to contest successfully.
For a married couple, a Revocable Living Trust works as follows:
• An attorney prepares the trust. It contains language to direct, exactly as you desire, the disbursement of funds or property at the death of the second spouse.
• Upon creation, ownership of all of your assets, except qualified retirement plans, is generally transferred to the trust.
• A simple will is prepared for both spouses, which at death merely transfers any assets that were previously overlooked into the trust.
• For tax planning purposes, the Revocable Living Trust also contains language to create a second trust called a Bypass Trust. This trust is not funded initially, but can be funded at the death of the first spouse to reduce future estate taxes.
• Both spouses serve as trustees of the Revocable Living Trust during their lifetimes, managing the estate. At the death of the first spouse, the surviving spouse serves as sole trustee of the surviving Revocable Living Trust, and can also serve as personal representative of the estate.
A Charitable Remainder Unitrust (CRUT) eliminates the IRD tax on retirement assets, removes a portion of the assets from the estate for federal estate tax purposes, and at the same time provides income for heirs.
With a CRUT, the donor selects the payout percentage (five percent or more) and a period of time for the unitrust to make distributions to personal beneficiaries. Actual payments are determined by this payout percentage and the value of the assets in the trust. It is revalued each year, and the donor may make additional contributions to the trust.
Many donors choose to pay the unitrust amount to family members for a period of time that will pay out an amount equal to the initial value of the property. For example, a trust which pays 7 percent for 15 years will pay income to family members equal to approximately the initial fair market value of the property. By this method the donor is able to double the total benefits from the property-once to the family through income payments, and once to Christian Freedom International or another ministry through distribution of the principal after all income payments are completed.
One advantage of the Charitable Remainder Unitrust is that the amount remaining in the trust grows tax-free. For example, if a person selects a six percent payout trust, and the trust investments earn eight percent, there will be two percent tax-free growth each year. This tax-free growth can substantially increase the value of the trust over time. And since the selected six percent payout is based on this value, distributions to personal beneficiaries increase proportionally.
The ability of the unitrust to increase both in principal and income payments over a period of years is frequently referred to as an inflation hedge. However, the reverse scenario is also possible. In the above example, if the growth in the trust falls short of the payout (six percent in this instance), then income payments to beneficiaries actually decline with time.
With a Charitable Remainder Trust, assets at death are transferred to a trust. The trust will pay out a set percent of the initial fair market value of the assets to heirs for a period of years. The percent and duration is determined in the estate documents with certain guidelines. At the conclusion of the time set to pay heirs, Christian Freedom International or another charity will receive the remainder of the interest in the trust. The trust assets grow tax-free. The Testamentary Charitable Remainder Trust gives the estate an estate tax deduction on a portion of the assets that go into the trust. It also eliminates any IRD tax exposure from these assets.
A Charitable Remainder Annuity Trust (CRAT) pays a fixed amount annually to a non-charitable beneficiary, with the remainder going to Christian Freedom International or another charity. The donor cannot make additional contributions to this type of trust.
A Charitable Lead Trust is a trust that provides for the payment of an amount annually, or at more frequent intervals, to a designated charity. The amount must equal at least five percent of the initial fair market value of the trust. At the death of the trust creator, or at the end of the designated term of years, the remaining trust principal is distributed to a designated beneficiary or beneficiaries.
A Charitable Lead Annuity Trust (CLAT) is a charitable lead trust that provides a series of guaranteed fixed payments each year of the trust period. The amount of the payments does not change over the period.
A Charitable Lead Unitrust (CLUT) is a charitable lead trust that provides a series of payments that are revalued each year. These payments equal a fixed percentage of the fair market value of the trust property, as revalued annually. We generally recommend that trusts be considered only if at least $50,000 is available to fund them. Below that amount, administrative expenses are likely to negate much of the benefit.
A way to support Christian Freedom International . . . and receive regular, fixed annuity payments for life.
A Charitable Gift Annuity (CGA) is part charitable gift and part annuity. Funded by your contribution of money or stock shares, the CGA provides fixed annuity payments to you (and/or someone else you designate) for life-and a gift to CFI, too. A portion of your contribution is tax-deductible in the year the CGA is made, and a portion of the annuity payments are tax-free.
What types of gifts are accepted for CGAs?
• Cash (check) or publicly-traded securities.
When will annuity payments start?
• You may choose to receive payments immediately or defer them to a future date, possibly to a time when additional income will be needed.
How often do I receive payments?
• You may choose to receive your annuity payments quarterly, semi-annually or annually, via check or electronic funds transfer.
How much will I receive?
• Payout rates increase with age and with the length of deferral.
The payment amount depends on four factors:
• The amount of your gift
• Your age at the time of gift
• Whether the payments begin immediately or are deferred
• Whether the CGA is a one- or two-life annuity
Based on these factors, the payout rate is set at the time of your gift and the annuity payment received will be the same for the remainder of the one or two lives.
How much will go to Christian Freedom International?
• The recommended annuity rates for a CGA are computed using the assumption that “on average” approximately 50 percent of the initial gift amount will remain for charity when the annuitant dies (if the annuitant lives to the average life expectancy). If the CGA is reinsured, the 50 percent assumed remainder value (future value) is discounted back to today’s dollars (present value) and made available to the ministry today.
What are the benefits of a CGA?
• Immediate tax deductions. You generally qualify for an immediate tax deduction for a portion of the contribution that funds your CGA.
• Regular Payments. A CGA produces a fixed payment for life with rates generally higher than CDs. A portion of the income is often tax-free.
• Flexibility. Unlike a trust, you may establish a CGA without a lawyer, although it is always a good idea to consult with your professional advisor(s) first.
Do you want to make a gift to Christian Freedom International?
Would you like to receive regular, fixed payments for the rest of your life?
Would you like payments to go to your spouse, parents, children or a friend?
Do you want to remove assets from your taxable estate?
Are your CDs and money market returns lower than you would like?
If the answer to any of these questions is YES, then a Charitable Gift Annuity with CFI may be right for you.
DISCLAIMER: This information is designed to provide information and illustration of the subject matters covered. It is not intended, nor should it be used as legal, accounting or other professional advice. It is always a good idea to seek legal and tax advice from your professional advisor(s).
For more information: If you have any questions please contact your financial advisor or call CFI at 800-323-2273.
If you’re interested in supporting Christian Freedom through a will, trust, or annuity, please Contact Us.
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