Geoff sensed that he had reached the point in his life to turn from accumulating assets to preparing to distribute them. Geoff had been good at earning, investing, and accumulating. He had a relative fortune that he controlled and that provided more than amply for his family. Geoff also shared generously with his community in various ways. But now, Geoff could see that things would eventually come to an end, and maybe sooner rather than later. Geoff needed an estate plan. Yet he also wanted to do something creative and visionary that might last for more than a generation or two. Fortunately, Geoff knew the lawyer whom he wanted to help him pursue that plan.
Legacy
Law also promotes your opportunity to leave a lasting legacy, for years or even generations beyond your demise. The above chapters have briefly touched on some of those legacy opportunities. They begin with your opportunity to accumulate earnings, amass and invest savings, acquire and hold appreciating assets, and build or create things of value. Law recognizes your property and holdings as assets of your estate after your passing. You have the law's support and encouragement to provide, through a will or trust, for the distribution of your estate after your demise, for the benefit of those family members, future generations, charities, causes, or other individuals and organizations you wish to favor. You may also form and fund a foundation or form, support, and operate a charity, as your legacy. This chapter addresses those opportunities in brief. See the guide Help with Your Legacy for greater detail on opportunities to create and leave a legacy.
Will
Law encourages individuals to provide for the orderly disposition of their property and payment of their debts after demise. State laws authorize individuals to execute a will by which they provide for the administration of their estate after death. A will provides for payment of expenses of administration and debts the decedent owes, and for distribution of remaining assets. When you execute a will, you decide on your heirs. If you do not execute a will, your estate passes by the laws of intestacy, generally to your spouse and adult children, depending on varying state laws. To execute a valid will, you need to reduce your wishes to a writing that you sign at the end, with two adult competent witnesses also signing. Notarization of signatures may confirm their validity without further attestation. State law may also hold valid a will in the testator’s handwriting, signed at the end, even without witnesses, provided that witnesses can confirm the testator’s handwriting at a probate hearing. Retain qualified legal representation to help you execute a valid will expressing your wishes.
Audit: Identify the following issues on which you should have qualified legal advice related to the treatment of your property and debts after your demise: (a) whether to execute a will; (b) what to include in your will; (c) how to ensure your will’s validity; (d) where to file or store your will; (e) whom to provide copies of your will.
Heirs
Law permits you to choose your heirs under a will. Your heirs may certainly include your spouse, children, grandchildren, and other natural objects of your affection. A testator may leave everything to a surviving spouse, simply to assure the spouse’s support, leaving the spouse to convey assets to children and grandchildren by gift or by will on the spouse’s own demise. If a testator leaves nothing to a spouse, state law may authorize the spouse to elect a statutory share of the estate anyway, again for support purposes. Testators generally treat children equally or equitably, although again, the testator decides. If one or more children are minors or financially irresponsible, the testator may convey their portions in trust for management by a responsible individual. Testators may also bequeath assets to friends, charities and their causes, religious institutions, and other individuals and organizations. Testators also may bequeath either specific items of real or personal property, or a percentage share of the estate, or a combination of such bequests. You may modify your will as often as you wish with an amendment, also called a codicil, following the same procedure for executing a valid will. Retain qualified counsel for advice and assistance in making your wishes known in a properly executed will.
Audit: Identify which of the following heirs you would prefer to include in your will, with the advice and assistance of counsel: (a) your spouse; (b) an ex-spouse; (c) your children; (d) grandchildren; (e) siblings; (f) nieces and nephews; (g) cousins; (h) your church or other religious institution; (i) your favorite charity; (j) a special cause.
Representative
Law permits you to choose the personal representative, also called an executor or administrator, of your estate. The personal representative carries out your wishes as expressed in your will, while following the probate laws and procedures. Testators commonly designate a spouse, trusted sibling, or stable and wise adult child as their personal representative. The will names the personal representative. Wills often name a successor personal representative if the first choice cannot or will not serve. Wills may also name co-personal representatives if the testator prefers to have two or more representatives sharing control. The personal representative typically retains a probate attorney to advise and assist with probate administration, especially for more-valuable and complex estates. You may also choose a corporate personal representative whose professionals would carry out the estate’s administration. You may also recommend a guardian or co-guardians, typically a married sibling or married close friends, for your minor child or children in your will, which may be your most important act of all.
Audit: Identify the personal representative whom you would choose from among the following candidates and a back-up or successor representative: (a) spouse; (b) parent; (c) adult children; (d) grandchildren; (e) sibling; (f) trusted friend; (g) corporate representative. If you have already made a will, confirm that your choice of personal representative remains your preferred choice. If you have minor children, ensure that your will recommends qualified guardians who know and have agreed to their appointment in the event of your demise.
Trust
Law also permits you to place assets in trust for the benefit of minor, dependent, or mentally incompetent family members, both while you are living and after your demise. A trust is common, for instance, for the financial support after the grantor’s demise of a mentally incompetent child or of an elderly, infirm, or unsophisticated spouse who might fall under the influence of others against the spouse’s own interests. You may alternatively establish a family trust to provide support for your future family generations, if your assets are sufficiently substantial. A grantor often funds a family trust established during life from a pour-over will at demise. The trust names the beneficiary or beneficiaries and the person or corporate entity to act as trustee. A trustee has the fiduciary duty to carry out the terms of the trust for the beneficiary’s best interest. Trustees owe a duty not only to carry out the trust document’s terms but also duties of loyalty, reasonable care or prudence, impartiality, monitoring, reporting, and not to commingle trust assets. Grantors execute trust documents under requirements similar to those for a will. Retain a qualified legal representative to advise and assist you in preparing and executing a trust, if in your legacy interest.
Audit: Identify which of the following beneficiaries may benefit from your establishing a trust in their interest: (a) a parent incapable of the parent’s own support; (b) a spouse needing support and protection; (c) minor children; (d) adult mentally incompetent children; (e) adult financially unsophisticated and vulnerable children; (f) minor grandchildren; (g) pets; (h) land conservancies; (i) other charitable causes.
Charity
Law also encourages you to establish, operate, and support a charitable organization to further your legacy. Internal Revenue Code Section 501(c)(3) exempts from federal income tax qualifying organizations operated exclusively for charitable, religious, educational, scientific, literary, or public-testing purposes. Forming your own charity with a nonprofit corporation form, charitable identity, volunteer board, staff members, and charitable mission can greatly aid your community. Charities qualify for tax exemption under a public support test, meaning that members of the public provide a substantial portion of the charity’s operating expenses. You may also make tax deductible donations to your own or another 501(c)(3) charity, providing you itemize deductions and otherwise qualify under the tax code. See the guide Help with Your 501(3) for further information on how to start and operate a charity.
Audit: Identify the following with respect to the charitable organization you would establish and operate, if you determined that a charity would appropriately further your legacy: (a) the name or identity you would give the charity; (b) the disadvantaged population it would serve; (c) the gap in goods or services it would fill; (d) whether it would serve a charitable, religious, educational, scientific, or literary cause; (e) its location; (f) whether it would employ paid staff and, if so, their skills. Retain qualified counsel to advise and assist you with forming and operating a charitable organization.
Foundation
Law also encourages you to establish a foundation to fund charitable causes. Individuals or families with substantial assets may find that making charitable donations each year does not sufficiently carry out their desire to support charitable causes long term. A foundation is a tax-advantaged grant-making organization funded by a single individual, family, or corporation, typically with funding or a funding commitment of at least $1 million. Foundations often bear the name of the individual, family, or corporation funding them. A foundation does not carry out charitable activities. Nor does a foundation solicit public support. The foundation instead gives grants to other 501(c)(3) charitable organizations to carry out the charitable mission the grant describes. You may establish a personal or family foundation to operate for a defined period or in perpetuity for your children, grandchildren, and future generations to operate, giving grants to charities that meet your foundation’s mission. Retain qualified legal representation to assist you in establishing a foundation.
Audit: Identify the following for the foundation you would establish, if you determined that a foundation was within your means and legacy interests: (a) the foundation’s name; (b) the source of the foundation’s funds; (c) whether it would be your foundation, your business’s foundation, or your family’s foundation; (d) which family member or other individual you would name to operate the foundation in your stead or after your demise; (e) the charities or causes you would form the foundation to fund; (f) the foundation’s duration.
Fund
Law also encourages individuals and families without the substantial means for a foundation to participate in a community foundation by establishing a community foundation fund. Community foundations have a special legal status that permits them to operate with the advantages of a private foundation but to establish separate accounts for individuals, families, or corporations to fund. A community foundation enables you to establish a fund in a smaller amount than that which a private foundation generally requires and to avoid the expense and administration of a private foundation. Individuals and families fund community foundation accounts with donations of $5,000, $10,000, $50,000, $100,000, $1 million, or other amounts. You may designate the charitable cause or interest your account would fund with grants evaluated and issued by the community foundation’s board. Consider a community foundation fund as an alternative to charitable donations or a personal, family, or corporate foundation, to further your legacy.
Audit: Identify the community foundation serving your geographic area. Review the funds your community’s foundation already has established. Do you see gaps in the charitable causes your community foundation already serves, where your funding of your own account for that cause would serve your community well? If you created your own fund with your community foundation, how much would you contribute? Would you plan future contributions or annual contributions to grow your fund? Consult your local community foundation and a qualified legal representative to learn more about the tax and other advantages of a community foundation fund.
Key Points
Law invites you to further your legacy before and after your passing.
A valid will enables you to direct distribution of your estate.
Give thought to your choice of heirs to meet needs and further legacy.
Choose a trustworthy family representative to administer your estate.
Funding a trust enables you to care for family members with needs.
Law encourages donations to and formation of 501(c)(3) charities.
A foundation can make sense for families with substantial assets.
Community foundations also administer funds for charitable causes.