Some 60% of Americans die without a valid will. This is unfortunate in most cases, because state laws will take over and will distribute your probate estate in accordance to a prescribed formula — possibly in ways that you would not choose. Any charitable interests you wanted to benefit will not occur.

One thing is certain as we go through life and that is change.

The circumstances of life change constantly. If you have taken steps to write a will, you can be certain that your circumstance and the makeup of your estate will change from time to time. It is important that you do not procrastinate to get your will amended or even rewritten as these changes in life occur. Here are some common events that should nudge you to change your will: marriage, divorce, a new baby, stepchildren, named heirs pass away, you move from a common-law property state to a community-law property state or vice versa, you dispose of or purchase significant assets, guardianship is no longer needed for your adult children, you change your mind about your bequests to heirs, you wish to add or change a charitable beneficiary.

Consider revising your will using a codicil or contacting your financial advisor.

Some states allow an individual to compose a will. If it is properly witnessed and signed, many Probate Courts will accept such a will.

However, most people have no idea how to get started with such a task. They wonder if they will adequately cover all the bases in a self-authored document.

A will is a very important legal document, and it is wise to employ the expertise of a qualified attorney. A will is one of the least expensive legal documents you would pay for, but a well-written document could save your heirs much more in dollars and hassle.

An executor or personal representative is the person you assign the responsibility to manage and distribute your estate in accordance with your will. An executor’s work will be monitored by the Probate Court. An executor does not need to be an expert in finances, probate law, or taxes. He or she can and should hire such experts that are needed for assistance. A good executor will be honest and organized, possess good common sense, and be willing to serve in this capacity. Most people will name their spouse or an adult child, or some other close heir. If possible, name someone who lives nearby and who is familiar with your financial matters. That will make it easier for the person to do chores like collecting mail, selling assets, and finding important records and papers.

This is the court that determines the validity of a will and provides judicial oversight over the distribution of the estate. If there is no valid will, then the Probate Court will appoint an administrator of the estate to facilitate the estate’s distribution in accordance with state law.

Non-probate assets are any assets in your estate that will pass to heirs outside of the Probate Court. Examples include jointly held property such as real estate, jointly held bank accounts, and assets that will pass to heirs based on a death benefit beneficiary designation that are prestated in a life insurance policy or qualified retirement plan (such as an IRA).

Additionally, some people title all their property to a living trust, and at death, the named trustee will distribute or manage assets in accordance with the trust document. The trust and assets possessed by the trust are not reviewed by the Probate Court. In states where probate fees are expensive, a living trust can save on those costs. Also, those who own property in another state may want to consider a living trust so that they do not have to deal with two Probate Courts. 

This is a simple amendment to a will, which avoids the cost and complication of rewriting an entire will. The codicil must be signed and witnessed or notarized as is the original will.

Download a sample codicilOpens new window.

Simply contact your IRA or retirement plan administrator and request a copy of the Change of Beneficiary Form. You can fill this in as you wish and include the Diocese for a portion or all of the remainder of your plan’s assets.

For gifts at death, any portion of your retirement plan assets that are given to a qualified charity will also qualify for income tax, inheritance tax, and federal and state estate tax deductions as applicable to the size of your estate and your state of domicile. Any assets coming out of your plan to your heirs may be subject to all of the taxes mentioned above.

It is important that you contact us so that we can assist you with transfer instructions. Or, you can use our Stock Transfer Form to facilitate the gift. If you own securities in a brokerage account, we can help you set up an electronic transfer of the shares to our brokerage account. If you possess actual stock certificates, we can tell you how to sign the certificates over to us and fill out a stock power form.

Assuming you are giving long-term (owned for 12 months or more) appreciated securities, you will receive a charitable income tax deduction equal to the fair market value of the shares. For common stock this is typically the mean value on the date that we take control of the shares you give. You will pay no capital gains tax. Gifts of stocks are deductible up to 30% of your adjusted gross income the year you make your gift. Any excess amount can be rolled over into the next tax year, for up to five additional tax years if needed.

It is generally our policy to liquidate any donated stock shares immediately after receiving them, so that we can use the cash proceeds to support the overall mission of the Diocese of Metuchen.

In many cases yes, and considerable tax benefits can result. However, giving closely held stock is more complicated than giving publicly traded securities and may be subject to certain transfer restrictions. We stand ready to assist you with your gift intention. One prerequisite to our acceptance of a gift of closely held stock is that the business or the shares have had a recent qualified appraisal. Please contact us so that we can walk you through the process.

Simply contact your life insurance company and request a Change of Beneficiary/Ownership Form. Designate us as the new owner and beneficiary of your policy.

If you give your policy to us while you are still alive, you will receive an immediate income tax deduction for the current value of the policy. In order for you to get this deduction when the charity is the policy owner, you make donations to the Diocese of Metuchen so we have funds to pay the insurance premiums. Put another way, the donor covers the premium payments that the charity now makes on the gifted policy by making regular additional monetary gifts to the charity. If you retain ownership of the policy, benefits payable to us at death can save you federal and state estate taxes depending on the size of your estate and your state of domicile.

Here are some questions we will need to answer to determine if your property will be helpful to us:

• Is the property void of any liens?
• Are there any environmental concerns with the property?
• Can our charity actually use the property for our work?
• Is the property marketable and salable within a reasonable period of time?
• What are the costs associated with accepting and holding the property?
• Can we realize a positive net return on this property?

You will receive an income tax deduction equal to the appraised fair market value of the property. An independent qualified appraisal is required for this purpose and it is up to the donor to acquire such an appraisal. Donating your property may also reduce your estate costs and taxes as well.

In many cases the answer is yes. Real estate can be transferred to a charitable remainder unitrust which will provide the donor with tax reduction benefits as well as setting up an income stream for beneficiaries such as a spouse, children and/or other loved ones.

A gift annuity contract becomes a legal financial obligation of the Diocese and is backed up by all our assets.

Both have distinct advantages. A gift of cash will produce a larger tax-free portion of the annuity. A gift of stock can increase your income because of reduced capital gains cost. Both assets produce an equal annuity rate and charitable income tax deduction.

A charitable gift annuity can only be set up for one or two lives. This is typically a husband and wife, but it could be two siblings, or two friends, etc. Beneficiaries must be at least 60 at the time of the gift. For more flexible beneficiary choices, you could consider a charitable remainder unitrust.

A commercial annuity, typically sold by banks and life insurance companies, will provide the owner with fixed or variable income based on commercial rates of return. These plans establish their annuity payments based on the assumption that all of the assets in the plan will be used up by the end of the income beneficiaries' lives.

A charitable gift annuity is part guaranteed annuity and part charitable contribution. The donor receives a partial income tax deduction based on the assumed value of the portion of the gift the charity will ultimately receive. A gift annuity establishes its payments on the assumption that there will be something left for the charity at the end of the contract. Often annuity rates for gift annuities cannot compete with the annuity rates of a commercial annuity because of the charitable component in the contracts. But then, there are fewer tax benefits with a commercial annuity.

Yes, you can make a gift now for an annuity contract that will defer your payments to a future date that you decide, typically sometime in your retirement years when you will need the income. In this sense, a deferred payment gift annuity can serve as a type of tax-deferred savings plan that will provide you with guaranteed income in the future.

A Deferred Gift Annuity provides lifetime annuity payments commencing at a future date.  Because of this deferral, payments from deferred gift annuities are higher than from annuities whose payments begin immediately, and donors usually receive a larger charitable deduction than they would for an immediate-payment annuity.  Many donors use deferred gift annuities as a source of supplemental retirement income.  They often create their annuity with funds they had already set aside for retirement savings, and set their anticipated retirement as the date to begin receiving payments.  An attractive option is to establish a series of deferred gift annuities over several years, all scheduled to begin payments upon the donor's retirement.

Yes, you may. Choose whatever date makes sense to you. And remember this: the longer you wait, the larger your payments will be.

One is not necessarily better than the other. Both have distinct advantages. A gift of cash will produce a larger tax-free portion of the annuity. A gift of stock will reduce the donor’s capital gain tax and produce income that will likely be at a lower tax rate. Both assets produce an equal annuity rate and charitable income tax deduction.

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

Typically, such a trust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. An annuity trust may also hold tax-free bonds.

Gifts of cash or appreciated property yield the same result for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal. If you desire to know your taxation rates when you fund your life income gift, you might want to consider a charitable gift annuity or deferred gift annuity.

Yes, subject to certain limitations.

A Charitable Remainder Annuity Trust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

If the assets in the trust are liquid such as cash or securities, typically a unitrust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. If the trust assets are primarily nonliquid assets such as real estate or personal property, the trust may be held for growth in capital appreciation rather than current income. At some later date, the nonliquid assets could be sold (avoiding capital gains taxes) to be reinvested to produce income for the income beneficiaries.

Gifts of cash or appreciated property yield almost the same results for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal. If you desire to know your taxation rates when you fund your life income gift, you might want to consider a charitable gift annuity or deferred gift annuity.

In most cases, yes. The value of the trust principal will be determined by a qualified appraisal of the property. However, real estate or other property may not be producing income and thus the income beneficiaries may receive no or very little income until these assets are sold and reinvested to produce income.

Yes, subject to certain limitations.

A Charitable Remainder Unitrust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

If you negotiate a provision in the Retained Life Estate contract for the right to lease the property for the remainder of your life estate, you can keep the additional money. You remain responsible for the taxes, insurance, and maintenance expenses spelled out in the agreement with the charity.

You are. Most likely the RLE contract will contain a provision that requires you to get prior approval from the charity to make such improvements.

Yes. The use of the asset is yours. Should you decide to lease for a while and then move back in, this gifting concept allows for that.

Yes. As long as the property qualifies under the IRS rules, it can be used to create this type of donation arrangement (i.e., you don't take depreciation or own it in a corporate structure, etc.) Check with your accountant to make sure it qualifies. Motor coaches and yachts qualify as second homes.

Maybe. If the trust is structured a certain way, you’ll be eligible to claim an income tax deduction in the year you set up your trust. However, that means that all of the trust income in following years will be taxed to you as well. Most donors structure their CLTs in a way that does not yield a current income tax deduction so that they don’t have to worry about income tax issues in the future. In both cases, you are able to provide wonderful support to the Diocese and to pass trust appreciation to your family free of gift and estate tax. We can provide you and your advisors with information that will help you decide which type of CLT will work better for you.

Yes, you may list your grandchildren as beneficiaries. Due to the generation-skipping transfer tax, there are more complications related to a lead trust with grandchildren as beneficiaries than one that passes assets directly to children. Most legal professionals would prefer the use of a Charitable Lead Unitrust if grandchildren are named as beneficiaries.

There is no minimum or maximum term for your Charitable Lead Trust under federal law, although applicable state law may require such a trust to end eventually (typically after several decades). However, if you want to maximize the benefit to the Diocese and minimize transfer taxes, we can help you determine the optimum term to accomplish your goals. Generally, the longer the term, the lower the taxable gift to your remainder beneficiaries and the higher the benefit to the Diocese of Metuchen.

Yes, although the higher the amount the greater the potential tax benefit to you and benefit to your heirs.

A CLT can act as a cash gift to us while providing tax advantaged planning to you and your heirs. Cash gifts may support any of the areas that you are most passionate about at the Diocese of Metuchen.