YOUR ESTATE: STEWARDSHIP AND THE NEXT GENERATION
- Learn the secrets of planning your estate and retirement.
- Build your estate on God's principles.
- Leave your family adequate financial resources.
Stewardship After Death
Key Scripture: . . . man is destined to die once, and after that to face judgment. Hebrews 9:27
Estate planning is an integral part of financial planning and should be started as early as possible. Procrastination characterizes poor stewardship. Basically, estate planning begins with the acknowledgement that someday you will die. Your death will probably occur when you don’t expect it—and you cannot take anything with you. It is therefore of utmost importance that you spend time alone with God, seeking his guidance on how to allocate your resources.
"Sons are a heritage from the Lord, children a reward from him" (Ps. 127:3). The most important reason for estate planning is to provide for the health, education, and welfare of your spouse and children in the event of premature death. During life God provides the finances necessary to establish an estate; civil law provides the legal means to conserve these resources for your surviving family members.
Every year estates are reduced by millions of dollars because of administration and taxes. Much of this shrinkage could have been avoided. Therefore, it is your duty as a good steward to look diligently for deductions or exemptions. Many taxes and fees can either be reduced or completely avoided. Obviously, evading taxes is illegal, but avoiding taxes is perfectly legitimate. Estate planning is essentially redirecting money from the government and lawyers back into your estate. The U.S. Supreme Court has declared it legal to arrange your affairs to reduce taxes to their lowest possible level.
Having a will is an exercise in good stewardship. Yet of all the people who die in the United States, approximately 70 percent leave no will. As a result, those without a will leave the following important decisions to the state:
Who will be in charge of administering my estate?
Who will be the guardian of my children?
Who will receive my property when I die?
Many people believe that if they don’t have a will, their spouse will automatically administer their estate. Usually this is true. But if the spouse does not come forward within a certain amount of time, someone else, even a creditor, can be named administrator. Others leave it to the state to distribute their property after death according to inheritance laws. They do not realize that in all probability—
The state and/or the federal government will assess heavy estate taxes.
The state will not distribute any of the estate to the Lord’s work.
The state may not distribute the estate to the people they would want to receive it.
Reasons for not having a will range from procrastination to indecision to superstition. Many people see a will as something that cannot be changed. But a will is amendable (i.e., you can change it at any time) and is completely revocable.
Intentionally or unintentionally, a will reflects the values of the parents. The method of distribution of the inheritance can actually affect the lives of children, both spiritually and materially, either positively or negatively, for years to come. Therefore, an important decision for anyone writing a will is not only who will receive the estate but how it will be received.
Three Types of Wills
"I Love You" or "Simple" Will. The first spouse to die leaves everything to the surviving spouse.
"A-B Trust" Will. The objective is to keep a portion of the assets in the estate of the first spouse who dies, in order to utilize the "exemption equivalent" of both parties.
"Pour-over" Will. This very complicated will leaves everything to a Revocable Trust that has already been set up.
Probate is the legal process through which your bills are paid and property titles are passed to others at your death. The original system of probate was designed to protect the estate as it was passed on to the heirs. While each state has its own probate laws, these laws have certain common factors: (1) They assume that someone is going to take advantage of an estate; (2) Their procedures are complex, lengthy, and expensive; (3) When a person dies without a will (intestate), probate cannot be avoided; and (4) The state distributes the property according to its own design.
Christians should try to avoid probate because it is:
Time consuming. On the average, the probate process takes one to three years.
Expensive. The national average for probate proceedings is 5 to 10 percent of the propery value with most of the money spent for lawyer’s fees.
A public procedure. Most people prefer that the details of their private lives not be made available to the general public.
Revocable Living Trust
To avoid probate, the revocable living trust is one of the most popular estate planning techniques. A trust is a legal document much like a will in that it distributes your property after death. But, unlike a will, the trust legally avoids the probate process. Since the probate courts do not have jurisdiction over trusts, and because the property held in a trust is not titled in your name, the revocable living trust does not have to go through probate.
There are several reasons why modern estate planners prefer to use a revocable living trust rather than a will:
It conserves the estate for the family as well as any possible gifts for the ministry. Many Christian families donate the savings (5 to 10 percent of the estate) to their church or other Christian organization.
The revocable living trust preserves the personal control of the estate during life. As circumstances change, the trust can be amended with no loss of control over the assets.
It saves the family time and great emotional stress. A living trust is less susceptible to contest by dissatisfied heirs, since it does not require court proceedings for settlement.
Both the trust and the distribution under the trust are private, since the estate does not pass through probate.
A living trust provides more flexibility than a will. When a person with a will moves to another state, the will becomes subject to and governed by the laws of the new state of residence.
The trust provides for an uninterrupted flow of income for the family upon the death of the trustor. It also provides for business continuity.
An important part of any estate planning is to provide for liquidity of some of its assets. During the transition period immediately following one’s death, liquidity provides flexibility by (1) preventing the sale of nonliquid assets, such as the family home, prematurely; (2) paying appropriate taxes; (3) facilitating distribution among several beneficiaries; and (4) allowing a closely held business to continue functioning. Both family and spiritual obligations can be accomplished through an effective estate plan.
Printed below are some of the most frequently asked questions concerning estates:
Q: What does "revocable," in a revocable living trust, mean?
A: Revocable means that the trust can be revoked or amended anytime during your lifetime. This allows for flexibility in managing your trust assets.
Q: Who is trustor (donor, settlor, grantor)?
A: These are legal names given to the person who sets up a trust. Such a sperson is referred to in the trust documents by one of these names.
Q: Who is a trustee?
A: The person or organization managing the assets of a trust is given the legal name of a trustee.
Q: May the trustor also function as the trustee?
A:Most state laws allow the trustor to also be the trustee. A successor trustee should also be named to manage the trust in the event the trustee in unable to manage the trust.
Q:If my assets are not in my own name, but retitled to the name of the trust, do I retain full control?
A: Yes. Serving as the trustee of your own trust or in the case of a husband and wife, as co-trustees if you so choose, you have complete management control of all your assets in the trust. You may freely add to or remove assets from the trust, and you can sell or exchange trust assets at any time.
Q: Is joint tenancy a substitute for a will?
A: No. In some instances it may be useful in addition to a will, but in the event of a common disaster, joint tenancy does not make any provision for asset distribution or guardianship. The laws of the state would prevail.
Q: Do I need an attorney to draw up my will?
A: Yes. It is advisable to engage competent legal counsel for drafting your will in order to include all provisions of your federal and state laws for your benefit.