Can I Give Real Estate to a Charity in my Estate Plan?

Many nonprofits are now encouraging donors to make gifts of non-liquid assets, like cars, boats or real estate. If its thoroughly vetted and properly structured, a gift of real estate can help donors meet their financial planning and philanthropic goals, and at the same time give charities a new source of funding.

Real estate holdings account for a major part of the assets in U.S. households. However, just a small proportion of charitable contributions are land or buildings. Many individuals with real estate holdings may want to consider donating their property to charity, instead of selling the property themselves. That’s particularly true, if they want to minimize taxes or generate retirement income.

The fact that many real estate gifts are more complex and cost more for charities to process and manage than cash donations, means that it’s important to think about donating to charitable organizations that have developed a clear set of gift acceptance policies and have the necessary procedures in place to accept a gift of real estate. As a prospective donor, you should look for policy guidelines that detail the kinds of properties that will and won’t be accepted. Perhaps the charity only accepts commercial or undeveloped land.

It is also important to look for the types of estate planning tools donors are allowed to use when making these gifts. These tools can include charitable remainder trusts, charitable gift annuities and retained life estates. You should also see if there are any stipulations on the charity’s acceptance of properties that come with mortgages or other risk factors.

Once a real estate gift has been approved on a preliminary basis by a charity, the donor may then be required to provide additional information about the property. This “due diligence” phase may include a title search, assessments of the local market and environmental conditions, a professional inspection and a site visit by the organization’s representative. It is customary for the charitable organization to defray the costs of conducting these studies.

After the due diligence has been finished, and the charity has agreed to accept the gift, the donor will be notified of the results of the investigations, and of the plans for how the final transfer of the property will take place.

This type of donation can offer many advantages to donors, including generating income, deferring or lowering taxes and decreasing the expenses of property maintenance.

Be sure to consult your estate planning attorney to discuss real estate contributions to charities.

Reference: TC Palm (November 8, 2018) “Donation of real estate is nice form of charitable giving”

A Four Decade Retirement Plan? Here’s How

Not everyone gets the good genes or good fortune that has Orville Rogers flying around the country to attend master’s level track meets, but he is an inspiring example to follow. Money describes Rogers in a title that says it all: “This 100-Year-Old Has Been Retired for 40 Years, Has a Healthy Savings Account and Is a Track Champion. Here’s His Impressive Path to a Rich Retirement”

Longevity in savings that aligns with his years is a powerful force. He started saving in 1952, 25 years before the creation of the retirement savings plan, we know today as a 401(k). Back in the day, companies provided their employees with pension plans and those without a pension plan lived on Social Security when they retired. Life expectancies were shorter, so you didn’t need quite so much money. Rogers was born in 1917, and his peer group’s life expectancy was about 48.4 years old.

By saving for retirement and using his downtime between flights to educate himself about money, he started investing and says that his account is now worth around $5 million. He says he wasn’t particularly frugal either and supported his church and other Christian causes throughout his life. However, he had time on his side, making periodic investments over an extended period of time.

Another practice that extends life: exercise. Rogers took up running at age 50 and hasn’t stopped yet. Studies have shown that anyone, at any age or stage, is helped by a regular schedule of physical activity, tailored to your personal needs. Even people who are wheelchair bound and living in a nursing home can benefit from a chair exercise program. Among older seniors, the ability to walk a quarter mile (one lap around a track), is linked to better health outcomes.

Until recently, Rogers ran five to six miles a week. He’s in rehab now and working his way back to his prior running and training schedule.

When you live as long as Rogers has, you outlive a lot of family members and friends. Rogers moved into a retirement community two years after his wife died, making new friends because, as he says, “… if I don’t, I’d have none left.”

Faith has also been a strong force in his life over these many years. At 98, he wrote a book, The Running Man: Flying High for the Glory of God. When he was starting out in his retirement years, he flew church missions in Africa.

“I’m enthusiastic about life,” Rogers says. That kind of inspiration is a lesson to us all.

Reference: Money (Nov. 2018) “This 100-Year-Old Has Been Retired for 40 Years, Has a Healthy Savings Account and Is a Track Champion. Here’s His Impressive Path to a Rich Retirement”

How Do I Set Up a Trust?

Trust funds are often associated with the very rich, who want to pass on their wealth to future heirs. However, there are many good reasons to set up a trust, even if you aren’t super rich. You should also understand that creating a trust isn’t easy.

U.S. News & World Report’s recent article, “Setting Up a Trust Fund,” explains that a trust fund refers to a fund made up of assets, like stocks, cash, real estate, mutual bonds, collectibles, or even a business, that are distributed after a death. The person setting up a trust fund is called the grantor or settlor, and the person, people or organization(s) receiving the assets are known as the beneficiaries. The person the grantor names to ensure that his or her wishes are carried out is the trustee.

While this may sound a lot like drawing up a will, they’re two very different legal vehicles.

Trust funds have several benefits. With a trust fund, you can establish rules on how beneficiaries spend the money and assets allocated through provisions. For example, a trust can be created to guarantee that your money will only be used for a specific purpose, like for college or starting a business. And a trust can reduce estate and gift taxes and keep assets safe.

A trust fund can also be set up for minor children to distribute assets to over time, such as when they reach ages 25, 35 and 40. A special needs trust can be used for children with special needs to protect their eligibility for government benefits.

At the outset, you need to determine the purpose of the trust because there are many types of trusts. To choose the best option, talk to an experienced estate planning attorney, who will understand the steps you’ll need to take, like registering the trust with the IRS, transferring assets to the trust fund and ensuring that all paperwork is correct. Trust law varies according to state, so that’s another reason to engage a local legal expert.

Next, you’ll need to name a trustee. Choose someone who’s reliable and level-headed. You can also go with a bank or trust company to be your trust fund’s trustee, but they may charge around 1% of the trust’s assets a year to manage the funds. If you go with a family member or friend, also choose a successor in case something happens to your first choice.

It’s not uncommon for people to have a trust written and then forget to add their assets to the fund. If that happens, the estate may still have to go through probate.

Another common issue is giving the trustee too many rules. General guidelines for use of trust assets is usually a better approach than setting out too many detailed rules.

Reference: U.S. News & World Report (November 8, 2018) “Setting Up a Trust Fund”

When Do I Need a Financial Power of Attorney?

A financial power of attorney is a document that provides a trusted individual with the authority to act on your behalf. The person who creates a power of attorney is called the “principal, and the person who receives this authority is called their “agent” or “attorney-in-fact.”

The Brainerd Dispatch recently interviewed Minnesota Attorney General Lori Swanson in its article, “Guest Opinion: Your legal rights – Financial powers of attorney.” The Attorney General explains that this person doesn’t have to be an attorney, but it should be someone the person trusts. This person should be responsible, honest and diligent.

A power of attorney is required to be in writing, signed before a notary, dated and clear on what powers are being granted by the principal (i.e., the person having the document prepared). If you want to make the power of attorney durable, meaning you want it to last even if you become incapacitated, then the document must have a statement like: “This power of attorney shall not be affected by incapacity or incompetence of the principal.”

You should talk to a lawyer when creating a power of attorney to be certain the power of attorney is drafted in a way that aligns with your wishes and with state law.

When creating a power of attorney, you must decide on the degree of authority you want your agent to have over your affairs. A general power of attorney gives your agent the ability to act on your behalf in all affairs.  However, a limited power of attorney grants your agent this authority only in certain circumstances.

A power of attorney is a wise move for every adult American, because each of us may become unable to manage our own financial affairs or make other decisions. Here are some examples of powers you can give to your agent:

  • To use your money to pay your everyday living expenses;
  • To manage benefits from Social Security, Medicare, and other government programs;
  • To conduct transactions with your bank and retirement accounts; and
  • To file and pay your income taxes.

A principal can revoke a power of attorney. A mentally competent person can remove a power of attorney at any point with a signed document. If a power of attorney isn’t removed, it ends with the principal’s death.

Note that some banks and investment firms have their own power of attorney forms. Preparing these organization-specific forms may make it easier for your agent to work with certain organizations with which you do business.

Reference: Brainerd Dispatch (November 20, 2018) “Guest Opinion: Your legal rights – Financial powers of attorney”

Where Do I Start as an Executor if There’s a House in the Estate?

Handling an estate can be a monumental task. The Greater Baton Rouge Business Report explains the details in its article that asks “So you inherited a house … now what?

For instance, an executor’s immediate worry might be the safety of the house. One of the first questions an heir might ask, is whether there’s a security company involved that has a contract for monitoring. If so, contact the company to see where to call should there be a security breach and change the security passwords. Another suggestion is to change the locks on the house, because who knows who has been given keys to the home over the years. Siblings might want to place valuable items in safety deposit boxes or remove them from the house, as soon as they can.

The key to this entire process among heirs is communication. Keep everyone up-to-date. This alone will reduce the risk of misunderstanding, mistrust and frustration in the family.

Different interests among siblings often creates tensions after inheriting a house. A house may have sentimental value to the heirs, but the executor must stay objective about the situation. Reducing the house to cash by selling it and dividing the proceeds, typically makes the most financial sense.

It’s costly to maintain a house in an estate and insurance and court proceedings can also be expensive. Come to an up-front agreement on terms of the sale, when drafting an estate plan, because disagreements among siblings can sometimes lead to costly and lengthy court proceedings.

Heirs might decide to keep a house, especially if it’s a beach house or mountain retreat. You’ll then need someone to be the manager. One way to accomplish this is to establish a limited liability company (an LLC) with the other heirs. This gives the heirs a more stable, corporate management structure, while allowing for more flexibility. Place a year’s worth of cash to cover of expenses into the LLC and sign an agreement between heirs that states what happens with repairs, renting the property and other scenarios.

If you do sell, the sooner you sell it and the closer to the time of death, the less likely you’ll have to pay taxes on any appreciation since the time of death and have to worry about what the value was at the date of death. Inherited assets get a new tax basis, known as the date-of-death value. Use a qualified real estate appraiser to value the property, because the beneficiaries need to know the house’s most recent value to calculate capital gains tax later, should they choose to sell it.

Reference: Greater Baton Rouge Business Report (November 13, 2018) “So you inherited a house … now what? Here’s some advice

How Seniors Can Improve Their Health in the New Year

After the holidays, you might be looking for ways to focus on your health and well-being. It is fine to enjoy the holidays, but if we continue to indulge ourselves throughout the year, we can be setting ourselves up for fatigue, low energy and a weakened immune system. Let’s make a plan to feel better in 2019.

Here are some tips on how seniors can improve their health in the new year.

Get Back to Good Nutrition

You gave yourself permission to nibble on the tasty morsels that accompany the holidays. As the years go by, you might find that some of your favorite treats leave you feeling less than jolly. You are not alone. As we age, some of the things that change include:

  • The metabolism gets less efficient, so it is harder to keep off excess weight.
  • The digestive tract becomes less tolerant of things like spicy or rich foods.
  • You might experience dehydration.
  • The immune system can weaken.

Not to worry, you can take control of all of these facets of aging. Work with a nutritionist to set up some guidelines and meal plans tailored for your situation, including any medical conditions you have and all supplements or prescription drugs you take.

If you prefer to approach this issue DIY, the “old school” advice still works. Eat more fresh vegetables and fruit, whole grains and lean protein. Drink plenty of water, and reserve processed and junk food for special occasions.

Stay Physically and Socially Active

Few things are better for your health, than getting off of the sofa and out of the house. Although it is tempting to become sedentary if your arthritis hurts, your diabetes makes you feel low energy and you have ongoing aches and pains, getting regular activity can improve how you feel. Talk with your doctor about your options for “gentle” exercise, like walking and swimming.

Call your local park system, fitness facility, or community or senior center for information about their programs for seniors. Make sure you ask about their 55+ discounts.

Many people become socially isolated after retiring, particularly if most of their friends were people from work. If you find yourself in this situation, you have two options: keep in touch with your old friends from work or make new friends. Some experts suggest that staying engaged socially can help to stave off Alzheimer’s disease and other forms of dementia.

Go to the Dentist

Your tooth enamel gets thinner as you age, so your risk for cavities increases as you get older. Dentists also advise that your likelihood of having a stroke, heart disease and diabetes has a connection to infections in the mouth. Catching and treating oral problems can protect your overall health.

Do Something New and Different

One of the best ways to maintain your ability to process information, think clearly and perform cognitive functions is to challenge the “little gray cells” with new activities on a regular and ongoing basis. Read books that you have never read before. Shake up your daytime, evening and weekend routine every now and then. Listen to a different genre of music for a few days. Take up a new hobby. All of these activities can help you to stay sharp and independent.

Your state’s regulations might differ from the general law of this article, so you should talk with an elder law attorney in your area.

References:

A Place for Mom. “10 Healthy Habits for Seniors to Keep.” (accessed November 15, 2018) https://www.aplaceformom.com/blog/11-5-14-healthy-habits-for-seniors/

I Was Left Out of a Will—What Can I Do?

It’s a stinging feeling. To be left out of a will feels like a rebuke from beyond the grave. You’ll need to set aside your emotions and consider your options, which may be limited.

Contested wills are not an easy battle. There are time limits to taking action. An estate planning attorney will be able to advise you on the requirements of your state. Investopedia’s article, “What To Do When You're Left Out Of A Will,” explains that you’ll need to be able to prove outright fraud, diminished mental capacity or coercion to have a will's terms dismissed.

GavelBefore making a federal case out of it, cool down for a few days and think things through. If you aren’t a family member and were never named in a previous will, you can’t contest the will. If the deceased talked to you about an inheritance before, write down as much as you can remember and estimate the dollar value (whether in money or possessions). If it was never discussed but was implied, you’ll need to give a high and a low estimate on what you could have reasonably received based on your knowledge of the estate. If this amount doesn’t cover your legal fees, forget it. You may even walk away, if it’s twice as much as the retainer because some estate battles cost more in legal fees than the inheritance. Again, consider this carefully.

The person who creates the will has the final word on who is and who is not in the will. If you have reason to believe that the will has changed, maybe because the person was under duress or suffering from diminished mental capacity, you can try to find out the details. You can ask the executor for the current will, any previous versions and a list of assets.

A sharp executor will compare copies of the will and note any significant changes. Therefore, it’s possible that a notice from the executor will be your first signal that you were removed from the will. If you aren’t told before the will goes to probate, you’ll be able to get a copy from the probate court. In addition, you’ll be told how long you have to contest the will. Each state has different rules and time limits, so ask a local estate planning attorney to help you get the copy and file the contest.

To contest the will, you need a valid reason. You need to reasonably prove that the testator lacked the mental capacity to understand what he was doing when the current will was signed, was pressured into changing it or that the will fails to meet state requirements and isn’t legal.

Your attorney will honestly tell you if you have a winnable case on these grounds. If you don't have grounds, there’s still a chance you can make a claim on the estate. For instance, if you did unpaid work for the testator, you may be able to claim costs. Again, look at the value of the claim versus the costs of moving forward.

With sufficient grounds, your attorney will file a contest against the will with the objective of invalidating the current will and enforcing a previous will that lists you as a beneficiary. If you’ve been left out of several revisions of the will, your chances of winning the dispute will be less because multiple wills must be invalidated. The burden of proof is on you, so be ready for a tough fight.

Instead of a court battle that will deplete your finances and those of the estate in legal costs, your attorney may be able to get the estate to agree to mediation. Mediation may be a better and faster resolution than a lengthy court battle.

Keep in mind that an estate contest comes with a great deal of emotional stress and could have a big impact on your relationship with family members or friends of the deceased. It is not easy to be left out of a will, but a realistic look at the financial and emotional cost of a battle that you may or may not win should be considered before throwing yourself into an estate contest.

Reference: Investopedia(May 31, 2018) “What To Do When You're Left Out Of A Will”

What Will Happen to Paul Allen’s Vast Fortune?

The co-founder of Microsoft serves as an excellent example of advance planning, maintaining privacy and creating a legacy.

Though a trust established years ago and several companies, Paul Allen began building his legacy of philanthropy long before his death. His last will and testament was a simple six-page document, according to an article from The Seattle Times, “Paul Allen’s will sheds little light on what will happen to estate.”

Paul_allen_bhudlnThe will was filed with King County on October 24—the same day his sister Jody announced she was named the executor and trustee of his estate.

Allen died on October 15 at age 65, from complications of non-Hodgkin lymphoma.

He was a Microsoft co-founder, who operated a long list of business and philanthropic initiatives that helped shape the Puget Sound region. His business concerns included owning the Seattle Seahawks, donating significantly to the arts community and scientific research, and running the multifaceted Vulcan Inc., which reshaped the real-estate landscape of South Lake Union.

Allen’s will places his assets into a 25-year-old living trust, where their disposition is not expected to be made public. It is important to remember that wills are public records, but trusts are not.

Forbes estimated his wealth at roughly $20 billion.

The will also sets out a list of successors, if Jody Allen declines or is unable to serve as executor.

Jody can appoint someone, or it would next fall to Nancy Peretsman, the managing director of investment firm Allen & Co., which is not connected to Allen. After him, the duty would fall to lawyers Allen Israel and Nicholas Saggese.

Jody Allen said in October that she “will do all that I can to ensure that Paul’s vision is realized, not just for years, but for generations.”

Many tributes to Allen have taken place since his passing. In early November, buildings in Seattle and throughout the state were lit up in blue, his favorite color and the color of the Seattle Seahawks, the football team he owned.

Reference: The Seattle Times (November 8, 2018) “Paul Allen’s will sheds little light on what will happen to estate”

Spiderman Creator Stan Lee’s Estate Needs Untangling

It’s going to take more than a super hero to unravel the mess that Stan Lee left behind.

The passing of Stan Lee, famed Marvel Comics publisher and chairman, was sad for his legions of fans. For his 68-year-old daughter J.C., there’s grief and a challenging estate to be settled. His last years were hard, with ill health, the passing of his wife of nearly 70 years and accusations of sexual harassment from nurses and home aides.

Stan LeeIn addition, Lee reportedly said that $1.4 million dollars was missing from his bank accounts and that a large chunk of the money had been used to purchase a condo.

MarketWatch’srecent article, “Stan Lee’s tangled web of estate planning and how to avoid it in your own life,”reports that Lee had also hired and fired several business managers and attorneys in this time.

“I learned later on in life, you need advisors, if you’re making any money at all,” he told the Daily Beastin a 2018 interview. He also remarked that he’d done much of his own money management at the start of his career.

“But then, a little money started coming in, and I realized I needed help. And I needed people I could trust. And I had made some big mistakes. And my first bunch of people were people that I shouldn’t have trusted.”

It’s not known at this point, if Lee had a will or any trusts in place. If he did not, then he’s joining other late celebrities like performers Aretha Franklin and Prince who failed to draft these documents. As a result, their heirs and potential beneficiaries have had to go to court to straighten things out.

Keeping track of an estate plan can become harder as a person ages, because he or she could suffer cognitive decline, or a professional or family member may think he or she is suffering from this. Stan Lee was the subject of this type of inquiry: in February, he signed a document declaring that his daughter spent too much money, yelled at him, and befriended three men who wanted to take advantage of him, the Hollywood Reporterreported. However, a few days later, Lee took it back.

Seniors can become get less confident in what they’re doing, and they are more susceptible to the influence of others who may not have the best of intentions. However, you can easily create an estate plan with which you’re comfortable, with the help of an experienced estate panning attorney.

A big rat’s nest that will need to be addressed by Lee’s daughter will be dealing with the many business documents that may be floating around from his current and past business managers and attorneys. To avoid this, work with an estate planning attorney and ask some specific questions, such as:

  • How do we organize and simplify my assets?
  • Will we need a trust, and how will they be managed?
  • How will you coordinate with my executor and/or attorney-in-fact while I’m well, and after I’m sick or gone?
  • How do you determine cognitive decline in an individual? What would you do, if you believed my ability to answer questions and manage my funds was diminished? What would you do once you’ve made this decision?
  • How often will we review my beneficiary designations and estate planning documents?
  • How should we coordinate a team of financial and legal professionals to make sure all are working towards the same goals?
  • How much or how little information about my estate should be discussed with family members?

Reference: MarketWatch(November 17, 2018) “Stan Lee’s tangled web of estate planning and how to avoid it in your own life”

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