- If you don’t have a financial plan you won’t have enough to live on in retirement nor assets to bequeath to your heirs. Having a will without a financial plan is like having a backyard swimming pool but no water. Nice, but not much use.
- Planning and signing a will is great, but if most of your assets pass based on title (e.g., a home owned jointly with a child), or beneficiary designation (e.g. an insurance policy or IRA), or account title (a POD or ITF bank account) your will might be well crafted but not much more useful than the empty swimming pool.
- If you have a great overall plan but inadequate liability insurance, your financial future could be jeopardized by a significant car accident with damages in excess of your auto policy.
- Legitimate earnings from activities that are consistent with your values – robbing a bank to build your wealth hardly seems an ideal track.
- Paying your fair share of taxes – tax planning is great, cheating is not.
- Budgeting – do you spend your income in a manner consistent with your values? Are you overly influenced by ad campaigns and other “values?” Do you budget for charitable causes, whether as a tithe or perhaps larger donation?
- Investing – you can also invest in mutual funds that are consistent with your religious, social or other values.
- When should you give your wealth? Most people presume estate planning focuses on the transmission of wealth on death, but that is far too narrow a perspective and can be contrary to fundamental goals you have. You should support or help people, causes and institutions important to you during your lifetime as well. How much wealth you will have to distribute on your death will be directly affected by your generosity while you are alive. Planning is critical to properly balance competing goals. If you live to an advanced age you don’t want to run out of money so you need to plan to assure that. Once your core financial goals are assured you can give charity, support children, and more during your lifetime. “I…give a tenth of all I get.” Luke 18:12. How much do you want to give to charity each year? How much on your death? Some use a 10% figure based on the Biblical concept of tithing. But a tithe was, according to some views, a percentage of income, of a year’s agricultural crop. It was not correlated to principal or wealth. But consider: “Every tithe of the herd and flock—every tenth animal that passes under the shepherd’s rod—will be holy to the Lord.” Leviticus 27:32. Thus, some choose to give more, much more. Another approach used by many is to treat charitable causes as an additional child. If they have four children they divide their estate into fifths, giving each child one-fifth and the charitable causes they wish to support the final fifth. Consider: “Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.” 2 Corinthians 9:7.
- How should you give? The options of what and how you can give can be quite broad as well. While writing out a check is the most common means of giving, there are a myriad of options. You can donate appreciated securities, give a life estate in a home or farm, buy life insurance and name a charity as owner and beneficiary, and much more.
- Which charities do you wish to support? Will your donations be outright gifts for the particular charities general purposes or will you create a donor agreement with the charity to assure that the donation will be applied for a specific purpose?
- How much of the resources you can afford to give each year will be given to charity or used to assist children, family and loved ones? Is there a limit on how much should be given to children or other loved ones? Will the additional gifts help or harm, motivate or disincentivize the donee? Is there such a thing as giving too much?
- How much should be given today, or next year versus retained until your death?
- What are your goals and objectives for the largess you wish to show each charity, cause or loved one? How can you best accomplish those goals?
- Include a bequest in your will (even if not optimal from a tax planning perspective) to demonstrate the importance of charity, giving back to society and the values you wish your heirs to see. Consider an explanatory sentence as illustrated above.
- Write an ethical will, a detailed letter of thoughts and instructions to your heirs. Express and reinforce the values you wish for them.
- If you have the financial resources create a more significant charitable program. For the wealthiest this could entail forming a private foundation and actively involving your children in the charitable planning and distribution decisions. If your means are more limited but you want to leverage a large gift to demonstrate your commitment consider life insurance. If you are young and health you can purchase a very substantial life permanent insurance policy to be owned by and to benefit a charity you select. The dollar amount of the policy can be very substantial relative to the annual cost.
- Don’t forget that how you lead your life is also a testament to the values you wish for your heirs. Consider: “Each of you should use whatever gift you have received to serve others, as faithful stewards of God’s grace in its various forms.” 1 Peter 4:10.
- Living Will (statement of health care wishes).
- Consider including a general statement of your Christian beliefs in the introductory (“recital”) clauses of your living will in order to establish a general framework for the tone and interpretation of the document. This could vary significantly depending on your specific beliefs and faith. The following is but one possible example of language that might be considered: “The well-informed, loving local body of Christ can be a vital means of life support. If I am very ill, whether or not terminal, it is my wish that the Christian community—pastoral counsel, godly friends, chaplains, the local church—serve to the extent feasible as a guiding force during my illness and especially towards the end of my life. A loving surrogate, if I have designated a health care agent in a separate document, and if not those assisting in my care, empowered by pastoral counsel, prayer, the Holy Spirit, medical information, and knowledge of my wishes will be my safe hope.”
- The focus of many living wills is to communicate a desire of the signer not to have heroic medical measures taken in extreme circumstances. The definitions of the terms like what constitutes “heroic” measures what are “extreme” and how should those and other terms be interpreted in accordance with your Christian faith? You should provide guidance in your document as to all these essential concepts. Also, be very careful not to assume any “form” comports with either your personal or religious wishes. Be certain to read and modify any language to conform it appropriately. Consider the following: “No Heroic Measures’ in accordance with Christian Traditions and Beliefs. I expressly request that all decisions be made within the moral framework of Christian traditions. If I have an incurable or irreversible, severe mental or severe physical condition; am in a state of permanent unconsciousness or profound dementia; am severely injured; and in any of these cases there is no reasonable expectation of recovering from a severe, permanent condition, and regaining any meaningful quality of life, then in any such event, it is my desire and intent that heroic life-sustaining procedures and extra-ordinary maintenance or medical treatment as understood in accordance with Christian moral traditions, may be withheld and withdrawn. It is not my desire to prolong my life through mechanical means where my body is no longer able to perform vital bodily functions on its own, and where there is little likelihood of ever regaining any meaningful quality of life. The condition and degree of permanent illness, injury, disability or accompanied by pain such that the average Catholic person might contemplate, in the moral tradition of the Church, the decisions addressed herein (regardless whether such person would make the decisions I have made herein). In any such event, I direct all physicians and medical facilities in whose care I may be, and my family and all those concerned with my care, to refrain from and cease extraordinary or heroic life-sustaining procedures and artificial maintenance and/or medical treatment, as understood in a manner that is consistent with Christian moral traditions. The procedures and treatment to be withheld and withdrawn include, without limitation, surgery, antibiotics, cardiac and pulmonary resuscitation, ventilation or other respiratory support.”
- The withdrawal of nutrition and hydration is one of the most emotionally and religiously charged decisions in a living will. The variables that should be considered, both medically and religiously, are quite complex. Be especially careful not to simply sign any “standard” form without reading and confirming that this particular provision incorporates your wishes. Consider: “Generally I do not believe that the Bible permits the withdrawal of nutrition and hydration and as such, the presumption for my care should be not to withdraw nutrition or hydration unless that decision and its implementation are both confirmed as within the spectrum of Christian religious beliefs. By way of example and not limitation if I am in a persistent vegetative state, and it is determined that it is acceptable to withdraw tube feeding, efforts should be made to feed me food and fluids by mouth so that withdrawal of the tube feeding is not a per se active step to terminate my life.”
- How should the provision of pain relief be handled? For many secular people the avoidance of pain is the paramount objective. For some, the use of increasing doses of pain medications can be used as part of an intentional effort of euthanasia. From your Christian perspective, how should the provisions of pain relief, a possible desire for mental clarity to participate in end of life decisions or prayer, and these decisions be dealt with. Consider: “I wish to have pain relief to the extent permissible in accordance with Christian religious principles. I wish that all treatment and measures for my comfort, and to alleviate my pain, be continued, so long as they do not actively hasten the onset of death. I recognize that the alleviation of suffering is a value in the Bible, but that the Bible also points out suffering’s redemptive nature. I request that discretion be used to balance these objectives to the extent feasible.”
- How should the issue of organ donations be addressed? “To exit the body is to be present with the Lord.” 2nd Corinthians 5:8. Once death occurs, there is no attachment or religious restriction, it is a personal preference. It is permissible in accordance with some Christian beliefs to donate a body for science. The cessation of brain stem function, as a definition of death, is acceptable under some Christian doctrine. If so, there should be no issue of harvesting organs. This entire area is subject of many different views. Be certain to review these issues and modify your document accordingly. If you believe it is acceptable to be an organ donor also sign an organ donor card.
- Be certain to address funeral and burial decisions. Don’t assume that your family “knows.” Too often in the emotional turmoil of the loss of a loved one different people remember different things and there are few more emotionally charged issue over which conflict should be avoided than how or where to bury a loved one. The Bible does not specify details about cremation and caskets. God will reform the body in the second resurrection. Consider the following as one of several provisions that you might add to your living will: “I do not wish my family to incur exorbitant costs on my funeral. My belief is that following my death I will be with the Lord and therefore my family should take whatever measures for my funeral, burial and other arrangements that provide them the most solace, including a religiously appropriate funeral ceremony, that are financially reasonable.”
- Health Care Proxy (designates a person to make medical decisions if you cannot).
- This document often is more legalistic in nature and defers to your living will concerning religious and similar personal decisions. Do give careful consideration to who you name as agent to be certain that the agent named, and the successors if that agent cannot serve, will understand and respect your religious convictions.
- Power of Attorney (authorizes a person, your agent, to handle tax, legal and financial matters if you cannot).
- Many standard powers of attorney only authorize the agent to provide for the support of you, the principal or grantor who creates the document and appoints the agent. If you have family, friends or others who you have cared for, be certain your agent is authorized and perhaps even directed, to continue to help them. “The Agent is further authorized and directed to provide for the health, education, support, and maintenance of Principal’s spouse, and Principal’s children (whether or not such children are minors or dependents, and even if above the age of majority), and [List Other Names] in accordance with an ascertainable standard as defined in Code Section 2041 and the Regulations thereunder. Principal recognizes that such transfers to or for the benefit of persons other than Principal may constitute gifts and authorizes that such transfers be permitted and that such transfers not be restricted by the provisions below under the caption “Gifts”. In the event that such transfers are deemed to constitute gifts under applicable State law, then the “Gift Rider” below shall govern to such extent to authorize such transfers.”
- By law if your power of attorney does not expressly authorize charitable giving your agent may have no authority to do so. If philanthropy has been a part of your life why should it end if you are incapacitated? Consider providing the authority to make contributions and guidance as to the types and amounts of contributions. “My agent may consider continuing my historical pattern of charitable giving to charities I have previously made gifts to, and in amounts not in excess of those I have previously given. I suggest but do not require that the agent endeavor to continue annual gifts that have been part of my regular charitable donations.” Perhaps you have tithed in prior years, if so you might direct or at least authorize your agent to continue to do so. “While I have traditionally tithed 10% of earnings to [List charities], I suggest that my agent continue to do so if feasible, but that in making such determinations my agent also consider the financial impact of continuing such tithing in light of my changed financial condition if I am incapacitated.”
- One type of donation that can be beneficial is to form a charitable remainder trust (“CRT”). This is a trust that can sell appreciated property, defer the capital gain, pay an annuity or unitrust amount to you the donor for a period of years or life. It can even include payments to a spouse or children after your death for their lives or a specified number of years. Because a CRT can incorporate both gifts and donation elements your agent will need to expressly be authorized to make such gifts. In addition to authorizing transfers to CRTs you might wish to provide for amounts larger than your historic gift pattern and perhaps to specify which charities or the types of charities to which this can be done. For a CRT to qualify for income tax purposes the charitable beneficiary must receive not less than a 10% interest, and since most gift annuities contemplate a 50% donation of the principal to charity, these may all have to be addressed separately in the provisions of your power of attorney that address donations. Gift annuities are noted here because in their minimum format many people view them as investment decisions, not gift decisions. However, in light of that considerable restrictions are placed on the Agent’s powers herein. “I authorize my agent to make transfers of assets of up to [Indicate Amount] Dollars to a Charitable Remainder Trust (“CRT”) and/or for the purchase of charitable gift annuities for which the periodic annuity payments shall benefit [List names of people], but no other beneficiary, with charitable remainder beneficiaries including only charities to which Principal has a history of charitable gifts. In the case of a CRT the aggregate interests of the remainder charitable beneficiaries at initial funding shall not exceed the minimum required to comply with applicable federal tax law. In the event that such transfers are deemed to constitute gifts under applicable State law, then the “Gift Rider” below shall govern to such extent to authorize such transfers.”
- Will (distributes your estate and appoints a guardian, if you use a revocable trust, your will pours assets into your trust and is referred to as a “pour over will”).
- If you rely on your revocable trust as your primary dispositive document than each of the points noted below should appear in your revocable trust and not in your will. It is generally not advisable to repeat provisions in two different documents because of the potential risks of inconsistency and the confusion that might create.
- Make charitable bequests. Bear in mind that since so few people are subject to an estate tax under the current tax laws there may be no tax benefit from doing this. As such, you might authorize the agent under your power of attorney to pay the bequests while you are alive to garner an income tax deduction. If this is done the agent should obtain a written acknowledgement from the charity that the donation is in lieu of the bequest (called an “advancement”). Charitable bequests, as discussed in the beginning of this article, can and should be used to not only benefit charities important to you, but to demonstrate your values, to your heirs.
- Name guardians for minor children if applicable. Be certain that you name guardians with careful consideration to the religious values they have so that your children will have the environment and nurture you wish for them.
- If you create trusts for heirs (which is often advisable) be certain to name trustees that also share your Christian views of wealth and consumption. Consider including the right for the trustees to distribute money to your heirs so that the heirs can make charitable gifts. If this is not expressly provided for it may not be feasible for the trustees to do so.
- If you have family, friends or others you have helped financially you might continue to provide for them after your death by creating what is often referred to as a sprinkle or “spray” trust. This is a trust with various beneficiaries and the trustees are authorized to make distributions among the class of beneficiaries in their discretion. This can be a flexible way to assure that your primary beneficiary, e.g. a spouse, is provided for, but to permit if the trust’s financial status permits, and the needs remain, the trustee to help others you wish to provide for.
- Revocable Living Trust (protects you during disability, avoids probate, distributes your estate).
- If you incorporate a revocable trust into your planning then the points noted above concerning your will should be addressed in your living trust.
- Irrevocable (Insurance) Trust (keeps insurance or other assets out of your estate, protects insurance or other assets from creditors and preserves the proceeds for heirs, can serve to minimize state and even federal estate taxes)
- See the comments above under wills concerning charity, beneficiaries and more.
Christian Estate Planning
By: Pastor Chris Edmondson and Martin M. Shenkman, Esq.
What is Estate Planning?
First, let’s define “estate planning” since it is commonly defined too narrowly. Estate planning almost always involves a will, but a will is often only a small part of the process, and often not the most important step. Estate planning does include planning for one’s demise, but it should include so much more. So what is “estate planning?” It should be the process of coordinating all relevant aspects of your financial, retirement, later life (e.g. planning for aging), disability, death and post-death planning. Consider:
What you need is a comprehensive plan that fits your circumstances. Like the three bears, your planning should not be more costly or complex then you need, nor should it be less comprehensive then is safe for you and your loved ones. Your plan should be “just right.” Rarely will a “canned” or “standard” plan do the job. Nor will replicating what your neighbor or friend did, work for you.
What is Christian Estate Planning?
With a definition of “estate planning” we can now explore the concept of how an estate plan can be “Christian.” Each component of your plan can embody your Christian values, beliefs and lifestyle. Let’s start with a simple but profound thought. Estate planning should not merely be about the transmission of wealth, but about the transmission of values. If you accept that premise simple steps can transform what might be a great tax, legal and financial estate plan, into a plan that can demonstrate to your heirs the importance of our Christian values.
Example: Add to your will a bequest to an organization that has been to your life, or which embodies the values you hold dear. “I give and bequeath $10,000 to oneChurch, located in Clarksville, TN.” Making a charitable bequest to a Christian organization is a wonderful way to demonstrate the importance of charitable giving, Christian values, priorities and more for your heirs. But, with a modicum of additional effort you can perhaps emphasize those values even more. What if the will included the bequest written in the following manner: “I give and bequeath $10,000 to oneChurch, located in Clarksville, TN, to demonstrate to my children the importance of the Christian value of charity, and the importance of the Church in my life, with the hopes that each of my children establish a similar bond with the Church.” Write a letter of final instructions, often referred to as an ethical will, to your heirs. Explain to them your connection with the Church, how the Christian concept of stewardship over assets is carried out by making a bequest in your will to compliment the philanthropy during your lifetime. An ethical will can complement and expand on a simple bequest in your will to create a profound educational point for your heirs.
A Little Dab will do Ya
Remember the old Brylcreem hair care slogan? “A Little Dab’ll Do Ya!” That’s a great paradigm for your estate planning.
Each aspect of your financial, retirement, insurance, death (dispositive scheme) and post-death (e.g., trusts for heirs) can all be imbued, to the extent you wish, with the same Christian values that you live now. This process will not require a different type of financial plan, or a unique type of legal document, merely a bit of tailoring, a little dab, to each step and document in the traditional or typical estate planning process. Small changes, however, can make a tremendous impact to you, your Church, causes you believe in, to your family and your heirs. Each change can be planned and implemented to be consistent with your particular beliefs and wishes. The example above, of a bequest to a charity of your choice in your will, with an accompanying statement of intent to assure your heirs understand the meaning of the bequest, is a minor change, an additional sentence or two, but can have a profound impact in transmitting values, not merely wealth. The focus of this article will be to identify these often small modifications that can help you in this process. The result will be your Christian estate plan.
Christian Financial Stewardship
The concept of stewardship stems from a simple premise: “The earth is the Lord’s, and everything in it.” Psalms 24:1. We are not the owners of wealth, merely the stewards of it for the time we have.
17 You may say to yourself, “My power and the strength of my hands have produced this wealth for me.” 18 But remember the Lord your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors, as it is today. Deuteronomy 8:17-18.
You have or will spend much of your lifetime accumulating wealth. Accumulating wealth certainly should be achieved with due regards to your Christian values. Every component of your financial life can be intelligently planned and can also be implemented in a manner consistent with your values. Consider:
How you ultimately dispose of or distribute the wealth you have accumulated during your lifetime is the final act of proper financial stewardship and should be done with as much care and attention as you marshalled to accumulate your wealth in the first place. This broadly includes gifts during your lifetime (to family, friends and charity), and how your assets are distributed on your death (whether under your will, by beneficiary designation, account title or otherwise). This component of your estate plan should be carefully and thoughtfully planned.
Christians have received riches of God’s grace, and are to respond with generosity and giving. Christians are called to a life of service, sharing and stewardship. We have an obligation to do good. When we give ourselves to the Lord, we will give generously. Jesus often taught about money. “Sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me,” said Jesus to a rich man (Luke 18:22). He said the same thing to his disciples (12:33). The new covenant demands all that we have, and that is fair, since Jesus gave all he had for us. He praised a widow who put two coins into the temple treasury, because she gave “all she had” (21:4).
Wealth is often an enemy of faith. It can “choke” people and cause them to be spiritually unfruitful (8:14). “Woe to you who are rich,” Jesus warned (6:24). He warned us about the dangers of greed (12:15) and warned about the danger of storing up wealth for self without being “rich toward God” (12:16-21). When we use wealth to help others, we gain “treasure in heaven” (12:33). This helps us have our heart in heavenly things instead of earthly, temporary things (12:34).
Creating an Estate
The Bible recounts Pharaoh’s disturbing dreams:
Then it came to pass, at the end of two full years, that Pharaoh had a dream; and behold, he stood by the river. Suddenly there came up out of the river seven cows, fine looking and fat; and they fed in the meadow. Then behold, seven other cows came up after them out of the river, ugly and gaunt, and stood by the other cows on the bank of the river. And the ugly and gaunt cows ate up the seven fine looking and fat cows. So Pharaoh awoke. He slept and dreamed a second time; and suddenly seven heads of grain came up on one stalk, plump and good. Then behold, seven thin heads, blighted by the east wind, sprang up after them. And the seven thin heads devoured the seven plump and full heads. So Pharaoh awoke, and indeed, it was a dream. Genesis 41:1-7.
Joseph later interpreted Pharaoh’s dream and based on that interpretation grain houses were established and grain was stored during bountiful years for future use during lean years. This simple recipe for wealth building and financial security is lost on much of the American public. As but one illustration, 80% of pro-football players are bankrupt within five years of their retirement. The American culture, and in particular advertising, pushes consumption and especially conspicuous consumption of products and services that often are superfluous at best. If your goals include financial security for your later years, passing wealth on to children to help them live the life you wish for them, and supporting charities and causes important to you, investing well is only half the equation. The other half is intelligent consumption, controlling your expenses and living within a budget that is appropriate not only for your means, but for your goals.
Controlling spending, your “burn rate” is a critical component to financial security, creating wealth and being able to achieve your financial goals. A large part of budgeting well is making decisions as to expenditures, differentiating between “wants” and “needs.”
19 “Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. 20 But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. 21 For where your treasure is, there your heart will be also. Matthew 6:19-21.
How much of your budgeted expenditures should be directed toward helping family and others, charitable endeavors, and other causes versus luxury purchases? How much of your accumulated wealth should be given or bequeathed to your designated heirs versus directed to charitable causes.
Where on the spending and lifestyle spectrum you choose to be is your personal choice, but everyone, it will have profound financial implications. Often those who are very wealthy believe that one of the luxuries of wealth is not having to budget. To the contrary, too high a spending rate relative to wealth will assuredly lead to a dissipation of that wealth.
6 But godliness with contentment is great gain. 7 For we brought nothing into the world, and we can take nothing out of it. 8 But if we have food and clothing, we will be content with that. 9 Those who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction. 10 For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. 1 Timothy 6:6-11.
If you create a budget, investment plan and financial forecast and it becomes apparent that you face to significant a risk of running short of resources, cut back.
Parable of the Talents
The famous biblical story of the talents provides a framework for beginning to consider the responsibilities of Christian financial stewardship, and estate planning:
14 “For it will be like a man going on a journey, who called his servants[a] and entrusted to them his property. 15 To one he gave five talents, to another two, to another one, to each according to his ability. Then he went away. 16 He who had received the five talents went at once and traded with them, and he made five talents more. 17 So also he who had the two talents made two talents more. 18 But he who had received the one talent went and dug in the ground and hid his master’s money. 19 Now after a long time the master of those servants came and settled accounts with them. 20 And he who had received the five talents came forward, bringing five talents more, saying, ‘Master, you delivered to me five talents; here I have made five talents more.’ 21 His master said to him, ‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much. Enter into the joy of your master.’ 22 And he also who had the two talents came forward, saying, ‘Master, you delivered to me two talents; here I have made two talents more.’ 23 His master said to him, ‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much. Enter into the joy of your master.’ 24 He also who had received the one talent came forward, saying, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed, 25 so I was afraid, and I went and hid your talent in the ground. Here you have what is yours.’ 26 But his master answered him, ‘You wicked and slothful servant! You knew that I reap where I have not sown and gather where I scattered no seed? 27 Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest. 28 So take the talent from him and give it to him who has the ten talents. 29 For to everyone who has will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away. 30 And cast the worthless servant into the outer darkness. In that place there will be weeping and gnashing of teeth.’ Matthew 25:14-30
Each manager was given certain wealth to steward while the owner was gone. The decision as to how much wealth was given was the masters, not the servants. Nonetheless each had an obligation to prudently handle all that he was entrusted. This can be viewed as each of us is given certain wealth to steward during our lifetime. The parable makes it quite clear that it was the responsibility of each manager to handle the funds he was entrusted prudently. It is also clear that for each of us, just as for each manager, the period of stewardship will come to an end and we will each account for how we handled the wealth entrusted to us during our lifetime. That final accounting may well be viewed as the final dispositions of wealth through estate planning. How have and will we give our wealth away during our lifetime? How will we give away our wealth at death?
Perhaps there is another message about planning in the parable. We each must use, perhaps literally, our talents (money, and literally “talents”), wisely. And perhaps an estate plan should guide and encourage our descendants to use their talents wisely.
Questions to Ask About Gifts and Wealth Distribution
When you are planning when, how and to whom to give your wealth, take a broad view and carefully contemplate your goals and the impact of your distributions on those people, institutions and causes that are important to you:
Give and Bequeath Wealth in Trust
The Parable of the Lost Son provides a caution about unfettered gifts (or bequests) of wealth:
11 Jesus continued: “There was a man who had two sons. 12 The younger one said to his father, ‘Father, give me my share of the estate.’ So he divided his property between them. 13 “Not long after that, the younger son got together all he had, set off for a distant country and there squandered his wealth in wild living. 14 After he had spent everything, there was a severe famine in that whole country, and he began to be in need. 15 So he went and hired himself out to a citizen of that country, who sent him to his fields to feed pigs. 16 He longed to fill his stomach with the pods that the pigs were eating, but no one gave him anything… Luke 15:11-32
No one can be sure which child (or other heir) will squander funds to his or her detriment. Not all stories of squandered wealth end with a reunion. In the worst of cases the excess wealth can be directed to fund alcohol or drug abuse, and result in the child winding up on prison or worse. A trust, with checks and balances on distributions and use of funds, can not only preserve wealth, but preserve the child. A trustee can be encouraged in personal discussions, a side letter of instruction and/or the terms of the trust instrument itself, to foster and encourage the lifestyle you want for your descendants.
So you should carefully consider how your gifts and bequests to children and other loved ones should be structured. While an outright gift or bequest with “no strings attached” is the simplest and most common approach, is it really optimal? Would it be preferable to give and bequeath to trusts for children so that you can name trusted and sensitive people and/or experienced institutions (banks or trust companies) to be trustees to manage that wealth for the benefit of the child or other heir? Frequently parents and other benefactors view trusts as “controlling from the grave.” That view is inconsistent with the wide range of options for how a trust can be crafted. The beneficiaries can get anything from substantial control (the beneficiary can be the sole trustee of his or her own trust) to limited control (a bank can have absolute discretion as to what to distribute and when), or anything in between. Even if a bank is given complete discretion the trust instrument will invariably provide guidance and the law provides limitations. Rather than controlling from the grave, trusts should be viewed as a means of providing guidance, protection and perhaps even continuing the message of the values you want for your children even after your death.
Does the Bible actually encourage the use of trusts? Consider “A good person leaves an inheritance for their children’s children… Proverbs 13. The optimal way to leave an inheritance for grandchildren and later descendants is to create a trust for your children and all future descendants to protect and transmit wealth down the generational lines.
Transmission of Wealth, Transmission of Values
As discussed above each step of your estate planning can be used to demonstrate the values you wish your heirs to live. Consider:
Tailoring Legal Documents to Incorporate Your Christian Values
The following is a summary of the common legal documents included in most estate plans with suggestions as to how you might tailor them:
Estate planning, in the broadest definition of what the process entails, is incumbent for every adult to address. If you wish your financial, legal, and other planning to conform to your Christian beliefs it is imperative that your proactively tailor each component of your planning to that goal. Often the changes that are necessary to do so are not complex or costly, but they can be profound.
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