Compared to residents of other wealthy nations, Americans are more likely to give their time and money to help others. In 2023, the United States ranked ninth in per capita gross domestic product (GDP) but fifth on the World Giving Index rankings.¹

Polling shows that Americans trust nonprofits more than government or business, but they generally know little about charitable giving and philanthropy, such as how these organizations distribute their funds and the rules that govern their activities.

Giving money to charity can provide personal and financial benefits to donors and be a part of the legacy they leave behind. If you are thinking about making a charitable gift—either now or when you pass away—there are some things to be aware of so you can make the most of your donation.

Fewer Americans Donating to Charity

Total charitable giving in the United States dropped 10.5 percent from 2021 to 2022, according to the report conducted by Giving USA 2023. As a percentage of disposable personal income, giving declined to a 40-year low of 1.7 percent.² Overall, the number of US households that annually give to charity declined from 66 percent in 2000 to less than 50 percent in 2018.

Nearly half of Americans who stopped giving to charity in the last five years told the Better Business Bureau they did so because they believe the wealthy are not paying their fair share. Others said they just could not afford to contribute to charity.³

Some statistics paint a rosier picture of American generosity. Adjusting for inflation, charitable giving by Americans was seven times greater in 2016 than it was in 1954. US charitable giving as a proportion of GDP has also increased slightly over this period but has remained at around 2 percent for decades.⁴

Americans grew more generous during the pandemic, with 2020 and 2021 donations both topping 2019 giving levels.⁵ A recent Gallup poll reveals that 81 percent of Americans donated money to charity over the past year, with the percentage of those giving rising in proportion to household income.⁶ Around 90 percent of households making $100,000 or more give money to charity each year.

Where Americans are Donating

There are approximately 1.5 million charitable organizations in the United States. Generally, the Internal Revenue Service (IRS) defines public charity as any organization that receives a substantial portion of its income from public donations.

Many—but not all—charities qualify as tax-exempt under IRS rules. The 501(c)(3) tax exemption, known as the charitable tax exemption, allows qualified organizations to avoid paying federal corporate and income taxes for most revenue sources.⁷

Designated 501(c)(3) charities are also able to solicit tax-deductible contributions that allow donors to deduct money given to these organizations on their tax returns. A gift made to a qualified tax-exempt organization as part of an estate plan can help to reduce estate taxes as well.

To meet tax-exempt IRS requirements, an organization must exclusively exist for one of these purposes:

• Charitable
• Educational
• Fostering of national or international amateur sports
• Literary
• Prevention of cruelty to animals and children
• Religious
• Scientific
• Testing for public safety

Charities, foundations, and nonprofits can gain 501(c)(3) status if they satisfy IRS tax rules.⁸ These philanthropic entities can include private foundations, community foundations, corporate foundations, limited liability companies, donor-advised funds, and even crowdfunding campaigns.

The nation’s top 100 charities received more than $61 billion in private donations in 2023. They include Feeding America, United Way, St. Jude Children’s Hospital, Salvation Army, Habitat for Humanity, Goodwill, YMCA, and the Boys & Girls Clubs of America.⁹

Charities and Taxes

The decision to make a charitable donation can be motivated by altruism, financial considerations, or a little bit of both. These donations can take the form of accounts, tangible personal property, and real estate. A donor can even choose to leave all of their money and property to charity at their death.

A gift made during a donor’s lifetime can result in an income tax deduction, provided that the charity is an IRS tax-exempt organization. For cash contributions, eligible itemized deductions for charitable contributions can be made up to a certain percentage of the donor’s gross income. Limits also apply to gifts of appreciated securities or property in a single year.

There may be further limits on charitable gifts depending on how they are given (i.e., directly to a charity or a private foundation, or using other strategies, such as a donor-advised fund). Appreciated securities may additionally bypass the capital gains tax if they are given to a charity during a donor’s lifetime.

When charitable gifts are part of an estate plan and transferred to the charity upon the donor’s death, they can remove money and property from the donor’s taxable estate, thereby lowering the donor’s estate tax liability, if one exists. There is an unlimited charitable deduction for estate plan gifts to charities. Gifts of this type can take several forms, including charitable trusts, retirement accounts such as individual retirement accounts and 401(k)s, and gifts made via charitable foundations and donor-advised funds.¹⁰

What to Know Before You Give

While it may be better to give than to receive, donors who plan to make a large charitable gift during their lifetime or at their death should temper their generosity with caution. Here are some things to look out for:

• Make sure the organization you donate to is a reputable charity and not a scam. Charity fraud—schemes that seek donations for fake charities—can take many forms. Charity scams proliferate on the internet, particularly on social media. They can also involve emails, text messages, crowdfunding platforms, and phone calls. Be sure to thoroughly vet an organization before donating. Look for red flags such as time-urgent pitches and names and website addresses that closely mimic real charities.¹¹
• Check that the charity qualifies for a tax deduction. Charitable donation tax breaks provide an extra incentive to support a good cause. The IRS provides a search tool for groups that are eligible to receive tax-deductible charitable contributions.
• Can you afford it? Charitable giving is not solely an activity of the rich. Households earning $40,000 or less give money with lower frequency than those households with higher incomes, but only by about 20 percentage points. Tax breaks are just one consideration for charitable giving; many people donate to charity for primarily altruistic reasons. However, the gifts should not come at the expense of your financial security. Experts recommend starting with 1 percent of your income and, if you can afford more, working your way up from there.

Get Estate Planning and Tax Advice Before Giving

It is not too late to make philanthropy a part of your legacy, but whether you are new to charitable giving or want to step up your gifts, there are strategies to follow that can increase the value of your charitable efforts.

However you plan to give and whoever you plan to give to, the rules around charities can be complicated and options abound. For professional advice about giving to charities, choosing what and where to donate, and the different gifting strategies that are available, schedule a consultation with our estate planning attorneys.

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1. Charities Aid Foundation, World Giving Index 2023, Int’l Charity Law Network, Univ. of Notre Dame (2023), https://charitylaw.nd.edu/research/2023-world-giving-index-2023/.
2. Amy Silver O’Leary & Tim Delaney, It’s Real: Charitable Giving Plummeted Last Year, Nat’l Council of Nonprofits (June 21, 2023), https://www.councilofnonprofits.org/articles/its-real-charitable-giving-plummeted-last-year.
3. Sara Herschander & the Associated Press, Overwhelming feeling that the wealthy aren’t paying their fair share behind massive pullback from charity, survey shows, Fortune (July 6, 2023), https://fortune.com/2023/07/06/why-is-charitable-giving-down-ultrawealthy-not-paying-fair-share-survey/
4. Statistics on U.S. Generosity, Philanthropy Roundtable, https://www.philanthropyroundtable.org/almanac/statistics-on-u-s-generosity/ (last visited Mar. 27, 2024).
5. Erica Pandey, The giving boom, Axios (Dec. 22, 2021), https://www.axios.com/2021/12/22/charitable-giving-boom-pandemic-racial-justice.
6. Jeffrey M. Jones, U.S. Charitable Donations Rebound; Volunteering Still Down, Gallup (Jan. 11, 2022), https://news.gallup.com/poll/388574/charitable-donations-rebound-volunteering-down.aspx.
7. Community Toolbox, Ch. 43, Managing Finances, Sec. 4. Understanding Nonprofit Status and Tax Exemption, https://ctb.ku.edu/en/table-of-contents/finances/managing-finances/nonprofit-status-tax-exemption/main (last visited Mar. 27, 2024).
8. Univ. of San Diego Professional and Continuing Education, Foundation vs. Charity vs. Nonprofit, https://pce.sandiego.edu/foundation-vs-nonprofit-vs-charity/ (last visited Mar. 27, 2023).
9. William P. Barrett, America’s Top 100 Charities, Forbes (Dec. 12, 2023), https://www.forbes.com/lists/top-charities/?sh=4ac45d7e5f50.
10. Charitable Contributions, Fidelity Charitable, https://www.fidelitycharitable.org/guidance/charitable-tax-strategies/charitable-contributions.html (last visited Mar. 27, 2024).
11. Fed. Trade Comm’n, Consumer Advice, Donating Safely and Avoiding Scams, https://consumer.ftc.gov/features/donating-safely-and-avoiding-scams (last visited Mar. 27, 2024).

As poet Robert Burns mused centuries ago, the best-laid plans of mice and men often go awry. Despite thoughtful effort and a concerted strategy, you cannot prepare for every emergency in life. A car accident, sudden illness, workplace injury, or chronic medical condition can force you to reevaluate the core assumptions you used to plan your future and set up your legacy.

According to the Centers for Disease Control and Prevention (CDC), approximately one in four US adults have some type of disability.^[1] Frustratingly, once you are no longer able to manage your own affairs (also known as being incapacitated), you will not be able to turn back the clock and make plans that will make your transition into a possible incapacity as smooth as possible for you and your loved ones. However, you can take meaningful actions prior to an incapacity to protect your money, property, and legacy in the wake of any newfound limitations. Here are some insights to that end:

Work with a qualified estate planning attorney to ensure that you have taken the following actions:

• Legally appointed a trusted person to manage your property, pay your bills, file your taxes, and handle similar financial and legal matters if you are unable to do these tasks
• Legally appointed a trusted person to make healthcare decisions for you if you become mentally or physically unable to make them yourself
• Communicated your wishes about healthcare decisions such as end-of-life care and do-not-resuscitate instructions in a clear and legally valid manner (if your state allows for this)

Work with a knowledgeable financial advisor to take the following additional actions:

• Ensure that you have appropriate life or disability insurance coverage
• Reassess your investment options and portfolio in light of the possibility of new limitations and constraints on your ability to generate income
• Ensure that you have a budget that would work if you become incapacitated so that all of your bills will get paid on time

Mind this important distinction:

Incapacity for legal or estate planning purposes is different from disability for other purposes, such as the determination of government benefits.

For example, disability for purposes of determining government benefits might mean that a person cannot work gainfully anymore because of cancer or a workplace injury. On the other hand, incapacity in an estate planning context typically means that a person is no longer capable of making sound decisions, often due to systemic illness or injury. In other words, you can be considered disabled without being considered incapacitated. 

Either way, it is important for us to work together with your financial advisor to ensure that you and your family are fully protected if you become incapacitated.

Here are some specific actions you can take now:

• Pay attention to where you want your money to go as well as to your long-term planning strategy. Your estate planning attorney can help you assess whether your current plans are still realistic and, if not, what alternative options you have.
• Maintain a healthy lifestyle. Visit your medical professionals on a regular basis and follow their instructions.
• Get the help you need from trusted professionals. Now is the time to tap your network of friends and family for assistance with the heavy lifting. No single advisor will have all of the answers. But your team can work in concert to reduce the anxiety and uncertainty that come with a potential incapacity and keep you focused on what really matters.

Please reach out to us to assess your long-term plans and documents so we can ensure that you are as secure as possible in the event of any new challenges.

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1. Disability Impacts All of Us, Ctrs. for Disease Control & Prevention: Disability and Health Promotion (May 15, 2023), https://www.cdc.gov/ncbddd/disabilityandhealth/infographic-disability-impacts-all.html.

Many people believe that estate planning is only about planning for their death. But planning for what happens after you die is only one piece of the estate-planning puzzle. It is just as important to plan for what happens if you become unable to manage your own financial or medical affairs while you are alive (in other words, if you become incapacitated).

What happens without an incapacity plan?      

Without a comprehensive incapacity plan, if you become incapacitated and unable to manage your own affairs, a judge will need to appoint someone to take control of your money and property (known as a conservator or guardian of the estate) and to make all personal and medical decisions for you (known as a guardian or guardian of the person) under court-supervised guardianship and conservatorship proceedings. The guardian and conservator may be the same person, or there may be two different people appointed to these roles. Depending on state requirements, the conservator may have to report all financial transactions to the court annually, or at least every few years. The conservator is also typically required to obtain court permission before entering into certain financial transactions (such as mortgaging or selling real estate). Similarly, the guardian may be required to obtain court permission before making life-sustaining or life-ending medical decisions. The court-supervised guardianship and conservatorship are effective until you either regain the ability to make your own decisions or you pass away. 

Who should you choose as your financial agent and healthcare agent?

Guardianship and conservatorship statutes are the state’s default plan for appointing the person or people who will make decisions for you if you cannot make them for yourself. This default plan, however, may not align with the plan you would have put into place on your own. Most importantly, state statutes may give priority to someone to act as your guardian or conservator who is not the person you would have selected had you engaged in proactive planning.

Rather than having a judge appoint these important decision-makers for you, your incapacity plan allows you to appoint the trusted individuals you want to carry out your wishes. There are two very important decisions you must make when putting together your incapacity plan:

1. Who will be in charge of managing your finances if you become incapacitated (your financial agent)?
2. Who will be in charge of making medical decisions on your behalf if you become incapacitated (your healthcare agent)?

The following factors should be considered when deciding who to name as your financial agent and healthcare agent:

• Where does the agent live? With modern technology, the distance between you and your agent may not matter. Nonetheless, someone who lives nearby may be a better choice than someone who lives in another state or country, especially for healthcare decisions.

• How organized is the agent? Your agent will need to be well-organized to manage your healthcare needs, keep track of your accounts and property, pay your bills, and balance your checkbook, all on top of managing their own finances and family obligations. While you may trust many of your loved ones to act on your behalf, not all of them will have the capabilities and organizational skills desired for this position.

• How busy is the agent? If the agent has a demanding job or travels frequently for work, then the agent may not have the time required to take care of your finances and medical needs.

• Does the agent have expertise in managing finances or the healthcare field? An agent with work experience in finance or medicine may be a better choice than an agent without it. Keep in mind that you can appoint different people for these different roles.

What should you do?

If you do not proactively plan for incapacity before you become incapacitated, your loved ones will likely have to go to probate court to have a guardian and conservator appointed. This would be a hassle, taking time and costing money during what is already likely to be a very stressful and emotional time.

Part of creating an effective incapacity plan means carefully considering who you want as your financial and medical agents. You should also discuss your choice with the person you select to confirm that they are willing and able to serve. This would also be a great opportunity to discuss with them your wishes as to the medical and financial issues that are most important to you.

Our firm is ready to answer your questions about incapacity planning and assist you with choosing the right agents for your plan. 

Comprehensive estate planning involves more than just planning for your legacy after your death, avoiding probate, and reducing taxes. Good estate planning also appoints people to make legal, financial, and medical decisions for you if you are alive but unable to make those decisions for yourself (in other words, if you are incapacitated).

What happens without a plan for incapacity?

Without a comprehensive plan for your incapacity, your family will have to go to court to have a judge appoint a guardian and conservator to make healthcare decisions for you and manage your money and property. A guardian will make all personal and medical decisions on your behalf as part of a court-supervised guardianship. A conservator will make all financial and legal decisions on your behalf as part of a court-supervised conservatorship. These roles may be filled by the same person or by two different people, depending on the circumstances. Keep in mind that the court may not appoint the person or people for these roles that you would have chosen. Until you regain capacity or pass away, you and your loved ones will have to endure expensive, public, and time-consuming court proceedings, which may include filing annual reports and obtaining prior judicial approval for certain actions.

Overall, there are two aspects of incapacity planning that must be considered: financial and healthcare.

• Finances during incapacity. If you are incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself, but your bills still need to be paid, tax returns still need to be filed, and investments still need to be managed.

• Healthcare during incapacity. If you are unable to communicate (for example, if you are in a coma or under anesthesia), you will not be able to make healthcare decisions for yourself. Without a plan, your loved ones may even be denied access to your medical information during a medical emergency. They may also end up in court, fighting over what medical treatment you should or should not receive (like in the case of Terri Schiavo, whose husband and parents did for 15 years).

To avoid these problems, you should have these five essential legal documents in place before becoming incapacitated so that your loved ones are empowered to make decisions for you:

1. Financial power of attorney. A financial power of attorney is a legal document that gives your trusted decision-maker (the agent) the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters for you that are described in the document. Financial powers of attorney come in two forms: immediate and springing. An immediate durable power of attorney allows your agent to act for you as soon as you sign the document. A springing power of attorney, on the other hand, is legally valid when you sign it, but your agent can only act for you after you have been determined to be mentally incapacitated. It is important to note that some states, such as Florida, do not recognize springing financial powers of attorney. There are advantages and disadvantages to each type, and we can help you decide which is best for your situation.
2. Revocable living trust. A revocable living trust is a legal document that has three parties to it: the person who creates the trust (also known as the trustmaker); the person who legally owns and manages the accounts and property transferred into the trust (the trustee); and the person who benefits from the accounts and property transferred into the trust (the beneficiary). In the typical situation, you will be the trustmaker, the trustee, and the beneficiary of your revocable living trust while you are alive. If you ever become incapacitated, your designated backup trustee will step in to manage the trust’s accounts and property for your benefit. The terms of the trust that you create will specify how the trust’s accounts and property are to be used (for example, you can authorize the trustee to continue to make gifts to charities or pay tuition for your grandchildren).
3. Medical power of attorney. A medical power of attorney, also called a medical proxy, healthcare proxy, designation of healthcare surrogate, or a patient advocate designation, allows you to name a person (your agent) to make medical decisions on your behalf when you cannot communicate them yourself.
4. Advanced directive or living will. An advance directive or living will shares your wishes regarding end-of-life care if you become incapacitated. Although a living will is not necessarily enforceable in all states, it can provide meaningful information about your desires—even if it is not strictly enforceable.
5. HIPAA authorization. A Health Insurance Portability and Accountability Act authorization gives your doctor authority to disclose medical information to the people you name in the document. This is important because health privacy laws may make it very difficult for family members or loved ones to learn about your condition without this release. While this document does not give a person authority to make medical decisions, it can help alleviate tensions by keeping everyone on the same page concerning your condition.

Is your incapacity plan up to date?

Once you create all of these legal documents for your incapacity plan, you cannot simply stick them in a drawer and forget about them. Instead, you must update and review your incapacity plan periodically and when major life events occur, such as moving to a new state or getting divorced. If you keep your incapacity plan up-to-date and make the documents available to your loved ones and trusted helpers, it should work the way you expect it to if needed. If you need to create or update your incapacity plan, please give us a call.

As a parent, you are responsible for the care of your minor child. In most circumstances, this means getting them up for school, making sure they are fed, and providing for other basic needs. However, what would happen if you and your child’s other parent were unable to care for them?

It is important to note that if something were to happen to you, your child’s other parent is most likely going to have full authority and custody of your child, unless there is some other reason why they would not have this authority. So in most cases, estate planning is going to help develop a plan for protecting your child in the event that neither parent is able to care for them.

What If You Die?

When it comes to planning for the unexpected, many parents are familiar with the concept of naming a guardian to take care of their minor children in the event both parents die. This is an important step toward ensuring that your child’s future is secure.

Without an Estate Plan

If you and your child’s other parent die without officially nominating a guardian to care for your child, a judge will have to make a guardianship decision. The judge will refer to state law, which will provide a list of people in order of priority who can be named as the child’s guardian—usually family members. The judge will then have a short period of time to gather information and determine who will be entrusted to raise your child. Due to the time constraints and limited information, it is impossible for the judge to understand all of the nuances of your family circumstances. However, the judge will have to choose someone based on their best judgment. In the end, the judge may end up choosing someone you would never have wanted to raise your child to act as your child’s guardian until they are 18 years old.

With an Estate Plan

By proactively planning, you can take back control and nominate the person you want to raise your child in the event you and the child’s other parent are unable to care for them. Although you are only able to make a nomination, your choice can hold a great deal of weight when the judge has to decide on an appropriate guardian. The most common place for parents to make this nomination is in their last will and testament. This document becomes effective at your death and also explains your wishes about what will happen to your accounts and property. Depending on your state law, there may be another way to nominate a guardian. Some states recognize a separate document in which you can nominate a guardian, and that document is then referenced in your will. Some people prefer this approach because it is easier to change the separate document as opposed to changing your will if you want to choose a different guardian or backup guardians.

What If You Are Alive but Cannot Manage Your Own Affairs?

Although most of the emphasis is on naming a guardian for when both parents are dead, there may be instances in which you need someone to have the authority to make decisions for your child while you are alive but unable to make them yourself.

Without an Estate Plan

Not having an incapacity plan in place that includes guardianship nominations means that a judge will have to make this judgment call on their own with no input from you (similar to the determination of a guardian if you die without a plan in place).

With an Estate Plan

A comprehensive estate plan can also include a nomination of a guardian in the event you and the child’s other parent are incapacitated (unable to manage your own affairs). Although you are technically alive, if you cannot manage your own affairs, there is no way that you will be able to care for your minor child. This is another reason why having a separate document for nominating a guardian (as described above) may be preferable to nominating guardians directly in a last will and testament. Because a last will and testament is only effective at your death, a nomination for a guardian in your will may not be effective when you are still living. However, a nomination in a separate document that anticipates the possibility that you may be alive and unable to care for your child can provide great assistance to the judge when evaluating a guardian. Depending on the nature of your incapacity, this guardian may only be needed temporarily, with you assuming full responsibility for your child upon regaining the ability to make decisions for yourself.

What If You Are Just Out of Town?

Sometimes, you travel without your child and will have to leave them in the care of someone temporarily. While you of course hope that nothing will go wrong while you are away, it is better to be safe than sorry.

Without an Estate Plan

Without the proper documentation, there may be delays in caring for your child if your child were to get hurt or need permission for a school event while you are out of town. The hospital or school may try to reach you by phone in order to get your permission to treat them or allow them to attend a school event. Depending on the nature of your trip, getting a hold of you may not be easy (e.g., if you are on a cruise ship with little access to phone or email). Ultimately, your child will likely be treated medically, but the chosen caregiver may encounter additional roadblocks  trying to obtain medical services for your child, and they may not be able to make critical medical decisions when needed.

With an Estate Plan

Most states recognize a document that allows you to delegate your authority to make decisions on behalf of your child to another person during your lifetime. You still maintain the ability to make decisions for your child, but you empower another person to have this authority in the event you are out of town or cannot get to the hospital immediately. This document allows your chosen caregiver to make most decisions on behalf of your child, except for consenting to the adoption or marriage of your child. The name of this document will vary depending on your state and is usually effective for six months to a year, subject to state law. Because this document is only effective for a certain period of time, it is important that you touch base with us to have new documents prepared so that your child is always protected.

We Are Here to Protect You and Your Children

Being a parent is a full-time job. We want to make sure that regardless of what life throws at you, you and your child are cared for. Give us a call to learn more about how we can ensure that the right people are making decisions for your child when you cannot.

Sitting down to create or update your estate plan can be overwhelming. Crucial to a successful plan is your ability to address two major questions: Who will get your stuff when you die, and how do you want those individuals or charities to receive that stuff?

Ways to Give Away Your Money and Property

Outright

One way you can give away your money and property at your death is to give it outright. In other words, once you have passed away and the administration process has been completed, your beneficiary will receive their inheritance (e.g., a bank or investment account, real property, etc.) outright with no strings attached. The inheritance immediately becomes theirs to do with as they please. This provides your beneficiary with the maximum amount of freedom and flexibility. They can keep the account or property, or they could spend or liquidate it. Additionally, this type of distribution is easy to include in your estate plan and easy to administer after your passing. All you need to do when preparing your estate plan is name the beneficiaries you want to receive your stuff in your trust or will. You do not have to plan out or have your attorney draft long and customized distribution provisions.

When it is time to distribute your money and property after your death, your accounts or properties will be turned over to your chosen beneficiaries after your debts have been settled, any applicable taxes have been paid, and your affairs have been wound down. However, please know that this freedom and ease come at a cost. If your beneficiary has creditor issues, is in the middle of a divorce, or is not good at managing their money at the time the distributions are to be made, that inheritance could be gone quickly. Further, you will almost never want minor children or beneficiaries with special needs to receive their inheritance outright.

In Trust

Regardless of whether you chose a will or revocable living trust as the tool for distributing your money and property at your death, that document can include a provision holding your beneficiary’s inheritance in a separate trust for their benefit. Having a beneficiary’s inheritance held in a trust means that your beneficiary will not receive their inheritance outright but will instead receive their inheritance when the terms and conditions that you create are satisfied. Here are some examples of terms and conditions for an inheritance that you may choose to establish for your beneficiaries:

• As a specified sum or percentage of the trust share when the beneficiary has reached certain ages (for example, one-third of the trust at age 30, one-half of the remaining trust at 35, and the remainder at 40). Under this scenario, your beneficiary will slowly have access to their inheritance. If the beneficiary makes bad choices with their inheritance in the beginning, they have time to learn from those experiences before being given additional distributions.
• As a specified sum or percentage upon reaching certain milestones (for example, one-third of the trust upon earning a postsecondary degree, trade school certificate, or honorable discharge from the military; one-half of the remaining trust upon successfully acquiring and maintaining employment for five years; and the remaining amount in the trust upon retirement). This option allows you to include certain milestones that you want your beneficiary to achieve before they receive their inheritance. If your beneficiary does not achieve the first one, they will have an opportunity to get access to their inheritance by completing other milestones. This option allows you to share your values with your loved ones. However, it may also cause difficulties if your beneficiaries do not meet one or more milestones or if the beneficiaries need access to the inheritance for reasonable purposes before hitting the milestones.
• For specific events or purchases (for example, an amount equal to the average cost of a wedding in your geographic area, the average cost of a three-bedroom home in your geographic area, or 50 percent of the start-up capital necessary to form a business once a business plan has been submitted and approved by the trustee). These provisions allow you to tailor the inheritance to fund those events or experiences that you believe are important and that you want to support. You can implement these distribution terms alongside many of the other scenarios described here.
• At the trustee’s discretion. Creating a fully discretionary trust means that your beneficiary will receive money from their trust share only if the trustee believes it is in the best interest of the beneficiary to receive funds. While this distribution scheme may seem very restrictive, it allows a trustee to evaluate the beneficiary’s situation at the time a request is made and adapt to changing needs. Also, by not entitling beneficiaries to inheritance distributions, any money or property held in the beneficiary’s trust has a greater chance of being unreachable by creditors or divorcing spouses. Once the money or property is given to the beneficiary, it can be taken. This allows the trustee to protect the legacy you are leaving behind.
• In a special or supplemental needs trust. For individuals who receive or may receive  government benefits due to a disability, the structure of their inheritance is very important. It may be necessary to leave an inheritance to these individuals in a special type of trust that does not disqualify them from receiving the government benefits while also allowing them to receive some benefit from the inheritance. Failing to properly structure the trust could cost your loved one their government benefits.

The important thing to remember is that you need to proactively make a legally valid plan if you have specific wishes about how your loved one will receive their inheritance. Without a plan put in place by you, your loved ones will be stuck with following the state law that determines who receives what, how much they receive, and how they receive it. For example, most state statutes will give an inheritance to an adult outright. So if you want more restrictions on your loved one’s inheritance, you need to have an estate plan that reflects your wishes. However, it is important to note that including a trust in your estate plan may lead to additional administrative tasks that may not otherwise arise, such as filing income tax returns for the trust, investing and managing trust assets, and preparing inventories and accountings. These tasks take time, and the person carrying out these tasks (the trustee) can charge the trust for their time.

Deciding Which Method to Use

Depending on who your beneficiary is, some options might be a better fit than others. It is important that you understand who your beneficiary is, what their needs are, and what your desired outcome is.

Charity

If you want to leave money or property to a charity, you may choose to give the money or property outright, especially if there is a particular goal or defined purpose that you have for the gift. You may also consider leaving the gift outright if you want it used for general charitable purposes, which in many cases, is what a charity would prefer when designating the use of the gift. However, you may choose to incorporate a charitable trust as part of your estate plan. This might be desirable if you have certain tax objectives that you want to accomplish.

Minor Child or Other Minor Loved One

It is usually advisable to leave an inheritance for minor children in trust for their benefit because, in most cases, a minor cannot legally own or manage their own accounts or property. With a trust, you can determine who will manage the inheritance instead of having a judge choose a guardian or conservator to manage the minor’s inheritance. If the money or property is left outright to the minor, it will likely be held for their benefit by a guardian, conservator, or custodian until the minor reaches the age of majority (18 or 21, depending on the state). This means that when the beneficiary becomes an adult, their inheritance will be distributed outright to them without any restrictions. For someone still so young, this could be risky.

Adult Child or Other Adult Loved One

Depending on the adult’s situation and the value of the inheritance you would like to leave them, all of the options described above could be available to you. However, when weighing the available options, there are some important considerations:

• Is your loved one likely to spend their inheritance as soon as they get it?
• Is there a likely possibility that your loved one may get divorced?
• Is your loved one engaged in a high-risk profession (e.g., law, medicine, etc.)?
• Is your loved one receiving or likely to receive government benefits?

If you answered yes to any of the above questions, you may not want to leave an inheritance to your loved one outright. A trust with specific terms, tailored to your beneficiary’s unique situation, may be the best way to ensure that the inheritance benefits your loved one instead of causing problems for them.

Surviving Spouse

If you are married, you may want everything you have to go outright to your surviving spouse upon your death. Maybe you consider everything you own to be owned jointly with your spouse, you want things to run as smoothly as possible, or you want your spouse properly provided for when you pass away. In addition to the considerations that we discussed for other adult loved ones, you need to consider the likelihood that your spouse may remarry or enter into another close relationship with someone and if that affects your decision in any way. If you leave everything outright to your surviving spouse, they will have the freedom to use the money and property in any way they want, including leaving it to a new spouse or buying expensive gifts for a new partner. If this is not what you want done with your money and property, it is important that you have a plan in place that puts more restrictions on your spouse’s inheritance.

We Are Here to Help

We know that there are a lot of different factors to consider when leaving an inheritance to your loved ones. We are here to walk you through the different options and help you solidify a plan that honors your wishes and protects your loved ones. If you need to begin the estate planning process or review your existing estate plan, please give our office a call.

When people think about creating an estate plan, they may think it just involves getting a set of forms that convey their wishes regarding their finances, health, and what will happen to their stuff when they die. Although the documents that comprise an estate plan may seem like simple forms, these important estate planning tools are the legally binding way for clients to manage their affairs during their incapacity (when they cannot manage their own affairs) or their death. Relying on nonlawyers to help with estate planning forms or provide legal advice can pose significant risks. Many professions should not provide legal advice, but it is not uncommon for some to cross into legal territory when they have related fields of expertise. Individuals in these professions must recognize the boundaries of their expertise and refer clients to qualified legal professionals when estate planning advice is needed. Additionally, consumers should be aware of these limitations and seek legal help.

Reasons to Be Cautious and Contact an Estate Planning Attorney

Many different types of professionals play important roles in the estate planning process. Some aspects of the process, however, should be handled only by lawyers. Nonlawyer professionals do not have the same legal training and expertise that a licensed and experienced estate planning attorney has. Estate planning requires an understanding of complex legal issues, including tax implications, property rights, and family law considerations. Relying on individuals who do not have the right qualifications may result in oversights or incorrect applications of law.

Other types of professionals can provide crucial information about your finances, insurance policies, property, and other relevant issues that contribute to a comprehensive estate plan. They can also offer expert advice regarding investment strategies, financial products that can enhance your estate plan, and important tax consequences.

Nonlawyers often provide generic estate planning solutions that are merely templates and do not address your specific needs and circumstances. Estate planning is highly individualized, and a one-size-fits-all approach may not adequately protect your money and property or meet your goals. Attorneys know which questions to ask to prevent or navigate specific legal problems and provide alternative strategies.

Estate planning laws and probate procedures also vary significantly from one jurisdiction to another. Nonlawyers may not be well-versed in the specific laws of your state, leading to incomplete or inappropriate legal documents that may not be legally valid or effective. Between improperly drafted documents and outdated documents that must be updated as your circumstances change, there is sure to be disappointment when you need your estate plan to work.

In addition, communication with attorneys is protected by attorney-client privilege, which ensures confidentiality. Most nonlawyers cannot offer the same level of privacy, potentially jeopardizing sensitive information and creating legal risks.

How to Find a Reputable Estate Planning Attorney

Finding a reliable and experienced estate planning attorney is crucial for ensuring that your wishes are properly documented, legally protected, and enforceable. Here are some general strategies to help you find a reputable estate planning attorney, regardless of your location:

• Referrals from friends, family, colleagues, or other professionals you trust for recommendations. After you have compiled a list of potential attorneys, search online for reviews and testimonials from previous clients to gain insight and find the right fit
• Online legal directories, such as the American Bar Association’s Lawyer Referral Directory, Avvo, Martindale-Hubbell, or WealthCounsel’s EstatePlanning.com. Find attorneys based on their practice area, location, and client reviews
• Professional organizations that focus on estate planning attorney memberships, such as the American Academy of Estate Planning Attorneys or the National Academy of Elder Law Attorneys
• Local legal aid organizations or pro bono services: some attorneys offer reduced fees or pro bono services for individuals with limited financial resources

Crafting the right plan for your unique situation requires working with a professional. If you have questions about the estate planning process or are ready to get started, give us a call.