Estate and Trusts

Legacy planning is about more than just passing down wealth; it’s an opportunity to create lasting impact. One of the most meaningful gifts you can provide is the gift of education. By planning for your legacy in a way that supports education, you can help future generations achieve their dreams, reduce financial burdens, and empower them to make a difference in the world.

1. Why Education Matters

Education is a powerful tool that opens doors and fosters personal and professional growth. It can transform lives, offering opportunities for better jobs, higher income, and a more fulfilling life. By prioritizing education in your legacy planning, you contribute to a cycle of knowledge and empowerment that can last for generations.

2. Ways to Incorporate Education into Your Legacy Plan

There are various strategies to include educational support in your legacy planning:

a) Establish a Trust or Educational Fund

Creating a trust specifically for educational expenses ensures that your funds are used for their intended purpose. You can set parameters for how the money should be spent, whether for tuition, books, or other related costs. This approach also allows you to manage distributions over time.

b) Contribute to 529 Plans

529 plans are tax-advantaged savings accounts designed for education expenses. You can contribute to a 529 plan for your children or grandchildren, allowing the funds to grow tax-free as they prepare for college or other educational opportunities.

c) Offer Scholarships

Establishing a scholarship in your name or family’s name can create a lasting legacy. Scholarships can be targeted toward specific fields of study, underrepresented groups, or local students, making a direct impact in your community.

d) Support Educational Organizations

Consider donating to schools, colleges, or educational nonprofits that align with your values. These organizations often use funds to improve programs, provide resources, and support students in need.

3. Teaching Financial Literacy

Alongside financial contributions, instilling the importance of financial literacy is essential. Educate your heirs about managing money, investing, and understanding the value of education. This knowledge empowers them to make informed decisions about their own financial futures.

4. Creating a Family Culture of Education

Encouraging a culture of lifelong learning within your family can reinforce the value of education. Share stories about your own educational journey, celebrate academic achievements, and create opportunities for discussions about future goals.

5. Involving Family Members in the Planning Process

Engage family members in discussions about your legacy plans. Understanding their aspirations and how they value education can help shape your approach. This collaboration ensures that your legacy aligns with their goals and fosters a sense of shared responsibility.

6. Consulting Professionals

Legacy planning can be complex, so consider working with financial advisors or estate planners who specialize in educational funding. They can help you navigate tax implications, set up trusts, and ensure your wishes are carried out effectively.

Legacy planning is an opportunity to create a lasting impact through the gift of education. By incorporating educational support into your plans, you empower future generations to reach their potential and carry forward the values you hold dear. Whether through trusts, scholarships, or simply fostering a love of learning, the gift of education is one of the most meaningful legacies you can leave behind. Start planning today to make a difference that will resonate for years to come.

In estate planning, you often come across the term “fair market value.” However, some assets are easier to value than others.

The IRS defines fair market value as “the value at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

Some assets are easily valued. A stock, for example, that is listed on a major exchange can be valued simply by averaging the highest and lowest quoted selling price for that day. That price, multiplied by the number of shares you own, gives you the value of your stock on that day. Establishing value on most other property is not quite as easy, though. Let’s look at other forms of property and how they might be valued for estate tax purposes.

• Real property. There are numerous factors that have to be considered, such as the size, shape, and location of the property, zoning restrictions, its potential use, and the value of surrounding property. The value of the buildings depends on whether they are rental properties, the present cost of reproducing them, and their loss of value because of depreciation. Also, certain properties, such as farm or business property, have special valuation issues that must be considered for estate tax purposes.
• Personal property. Property such as your car, furniture, jewelry, etc., will be valued according to the definition mentioned above. If you have a house full of possessions, each object will be valued separately. Professional appraisals may be necessary for items such as collectibles or one-of-a-kind possessions.
• Life insurance. Whether or not life insurance will be included in your estate depends on a number of factors. Do you own the policy or policies? Did you hold any incidents of ownership at the time of your death or did you transfer the ownership or incidents of ownership within three years of your death? Also, any insurance proceeds payable to your estate will be included in your estate for estate tax purposes. The value of the insurance is generally the lump-sum amount of the insurance proceeds.
• Stock of closely held corporations. A professional appraisal is usually required. This stock is not often traded and, as a result, is difficult to value. Factors in valuation include: the nature and history of the business, its financial condition, its future outlook, its goodwill, and the market price of the stock of corporations in a similar business.
• Professional practice. This is more difficult to value than other types of businesses because so much is dependent on the professional’s expertise. If, for example, a dentist dies, his or her family can’t simply take over the practice unless a family member happens to be a licensed dentist. The valuation will depend to a great degree on the practice’s client base, fee structure, competition, source of payments, strength of staff, location, and assets.

Regularly putting a value on your estate is a good idea because it allows you to plan for the payment of bequests, debts, and estate taxes. But it is only one step in the estate planning process. Your legal, tax, and financial professionals can help you understand the steps you need to take.

You don’t have to be fabulously wealthy to benefit from a trust. For many people, a trust is a great financial planning tool.

What Is a Trust?

A trust is a legal arrangement between the person who sets up the trust and transfers property to it (the “grantor”) and the individual or institution that agrees to manage the trust assets (the “trustee”). The grantor specifies who is to benefit from the trust (the “beneficiaries”) both during his or her lifetime and at death, if applicable, names the trustee, and spells out in the legal document creating the trust how the trust assets are to be managed and distributed.

What Can a Trust Do?

Trusts can be used for many purposes, including:

• Managing your assets if you become incapacitated. With a revocable living trust, you can stay in control of your assets while you’re able and avoid probate after your death. You can also arrange to have a successor trustee make investment decisions and handle other financial matters for your benefit if you’re no longer able to do so. This arrangement avoids the expense and complications of a court-ordered guardianship or conservatorship.
• Reducing the size of your estate. With a grantor retained annuity trust (GRAT), you transfer assets with the potential for appreciation to an irrevocable trust for the benefit of a child, other family member, or noncharitable beneficiary and retain an annuity interest for a term of years. When the annuity ends, your child (or other beneficiary) will receive the remaining trust assets. If you outlive the trust term, the value of the assets won’t be included in your estate.
• Donating to charity. If you set up a charitable remainder trust (CRT), you receive an income stream from the donated assets for life or a set number of years. Then, at your death or when the trust term ends, the charity you have chosen will get the trust assets. If you set up a charitable lead trust (CLT), the charity you choose receives income from the assets for a period of time that you specify. After that period ends, the assets flow to your family as “remainder beneficiaries.” Both CRTs and CLTs offer potential income tax and estate tax advantages.
• Preserving wealth for future generations. With a dynasty trust, wealth is preserved and generated by cascading through multiple generations. Any income or appreciation generated by the trust assets may be exempt from estate and generation-skipping transfer taxes as long as it remains in the trust and if the laws governing such trusts are satisfied. Typically, your children and then your grandchildren would be the trust income beneficiaries. You also can determine under what conditions your beneficiaries can or cannot receive income from the trust.
• Protecting assets from creditors. When you set up a trust, you can generally include “spendthrift” provisions that prevent your beneficiaries from assigning their interest in the trust to creditors. Putting assets in trust for your child instead of giving them to your child outright may be a good way to provide asset protection in case of a future divorce or major lawsuit.

Your financial and legal professionals can provide more information about the different types of trusts and how they may apply to your situation.