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Giving Like a Rock Star: Legal Tips for Donors on Giving Tuesday

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giving tuesday 2019

After the onslaught of Black Friday advertising and Cyber Monday announcements filling up your inbox, Giving Tuesday (December 3 this year) feels like a breath of fresh (wintery) air from the shopping rush. The “holiday,” often known by its social media tag of #GivingTuesday, is all about celebrating generosity and philanthropy. Giving charitably to your favorite organizations feels great and allows you to make a difference in your community, state, and the world. But, you also want to make sure your gift is legally compliant and beneficial, particularly for those who are “bunching” their donations to claim the charitable deduction on federal income taxes. 

Before you donate on #GivingTuesday (or any other day) consider these legal tips:

Make Sure the Charity is Qualified

A charitable deduction can result in significant tax savings, but for that to occur, the donation must be made to a qualified 501(c)(3). While that may sound basic, some initiatives may look like nonprofits but actually operate as a business, not a tax-exempt organization. A little bit of research can go a long way here. First, read up about the organization in question online and don’t hesitate to call to speak to a representative. You can also use the IRS’ Exempt Organizations Select Check; limit the search to organizations eligible for tax-deductible charitable contributions.

(If your favorite organization is in need of assistance for obtaining tax-deductible status, don’t hesitate to reach out.)

#GivingTuesday What Will You Give?

Sufficient Documentation

Proper documentation is required in order to take the charitable contribution deduction for contributions of $250 or more. This means you need written acknowledgment that expresses the required info of the donee (charity), date of donation, and monetary amount. It’s your legal obligation as the donor to ask for the written acknowledgment, not the charity’s obligation to offer it.

Here’s a simple breakdown of what’s needed for specific types of giving-

  • Gifts of less than $250 per donee — you need a canceled check or receipt
  • $250 or more per donee — you need a timely written acknowledgment from the donee
  • Total deductions for all property exceeds $500 — you need to file IRS Form 8283
  • Deductions exceeding $5,000 per item — you need a qualified appraisal completed by a qualified appraiser

Need more info? I go into detail about appraisers in this blog post.

Is your Favorite Nonprofit Up-to-Date for the Federal Income Tax Charitable Deduction?

Restrict in Writing

If you feel strongly about a specific program, region of operation, or use within the nonprofit, you’ll want to restrict the charitable donation. The restriction must be made in writing, at the same time as the donation is made.

Going Global

#GivingTuesday has expanded greatly since its founding in NYC to become a global event. You may hold a foreign-based charitable organization near and dear to your heart and, of course, you may give to that organization, however, your donation won’t qualify for a charitable tax deduction. 

Donations to Foreign Charities not Deductible for Income Tax

Background Research

I work with my estate planning clients on defining their goals for their future and assets. The same baseline advice applies to charitable giving—what are your goals? Do the organizations you are donating to support your giving goals? Look at materials published by  One way to gauge this is by reviewing the nonprofit’s annual information on its Form 990, “Return of Organization Exempt From Income Tax.” This form is intended for the public and includes important financial info. The IRS publishes Form 990 and it’s easy to check out the details on Guidestar, a nonprofit database.

If you have any questions on how to give charitably and do so wisely, don’t hesitate to reach out. Maximizing charitable giving in Iowa is the mission of Gordon Fischer Law Firm and we want to help as many Iowans give confidently as we can!

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Death & Estate Planning: The Slayer Rule

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slayer rule

In honor of Halloween, I thought it appropriate to explain the ominous-sounding principle of the slayer rule. [Cue a full moon, bats, and a high-pitched cackle here.]

It’s a plot you may come across in murder novels or movies: someone kills someone else in order to inherit money, a house, artwork, or anything else of assumed value. Or, in some cases, the intent might not specifically be an inheritance, but nevertheless, the “slayer” will inherit as a result of the other’s death.

This scheme hits at very core of what most people think is unfair and unjust–why should someone who cuts another’s life short be entitled to benefit from their criminal act? This is why most states have adopted “slayer statutes.”

For example, Iowa adopted such a law (Iowa Code § 633.535) in 1987. It says primarily:

A person who intentionally and unjustifiably causes or procures the death of another shall not receive any property, benefit, or other interest by reason of the death as an heir, distributee, beneficiary, appointee, or in any other capacity whether the property, benefit, or other interest passed under any form of title registration, testamentary or nontestamentary instrument, intestacy, renunciation, or any other circumstance. The property, benefit, or other interest shall pass as if the person causing death died before the decedent.

Note that states differ as to specific provisions and different factors like considerations of an insanity defense, and whether or not a slayer’s heirs are also disinherited. The information in the blog post is meant to speak generally. For slayer rule specifics, it’s important to consult with an experienced attorney in the jurisdiction in question.

Main Principles of the Slayer Rule

Generally speaking, the principle of the rule is that an estate plan beneficiary cannot inherit any property, fiduciary appointment, or power of appointment from a testator who the beneficiary intentionally and feloniously kills. The rule also applies if the beneficiary kills someone else (besides the testator) who had to die before they could inherit. In the case of an estate planning document (like a will), the entire will is interpreted by the court as if the slayer died before the testator. (This causes the gifts to said slayer-beneficiary to lapse.)

What if there is no will? The slayer rule still applies. So in the case of non-probate transfers (like a trust or a checking account with a beneficiary designation) the slayer could not inherit. The same goes if the slayer is an heir at law set to inherit under the state’s intestacy laws.

Legal Phrase of the Day: “Heirs at Law”

What Kind of Killing Triggers the Slayer Rule?

Typically the killing must be: 1) intentional; 2) felonious; and 3) without legal justification, like valid self-defense. Murder and some forms of manslaughter (such as voluntary manslaughter) tend to fulfill these requirements. Negligent homicide and involuntary manslaughter typically won’t qualify, as the slayer lacks the required element of intent.

The Scary Tale of What Makes a Will Valid

For example, let’s say Anna has a son named Billy. Anna’s husband (Billy’s father) had passed away previously and Billy was set to inherit his mother’s entire estate under her will. Billy loved his mom and liked to make sure she still got out and did fun things in her older age. One night Anna and Billy go out to dinner and order some wine. Billy drinks a bit too much, but because his mother’s eyesight is impaired, Billy still chooses to drive his mother home even though he’s impaired. The car crashes and Anna, unfortunately, dies as a result, but Billy lives. Even if drunk driving is a felony in the jurisdiction, Billy lacked the intent element as there’s no evidence that shows he intended to kill Anna. Thus, the slayer statute would not prohibit Billy from inheriting Anna’s estate.

Does There Have to be a Trial and a Conviction?

For the slayer rule to come into play, there doesn’t need to be a criminal trial or a criminal conviction. It is enough for a civil litigation court to find the slayer responsible for the other’s death by a preponderance of the evidence. Interestingly enough, even if an alleged slayer is acquitted of a crime, it does not stop the civil court from applying the slayer rule and barring the inheritance.

That said, if there is a final, unappealable criminal conviction finding the killing to be intentional and felonious, it would establish all the requirements of the slayer rule. There would be no other need for other proof because such a criminal conviction requires proof beyond a reasonable doubt.

Spooktacular Savings on Probate Fees

 Smart Estate Planning 

Of course, the odds that the slayer rule will apply to most of our estates is (thankfully) extremely rare. But it’s analogous to a more common situation — the beneficiary dying before the testator. An issue that then complicates donative intent is if the testator fails to or doesn’t have time to update their estate plan and there’s no remainder (or back-up) beneficiary to inherit instead. When working with an experienced estate planner it’s a wise idea to name secondary beneficiaries, as well as “back-up” will executors or trust trustees. That way distribution or administration of your hard-earned assets is not left up to the court.

Beneficiaries, Executors, and Guardians, Oh My!

Questions about the slayer rule or other somewhat obscure estate planning laws? Need to get started on your estate plan? Don’t hesitate to contact me for a free consult!

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Podcast Recommendation: The Thing about Pam

I love a good podcast. They’re perfect for diving into a story or learning about something new while driving, walking, or just chilling on a quiet weekend morning. Don’t worry. I’m not here to suggest an estate planning podcast. (While I would queue that up, not many people share my affinity for the nuances of trusts and estates.) However, Dateline NBC‘s new podcast, “The Thing About Pam” does involve some estate planning aspects. I don’t want to give away the true-crime plot as it’s super interesting and definitely a bit spooky, which is fitting for Halloween, but life insurance policies play a major role in a few ways.

The Thing About Pam

the thing about pam

Allegedly, a victim was killed just four days after changing the beneficiary to her life insurance premium (around $150,000). Furthermore, an elderly woman with dementia supposedly fell off a balcony and the beneficiary received around $100,000 from the senior citizen’s life insurance. Perhaps not so coincidently, the same person was the beneficiary of both life insurance policies⁠—and both policyholders died under suspicious circumstances.

Life insurance was also used at a suspect’s homicide trial as one of the main motives for premeditated murder.

For fans of true crime tales, there’s a lot to unpack in this podcast and for Iowans, in general, it’s a good reminder about the role life insurance beneficiary designations work with your estate plan.

Don’t Forget About Beneficiary Designations

Quick Lowdown on Life Insurance

Life insurance is a vehicle for non-probate wealth transfer. This means that life insurance passes outside of probate (the legal procedure by which a decedent’s estate is distributed) to the beneficiary named on the policy. Multiple persons can be named, but generally, most policies don’t allow for class beneficiaries such as “my children” or “my nephews.”

Life insurance can be a great tool to provide estate liquidity and achieve estate planning goals such as passing along a family allowance for surviving spouses and dependents. Life insurance can provide debt relief, income replacement, and be a step toward wealth accumulation. Additionally, proceeds are paid to beneficiaries income tax-free!

Where life insurance can get complicated or leave intended beneficiaries named elsewhere in estate planning documents without remedy is where the policyholder passed away and left someone no longer a part of their life as a named beneficiary.

6 Simple Tips for Beneficiary Designations

For instance, let’s say Annie had named her ex-husband Bob as her life insurance beneficiary back before they got divorced. Divorce does not automatically remove an ex from the policy. Because most life insurance policies are revocable (meaning the policy owner could change the beneficiary at any time) Annie could have changed the beneficiary designation, but for whatever reason forgot to. Consequently, Bob takes the life insurance money, despite the fact that Annie, at the time of her death, would have likely preferred to name someone else (like her brother Cam or niece Deb) on the policy. and then died without ever changing it.

Smart Estate Planning

In the world of wills and trusts, planning ahead means planning for many different scenarios to ensure that your property passes to who you want when you want. Of course, no one (like the victim in the recommended podcast) tends to think their life insurance policy will be part of litigation (or a criminal murder case for that matter), but that’s why it’s important to enlist an estate planner who can analyze the whole picture, not just individual pieces.

Estate Planning Basics: What You Need to Know, but Were too Bored to Ask

I offer a free estate planning consultation as well as this free estate plan questionnaire to help you get started on the important set of legal documents. I’d also love to hear what you think about the podcast and get your recommendations for other great series to listen to! Contact me via email or by phone at 515-371-6077.

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Estate Planning Scenario: Death During Real Estate Sale

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real estate keys to house

It’s National Estate Planning Week (I know you’re as excited about it as we are!) which is a good excuse to bring up a hypothetical scenario: what happens, in terms of estate planning, if either the buyer or seller in a sale of real estate (like a house or land) dies before the closing?

It’s a situation that is fairly improbable, but it can and does happen. Plus, it’s good to explore just in case you ever find yourself dealing with this as the executor of a loved one’s estate.

Let’s say that you’re buying a house and you’ve already executed the contract (a purchase agreement) with the seller. Before the closing date, the seller passed away. What happens to the property? How does it fit into the seller’s estate plan? What is the executor responsible for? It’s easy to see how this can be a complicated conundrum.

National Estate Planning Awareness Week & a Brief History Lesson

Equitable and Legal Title

At this point, after the purchase agreement is drawn up and before the closing, you as the buyer hold an equitable title in the real property (the house). Equitable title is legal parlance meaning here that the buyer has a right to obtain full ownership of a property (or property interest). Equitable title comes with certain rights. For example, the seller can’t sell the property to a third party or subject the property to an encumbrance or a lien that would interfere with the buyer’s property interest.

Legal title, in comparison, is actual ownership of the land. In the period between the sale agreement and the closing, the seller holds the legal title to the property being sold. Legal title transfers to the buyer when the final payment is made (typically this is done at the closing or through an escrow process when the buyer receives the property deed in exchange for the payments made).

Like our hypothetical, if the seller dies during this point in the sales process this legal title in the property is a part of the seller’s estate. That means the seller’s estate can still sell the property (and is contracted to do so), collect the profit from the sale, and then disperse the profits as part of the decedent’s total gross estate to the beneficiaries.

Think Estate Planning is Just for the Wealthy? Think Again!

What About the Seller’s Heirs?

The seller’s heirs-at-law and/or estate plan beneficiaries may have expected to inherit the house. But, if the seller entered into a valid contract for sale before they died, the estate’s executor is bound to honor the contract.

Note that sometimes there are required waiting periods where the executor must wait before executing documents for the estate (such as the sale of real estate). So, as the buyer, you can anticipate a reasonable time delay (think 30 days) compared to the schedule set out in the purchase agreement.

Of course, there are many rules of real estate and contract law that come into play, but in terms of property and how it plays into the estate planning process, these are the basics!

Ultimate Estate Planning Checklist

Enlist an Estate Planning Attorney to Help Everything Run Smoothly

If you do find yourself in the position of being the executor of a seller’s estate and that seller died in the midst of a real estate sale, don’t hesitate to enlist the expertise of an estate planner to help guide you how to best accommodate and fulfill your fiduciary duties.

9 Reasons You Need a Lawyer to Write your Estate Plan

On a related point, if you sell your house or purchase a new property, it may necessitate updates to your estate plan! Review your plan and then schedule a free consult to ensure all of your assets are properly accounted for in your plan.

Any questions about your specific estate planning situation? Contact GFLF at gordon@gordonfischerlawfirm.com or by phone,515-371-6077.

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National Estate Planning Awareness Week & a Brief History Lesson

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this week calendar

Believe it or not, National Estate Planning Awareness Week is a very real thing and we’re celebrating October 21-27! Let’s kick it off with a brief history on the Week and estate planning in general.

Background on National Estate Planning Awareness Week

National Estate Planning Awareness Week was an effort spearheaded by the National Association of Estate Planners & Councils (NAEPC) and Rep. Mike Thompson (D-CA) (with 49 other Representatives on board).  In September 2008, Congress passed H. Res. 1499 which designated the third week in October as a week for assisting the public in understanding the importance and benefits of estate planning, as well as how to assemble a qualified team of experts to assist in the process.

In general, it’s in the best interest of society when the transfer of wealth and property is as seamless and as close to the decedent’s intent as possible. That’s where estate planning comes in and why it’s so essential.

Sure, you won’t see decorations for sale for National Estate Planning Awareness Week…but you can still celebrate by discussing your estate planning needs and goals with a qualified, experienced estate planning attorney. This goes for your first (much needed) estate plan, but also revisions on existing estate plans. (Remember, estate plans never expire!)

5 Scenarios for Estate Planning Revisions

Time Warp: A Brief History of Estate Planning

For as long as people have had property, that property has been distributed or passed along in some manner or another. In early cultures property was considered to be owned collectively by a family or tribe and when a leader of the group perished the assets were divided in accordance with family/tribal customs.

Estate planning was apparent in ancient Rome under the Code of Justinian which recognized oral and written wills that were approved by a public official. In the Anglo-Saxon period of England, royalty had to approve land transfers. That changed in the 12th century when property would automatically pass to the eldest son. Under English law, the Statute of Wills was established in the 16th century which allowed a landowner to pass along their land as they wished, whether that was to the eldest or not.

Current state intestacy laws are a modern iteration of British common law in which property inheritance passed to the spouse and children in pre-defined percentages.

Unfortunately, women were often excluded entirely from estate planning; assets were only distributed amongst male heirs at law and women were disinherited. At certain points throughout history, women (such as a wife or daughter) could be provided for through a trust upon the death of the husband/father, but often that trust was dissolved if/when the woman married/remarried. Thankfully policy and society progressed, and now women and men have an equal right to inheritance and ability to convey assets.

(Legal) Word of the Day: Trust

To that point, the individual American citizen of today has the freedom to plan for the distribution of property as wished without approval needed or mandate defining who can and cannot be a beneficiary.

Estate Planning in the United States

Statue of Liberty

In U.S. history, estate planning has been intricately linked with estate taxes because estate planning techniques are tools to reduce or even eliminate the Federal estate tax. To understand that in full you could go all the way back to the Stamp Act of 1797, where a tax was passed to fund the Navy in an “undeclared war with France.” The estate tax was subsequently abolished and then reinstated with corresponding wars including the Civil War and Spanish American War.

The estate tax, more or less as we think of it today, was instituted in association with World War I in 1916. To bypass this, people would gift parts of their estates to their families to which the lawmakers responded to by passing a gift tax in 1924. It was briefly repealed and then re-enacted in 1932 and remained that way until 1976 when the gift and estate tax were consolidated.

In modern political history, the estate tax has seen a few major changes; it was entirely revoked in the 2010 calendar year after 2001 legislation phased out the tax. However, that didn’t last long. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 meant a return of the estate tax but raised the exclusion to $5 million for 2011 and 2012. Then came the American Taxpayer Relief Act of 2012 which kept the $5 million inflation-adjusted exclusion figure, but increased the maximum rate of the tax to 40 percent from 35 percent. In 2018, the exclusion rate sits at $11.18 million per individual. This means an individual can leave $11.18 million to heirs and pay no federal estate or gift tax. Married couples get an exclusion for each spouse, so a couple can leave up to $22.36 to their heirs and IRS won’t collect estate tax on it.

What the New Tax Law Means for Your Estate Plan

Final Footnote

All of this history is to say that estate planning, in some form or another, has been an important aspect of societies in the world for a long time. Regardless of the size of your estate, and just like the ancient Romans or Americans of the early 1900s, you want to pass along your assets to the people you care about and want to provide for. Claim your right to distribute your property in accordance with your wishes by ensuring you have an up-to-date, quality estate plan. The best way to get started is with my free (and no obligation) Estate Plan Questionnaire. It’s a great tool for organizing all the important information you and your estate planner need to know when creating your custom estate plan.

Think Estate Planning is Just for the Wealthy? Think Again!

This is the first of a week’s worth of articles all dedicated to the topic of estate planning as a part of National Estate Planning Awareness Week. Want to discuss your estate plan or talk about the history of the estate tax? Don’t hesitate to contact me.

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Read GoFisch: September 2019 Edition of GFLF’s Newsletter

woman reading on phone

The September edition of GoFisch is live! This month’s edition features:

Like what you read? Don’t forget to subscribe to GoFisch and tell your friends. I like to think of it as the least boring law firm newsletter you could hope to read!

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Back to School: Latin Lesson on Gifts Causa Mortis

hourglass in sand
Here on the GFLF blog we talk a lot about the transfer of property made at the time of death through estate planning tools like a will, disposition of personal property document, or a trust. Everyone needs an estate plan to most effectively and seamlessly transfer real property (think land and real estate) and personal property (think jewelry, art, all of your “stuff”) to the people and charities you care most about. These are all called testamentary gifts. (Think “last will and testament” if that makes it easy to remember.)
As you probably know all too well, you can also make gifts to other people during your lifetime. These are called inter vivos gifts if you want to be lawyerly with it. This one’s easier to think about because you’ve been giving gifts for holidays, birthdays, weddings, and anniversaries regularly. You can also make gifts while living of cash, real estate, land, stocks/bonds, and other non-cash assets to charitable organizations.
One specific type of inter vivos gift doubles down on the Latin–it’s called a gift causa mortis. This type of gift is made by the donor while they’re alive in the event of impending death. Causa mortis in Latin translates to “because of death.” Sometimes this type of gift is referred to as a deathbed gift. The most common kind of gifts causa mortis tend to be small, valuable and/or meaningful gifts like a wedding ring.
To make this more salient, consider the scenario where Abe was in a severe accident and is aware that he is going to pass soon. Abe turns to his son Bob, who rushed him to the ER, and tells him that he wants him to have his watch. He takes it and gives it to his son Bob and then gets rushed into surgery. This is a simple example of a gift causa mortis.
Now, with out amateur Latin lesson complete, let’s dive into the elements of the rules related to gifts causa mortis.
woman blowing on a dandelion

Elements of Gifts Causa Mortis

A valid inter vivos gift involves:

  1. intent by the donor facing imminent to donate;
  2. delivery of the gift; and
  3. acceptance by the donor.

Delivery of the Gift

The gift must be delivered to the recipient. That’s easy if it’s something handheld like jewelry that you’re wearing, but what about anything that the donor doesn’t have on them personally? So long as the “delivery” is sufficiently symbolic, that will suffice if physical delivery at the time of the gifts is impractical.

woman giving white rose

Another Hypothetical

Let’s say a donor wanted to make a gift causa mortis of an antique piece of furniture to their niece. At the time the donor was residing in a hospice facility and very clearly toward the very end of her terminal illness. It would be impractical for the law to expect the dying donor to physical deliver the furniture to her niece. As long as the donor gave the niece a symbolic representation of the gift, such as writing out the details of the furniture’s location and details in the presence of a witness, it would likely be found valid upon the donor’s passing.

Another example that applies arose out of a case where a donor’s delivery was found to be valid where she signed the back of her car’s certificate of title to gift the automobile to her brother.

Can I Get a Witness?

To avoid post-mortem litigation by other heirs-at-law or the decedent’s estate’s executor, it’s preferable if the delivery of the gift is witnessed by a third party who can attest to the validity of the gift. Additionally, if there is an option for a piece of writing to be made out detailing the gifts and signed in the presence of a third party, that’s even better.

Revocable  & Conditional

Gifts causa mortis are revocable, which means that the donor (the gift giver) can revoke the gift at any time (while still alive). This revocation can be completed unilaterally, with only the donor. This is different than an inter-vivos gift, which when completed, is completely irrevocable.
person giving wedding bands
Gifts causa mortis are also conditional on the donor’s death, meaning the gift giver actually has to perish before the donee’s ownership is valid.
Taking it back to our story with Abe and his son Bob: if Abe gave his watch to Bob before surgery with the imminent expectation of dying soon, but ended up living through the surgery, the gift is no longer valid and automatically revoked. Of course, Abe could choose to make an inter-vivos gift to Bob if he decided to do so.
Additionally, if the recipient dies before the donor, then the gift is revoked and the beneficiary’s estate has no claim to the property.

Imminent Death

tombstone close-up
For a valid gift causa mortis, the donor has to die imminently…what constitutes “imminent death?” This has been debated in different cases. What’s clear is the gift giver doesn’t have to die immediately, like seconds after the gift is given. But, the donor must pass away from the danger or condition that was present at the giving of the gift. Plus, it doesn’t “count” if the donor has a fear that they might die at some vague point in the future.
Intervening Recovery
Additionally, there must be no intervening recovery between the gift and death.
Back to our hypothetical: let’s say Abe goes into surgery and survives from the injuries relating to his accident. At this point the gift of the watch is invalid. Abe may unfortunately go on and pass away from a different condition a few months later, but the previous gift causa mortis of the watch is not suddenly valid just because Abe eventually died.

What’s the Difference Between Gifts Causa Mortis and Testamentary Gifts?

Typically gifts causa mortis are informally made in the moment, are not planned to the same extent or formally written out like testamentary gifts. In the majority of states, gifts causa mortis are immediately transferred to the recipient’s ownership after death, whereas gifts made through a will or testamentary trust transfer ownership after the probate process is complete. Additionally, gifts causa mortis can only be made of personal property, not real property like your house or farmland.

How do Gifts Causa Mortis Fit into Taxes?

Similar to testamentary gifts, gifts causa mortis are taxed under federal estate tax law. The policy behind this is because the gifts aren’t complete until the donor’s passing. (Note well that the federal estate tax also applies to general inter vivos gifts made within three years of death. This means the value of such gifts is included in the estate in order to calculate the estate taxes.) It’s also worth noting that the federal estate tax applies to so few people now after the passage of the Tax Cuts and Jobs Act, so you don’t really to be concerned about this!
dying bouquet of flowers

Final Words on Gifts  Causa Mortis

Gifts Causa Mortis or not, there is no substitute for an airtight, updated estate plan. If you have such a plan in place, there’s no need to try and meet all the elements and intricacies of gifts causa mortis.

None of us know when our time will come, and we may not have the opportunity to give away our prized possessions via causa mortis right before death. But, we can know that estate plans never expire and can give you peace of mind that your property will be pass to the people you intend without legal contest (which can arise from gifts of causa mortis).

No questions are dumb questions when it comes to the complex world of property and estates. Don’t hesitate to contact GFLF or schedule a free consult to get your estate planning needs and goals in order.

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Let’s Head Back to School! First Lesson is on Planned Giving

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September calendar

Recently my social media feeds were alight with friends and family member’s grinning kiddos holding signs announcing their first day of a new grade. It made me nostalgic! While I wouldn’t want to repeat law school all over again, I do think it’s never too late to head back to the classroom—proverbial or real. So, the GFLF is heading back to school with lessons in English (like legal words/phrases of the day), reading (GoFisch book club) history, finance and the like. Today’s lesson on planned giving crosses over between business and economics, and it’s super important for donors of all gift amounts and nonprofit pros alike.

Back to school

What is planned giving?

Planned giving is the process of charitably donating planned gifts. A planned gift is a charitable donation that is arranged in the present and allocated at a future date. A planned gift is often, but not always, donated through a will or trust. (I would say this is true 80-90% of the time; put another way, planned gifts are bequests 80-90% of the time). As such, planned gifts are very often granted after the donor’s death.

Charitable Giving: As American as Apple Pie

Besides charitable gifts made through wills and trusts after death, other planned gifts include charitable gift annuities; charitable remainder trusts (along with the entire alphabet soup of CRATS; CRUTS; NIMCRUTS; FLIPCRUTS; etc.); charitable lead trusts, and remainder interest/life estates in real property. All these gifting tools/techniques/vehicles I’ve discussed previously, sometimes numerous times.

What is a Nonprofit?

  • You give $20 to a person you meet on the street who lost his bus ticket home.
  • At your local gas station, there is a collection jar for a local child with leukemia. You donate your change.
  • You leave money in your will for your niece Jane, hoping she uses it to continue her collegiate studies in engineering.
  • You have a neighbor who suffers from dementia. You and your friends decide to have an informal walk to raise awareness about the disease and raise money for your neighbor’s health care needs.

While noble, these are not examples of “charitable giving,” as we use the term here. In this context, we are talking about charitable giving to an organization formed under 501c3 of the Internal Revenue Service Tax Code. A 501c3 agency can be known by several terms in general usage, including “nonprofit organization” and “public charity.” For simplicity’s sake, we’ll use the term nonprofit throughout.

Nonprofit Policy Special: 10 for Form 990

Nonprofits cover an extremely broad swath of types of organizations, including schools, churches, hospitals, museums, social services organizations, animal welfare groups, and community foundations.

Nonprofits Must Embrace Planned Gifts

Sometimes nonprofits are overwhelmed at the thought of expansive planned giving because of the number and complexity of some of the planned giving vehicles. How does this match up when you want to donate a less obvious gift than cash, such as stocks and bonds or grain? Nonprofits need to expand their ability to accept gifts of many varieties for at least three reasons:

Craft Beer Factor

The first reason I call the “craft beer factor.” (Bear with me here for a moment). I’m old enough to remember when there were just two kinds of beer. Don’t believe me? You should, as it was immortalized in one of the most famous advertising campaigns of all time–“tastes great, less filling!” This ad campaign strongly implied there were really just two types of beers.

craft beer on table

Then came the craft beer movement. I’m not sure whether craft beers were a response to consumers, or whether craft beers created a demand; presumably both. In any case, now a place like Toppling Goliath Brewing Company in Decorah, Iowa, has about thirty varieties of beers (this is based on an informal count from their website).

Now any retail establishment which sells beer must offer lots and lots of different kinds of beer. Any retail establishment which isn’t able to offer its customers wide variety risks irrelevance, or worse.

This is true not just of beer, but of everything. Another quick example– McDonald’s has around 145 menu items, that’s up from about 85 items in 2007. Also, McDonald’s now offers breakfast items not just in the morning, but all day-long.

Consumers want what they want, when they want, how they want.

Donors expect and often demand the opportunity to use many different options to assist their favorite charities. No longer can nonprofits simply ask folks to pony up cash, or just accept credit cards. Donors want to be able to converse with their fave charity and discuss using their whole portfolio. Nonprofits need to be able to accept, and intelligently discuss, gifting of many different types of non-cash assets.

A nonprofit which doesn’t offer its supporters a wide variety of giving options risks irrelevance, or even worse fates! So, as a donor, if you’re interested in donating an asset that your favorite nonprofit doesn’t typically facilitate, connect them with an experienced nonprofit attorney to make the gift a reality.

Planned Gifts Consist Overwhelmingly of Bequests

Second, planned giving is still mostly about wills and trusts. As already stated, I estimate 80-90% of planned gifts are bequests. Simple! Nonprofits should put substantial efforts to encouraging increased, larger testamentary bequests. Donors who already have an estate plan, but didn’t realize they could designate their favorite organizations as beneficiaries should contact an estate planning attorney.

YOU Are a Super Hero: Charitable Giving Through Estate Planning

Everyone can Understand Planned Giving!

Be it strategies for a monthly giving program or facilitating complex planned giving vehicles like NIMCRUTs, the opportunities for continuous learning about different planned giving technique are seemingly endless! And, there are so many different options, that all donors should feel great about supporting their fave causes with tax-wise gifts that work best for them. I strive to offer free information that breaks down different aspects of planned giving in human terms, as well as promoting community opportunities/events for nonprofit professionals.

heart on blue wood

Still need help understanding planned giving or any particular tool or technique? Want assistance coordinating a complex gift? Reach out to me anytime. I offer a free one-hour consultation to anyone and everyone. You can contact at my email (gordon@gordonfischerlawfirm.com) or on my cell (515-371-6077). I’d truly love to hear from you.

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In Trusts We Trust: Everything You Need to Know to Get Started

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If you’re unsure of what a trust is and how it works, you probably don’t have one. And, if you don’t have a trust, you’re not alone. About 57 percent of U.S. adults don’t have an estate planning document like a will or a trust even though they believe having one is important.

What Is a Trust? How Does It Work?

If you haven’t stopped to consider how a trust might help ensure that your wishes are followed and your assets are handled, you could be making a critical estate planning mistake.

A trust is simply a legal agreement among three parties—settlor, trustee, and beneficiary—that provides instructions on how and when to pass assets to the trust’s beneficiaries. Let’s look at the role of each of these three parties, and then delve into how trusts work.

Settlor

A settlor—sometimes called the “donor, “grantor,” or “trustor”—is the person who creates the trust and has the legal authority to transfer assets into it.  

(Legal) Word of the Day: Settlor (AKA Donor or Grantor)

Trustee

The trustee is the person who agrees to accept, manage, and protect the assets delivered by the settlor. The trustee has a fiduciary duty to administer the assets according to the trust’s instructions and distribute the trust income and principal according to the rules outlined in the trust document and in the best interests of the beneficiary.

A trustee can be one, two, or more people. A trustee can also be what is known as a “corporate trustee,” such as a financial institution (like a bank) or a law firm that performs trustee duties and charge fees for their services. There are no formal requirements for being a trustee and nonprofessionals frequently serve as a trustee for family members and friends.

What Is a Trustee & What Do They Actually Do?

Beneficiary

The beneficiary is the person or entity benefiting from the trust. The beneficiary can be one person or entity or multiple parties. Also, trust beneficiaries don’t even have to exist at the time the trust is created (such as in the case of a future grandchild or charitable foundation that has not yet been established).

Trust Beneficiary: Break it Down

Trust Property

A trust can be either funded or unfunded. “Funded” mean that the settlor’s assets—sometimes called the “principal” or the “corpus”—have been placed into the trust. A trust is unfunded until the assets are in it (failing to fund a trust is a common estate planning mistake). 

Trust Assets

Trusts can hold just about any kind of asset: real estate, intangible property (like patents), business interests, and personal property. Common trust properties include farms, buildings, vacation homes, stocks, bonds, savings and checking accounts, collections, personal possessions, and vehicles.

“Imaginary Container”

Think of a trust as an “imaginary container” that holds and protects your assets. After the trust is funded, the trust property will still be in the same place before the trust was created—your land where it always was, your artwork on the wall, your money in the bank, your comic book collection in the den. The only difference is the asset will have a different owner: “The Jane Jones Trust,” rather than Jane Jones.

Estate Planning: What About Trusts?

Transfer of Ownership

Putting property in a trust transfers it from personal ownership to the trustee, who holds the property for the beneficiary. The trustee has what is called “legal title” to the trust property and, in most instances, the law treats trust property as if it were now owned by the trustee. Each trust has its own taxpayer identification number, just like an individual.

But trustees are not the full owners of trust property. Trustees have a legal duty to use trust property as directed in the trust agreement and as allowed by law. The beneficiaries retain what is known as “equitable title”—the right to benefit from trust property as specified in the trust.

Assets to Beneficiary

The settlor provides terms in a trust agreement directing how the fund’s assets are to be distributed to a beneficiary. The settlor can provide for the distribution of funds in any way that is not against the law or against public policy. The near-limitless flexibility of trusts is a primary advantage for setting one up.

Calling all Word Nerds: 9 Terms to Know About Trusts

Types of trusts

A joke among estate planners says that the only limit to trusts is the imagination of the lawyers involved.  It’s true, though, that the number and kind of trusts are virtually unlimited.

Let’s start by taking a look at the four primary categories of trusts:

Inter vivos and Testamentary Trusts

Trusts that are set up during the settlor’s lifetime are called “inter vivos” trusts. Those that arise upon the death of the settlor, generally by operation of a will, are called “testamentary” trusts. There are advantages and disadvantages to both types of trusts, and how one decides depends upon the goals and purposes of the settlor.

Revocable and Irrevocable Trusts

Inter vivos and testamentary trusts can be broken down into two more categories: revocable trusts and irrevocable trusts. A revocable trust can be changed at any time during the settlor’s lifetime. Second thoughts about a provision in the trust or about who should be a beneficiary might prompt modification of the trust’s terms. The settlor can alter parts of the trust or revoke the entire thing.

Show Your Kids You Love ‘Em with a Testamentary Trust

Irrevocable Trust

An irrevocable trust is a type of trust that can’t be changed by the settlor after the agreement has been signed and the trust has been formed and funded. The terms of an irrevocable trust can’t be modified, amended, or terminated without the permission of the settlor’s beneficiary or beneficiaries.

A revocable living trust becomes irrevocable when the settlor dies because he or she is no longer available to make changes to it. But a revocable trust can be designed to break into separate irrevocable trusts at the time of the grantor’s death for the benefit of children or other beneficiaries.

You might wonder, “Why make a trust irrevocable? Wouldn’t you want to maintain the ability to change your mind about the trust or its terms?”

Not necessarily.

Irrevocable trusts, such as irrevocable life insurance trusts, are commonly used to remove assets from a person’s estate and thus avoid them being taxed. Transferring assets into an irrevocable trust gives those assets to the trustee and the trust beneficiaries forever. If a person no longer owns the assets, they don’t comprise or contribute to the value of his or her estate and so they aren’t subject to estate taxes upon death.

Revocable living trusts

There is no “one size fits all” trust—different kinds of trusts offer different benefits (and drawbacks) depending on a person’s circumstances. Age, number of children, health, and relative wealth are just a few of the factors to be considered. The most common trust my clients use is a revocable living trust, sometimes referred to by its abbreviation, “RLT.”

What the Queen of England can Teach us about Trusts

A revocable living trust—created while you’re alive and that can be revoked or amended by you—has three advantages over other kinds of trusts:

 1. Money-Saving

Establishing a revocable living trust helps avoid costly probate—the legal process required to determine that a will is valid. Probate generally eats up about two percent (2%) of an estate, which can add up to a chunk of change you’d probably rather see go to your beneficiaries.

Avoiding probate also means avoiding other fees, such as court costs, that go along with it.

2. Time-Saving

A revocable living trust not only eliminates the costs of probate, but the time-consuming process of probate as well. Here in Iowa, probate can take several months to a year, or sometimes even longer, leaving beneficiaries without their inheritances until the very end of the probate process. The transfer of assets in a trust is much faster.

3. Flexibility

Don’t want your 16-year-old niece to inherit a half-million dollars in one big lump sum? I agree it’s probably not a good idea.

A revocable living trust offers flexibility for the payout of an inheritance because you set the ground rules for when and how distributions are made. For example, you might decide your beneficiaries can receive certain distributions at specific ages (21, 25, 30, etc.), or for reaching certain milestones, such as marriage, the birth of a child, or graduation from college.

last will and testament

Drawbacks

Despite the significant advantages of establishing a revocable living trust, there are drawbacks people should be aware of

For starters, trusts are more expensive to prepare than basic estate plan documents such as wills. However, the costs associated with sitting down with a lawyer and carefully putting in place a trust is, in my opinion, greatly outweighed by the money your estate will save in the end.

Creating a trust can also be an administrative bother at the start of the process because assets (farm, business, stock funds, etc.) must be retitled in the name of the trust. But, all things considered, this is a small inconvenience that is greatly outweighed by the smooth operation of a trust when you pass away.

You Can Trust me to Talk About the Best Trust(s) for You

Interested in learning more about trusts or questioning if you need one? Feel free to reach out at any time by email, gordon@gordonfischerlawfirm.com, or on my cell, 515-371-6077. If you want to simply get started on an estate plan (everyone needs at least the basic documents in place!) check out my estate plan questionnaire, provided to you free, without any obligation.

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How a Letter of Instruction Works with your Estate Plan

letter of instruction

When I prepare estate plans for my clients, they typically include six key documents. For more complex estates, the plan may also involve trust and/or business succession documents. However, to make estate planning as simple and the least chaotic for your loved ones tasked with fulfilling your wishes, I also recommend drafting another document: a letter of instruction.

What Exactly is a Letter of Instruction?

Think of a letter of instruction like an easy-to-read-and-understand summary shortcut for your estate plan’s executors and representatives. Its main purpose is to help guide the person(s) settling an estate through the process, step-by-step, in plain, clear language.  The letter can serve as a cheat sheet of sorts. It’s not legally required and certainly doesn’t take the place of a valid will, but it’s a meaningful nod to those you have tasked with handling your affairs.

Avoid the Worst Case Scenario: Litigation over an Estate Plan

Your letter of intent doesn’t have to go by any specific form or outline, so some people tend to use it as a way of giving personal instructions and giving details beyond what is articulated in your estate planning documents. A useful letter of intent can include the following information:

  • Location(s) of:
    • Important papers such as birth certificates, any divorce/marriage certificates, citizenship papers, etc.
    • Estate plan.
    • Titles and/or deeds to real estate and rental property.
    • Recent copies of all financial statements like tax returns and other potentially important legal documents.
    • Safety deposit boxes and the respective keys.
    • Tangible property that may not be readily accessible
  • Names, passwords, account numbers, and PIN numbers for financial accounts.
  • Social security number.
  • Contact information for:
  • Instructions for the care of any pets. (You may also want to establish an animal care trust.)

6 Estate Planning Resolutions You Can Actually Keep

Regular Updates & Safe Storage

Like your other estate planning documents, the letter of instruction should be reviewed annually and updated as needed. Because the letter of intent includes confidential personal information it should be stored in a secure place that can also be accessible by your estate plan’s executor.

Estate Planning: On Valentine’s Day Skip the Heart Box & Go for Secure Storage

But First, an Estate Plan!

Before you go about drafting a letter of intent, it’s important to place a priority on executing an estate plan that helps you meet your goals and define your legacy. My free, no-obligation Estate Plan Questionnaire (the first of the six key estate planning documents) is a great place to get started. Otherwise, contact me by phone or email with any questions and to discuss which estate planning strategies may be best for you and your family.

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