Suppose a person has a total estate of $3,000,000 but only $200,000 of it is governed by his will. If he includes in his will a charitable bequest of 10 percent of his residual estate, the charity would receive no more than $20,000, which may be far less than he intended.
Such a scenario is far more likely than one might imagine. Consider what the following assets have in common:
- Real estate and bank accounts held in joint tenancy.
- Bank and brokerage accounts transferable on death to a beneficiary.
- Life insurance proceeds payable to named beneficiaries.
- Retirement benefits payable to a spouse, children, or others.
- Property held in trust.
The answer is that none of these assets is controlled by your will. They all transfer directly to the joint tenant or named beneficiary. If you neither owned nor had an interest in assets other than those on this list, your will would have no effect—and the intended beneficiaries of your will (charitable and otherwise) would get nothing. Of course most of us do own other assets that are governed by our will. These include:
- Property of any type owned in your name alone.
- Your interest in property owned by you and others as tenants-in-common.
- Payments owed to your estate (compensation, for example) because of your death.
- Proceeds payable to your estate from life insurance policies and retirement plans.
Because we likely have assets on this second list, it is important to have a will. When developing an estate plan, it is essential to coordinate probate assets (those that pass under your will) and non-probate assets (those that pass outside your will). Failure to do this can result in unintended inequities. For example, a father wanting to divide his estate equally between his two daughters made one a joint tenant of his personal residence for ease of transfer but named them as equal beneficiaries under his will. The one daughter received the residence, which was a large share of the estate, plus one-half of the other assets. This resulted in a rupture in the sisters’ relationship.
If you are planning an end-of-life gift to our organization, you will want to consider which assets might be the source of that gift. Keep in mind that there are ways of doing this other than, or in addition to, providing a charitable bequest. Here are three:
- You could name our organization as a beneficiary of remaining retirement funds (a type of gift that has significant tax advantages).
- You could make us a beneficiary of a life insurance policy.
- You could sign a transfer-on-death beneficiary form for a bank or brokerage account.
We can help provide suggested language that would accomplish your philanthropic objectives. Contact us today.