Orlando Estate & Elder Law

Deductions for Donations to Wealthy Colleges May Disappear

Many are concerned that the costs of going to college are too high for the average American family. A new proposal would make some colleges bring down costs by going after their donations.

One of the issues during the 2016 Presidential campaign was the high cost of getting a college education and paying off student loan debt. The various candidates made many different proposals ranging between making all public colleges free to changing how student loans are paid off.

The winner of the election, Donald Trump, did not make a specific proposal on how to make college more affordable, but he did propose changes to the student loan program.

He might have a cost proposal on his desk before long, according to Private Wealth in "Rich College Donors' Tax Break Suddenly in Danger"

One of the issues with the cost of college is that some of the most expensive schools are also the wealthiest since they have large endowments. Some reform advocates have suggested that the schools should use their endowments to defray more tuition costs for middle-class students.

Republicans in Congress will soon vote on a proposal to do just that.

The idea from Tom Reed, a congressional Republican, is that 25% of any donations to a school with an endowment over $1 billion must go to financial aid or the donor will not receive a tax deduction for the gift.

President-elect Trump has not endorsed this proposal, but Tom Reed is the vice-chair of Trump's transition team. If this passes, then wealthy donors will need to revisit their estate plans and any planned gifts to universities.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Private Wealth (January 5, 2017) "Rich College Donors' Tax Break Suddenly in Danger"

Suing Over Charitable Pledges?

A lawsuit brought by Duke University has brought media attention to charitable pledges and whether they are enforceable against an estate.

It is common for wealthy people to make pledges to donate money to charity at some future date. Doing so gives the wealthy person time to come up with the liquid assets to donate, if necessary, and lets the charity know when to expect donations.

It also allows donors to keep their assets and profit off them in the time between when the pledge is made and when it is fulfilled. However, what happens if the pledge is not fulfilled?

The answer to that question has been in the news recently as Duke University filed a lawsuit against the estate of Aubrey McClendon and her $10 million unfulfilled pledge.

The Wills, Trusts & Estates Prof Blog looked at some ways a court might decide to enforce the pledge in "History of Charitable Pledges."

Basically, courts will first look to see if there is an enforceable contract, either bilateral or unilateral. Failing that, the court might try to use a legal doctrine known as “promissory estoppel.” In layman's language that means something like, "You made a promise and the other party relied on it. You received some benefit from your promise, so you should not be able to disavow it."

The bottom line is that the legal system has a public policy preference of seeing that charitable pledges are fulfilled and will seek legal ways they can be enforced.

For more information on estate planning including charitable planning  in Orlando and throughout Central Florida, visit our estate planning website and be sure to subscribe to our complimentary informative e-newsletter while you are there.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 9, 2016) "History of Charitable Pledges."

A Schoolteacher from Kansas City Left Small Fortune to Jesuits

That a schoolteacher from the Kansas City area left the bulk of her estate to the local Jesuits did not come as a big surprise to anyone, but the size of her estate surprised everyone.

For people who knew Anna Kurzweil there was no indication that she was a wealthy person. She grew up on a farm outside of Kansas City and went to work as a teacher after graduating from college. During World War II she went to work in a factory that produced airplane engines.

A deeply religious woman, Kurzweil joined a religious order after the war. However, before taking her final vows she left to take care of her mother who had grown ill. Kurzweil returned to teaching and made less than $25,000 year.

Eventually, she retired and lived on a modest pension. Thus, it was a surprise when she passed away in 2012 and bequeathed $2 million to the Jesuits.

Religious News Service reported this story in "Kansas City teacher astonishes with $2 million gift to Jesuits."

Kurzweil's secret to amassing her fortune was simple. She lived modestly and frugally. She invested her money wisely and let it grow. It also probably helped that she never married and never had children.

What her story proves is that even people of modest means can amass wealth when they live within those means and do so consistently. Kurzweil had the good sense to understand that and thus she was able to leave enough money to a cause she believed in.

I would be happy to assist if you would like to include a charitable gift of any size in your estate plan.  Please contact my office to set a consultation.

Reference: Religious News Service (Feb. 9, 2016) "Kansas City teacher astonishes with $2 million gift to Jesuits."

Good Tax News - Charitable IRA Giving Here for Good

The 2006 IRA charitable rollover exclusion was a popular tax break for wealthy elderly people and the charities to which they donate. It has been made permanent.

Seniors trying to spend down the size of an estate for estate tax purposes often find it helpful to donate to charities. Other seniors donate for philanthropic reasons.

In 2006, Congress made it much easier for many people over 70½ to make donations. They could donate up to $100,000 directly from their traditional IRAs to charity without facing income tax penalties. However, as Congress so often does this charitable rollover exclusion was not made a permanent part of the tax code. It required periodic reauthorization.

It has recently been made permanent retroactive to Jan. 1, 2015 as reported by the Wills, Trusts & Estates Prof Blog in an article entitled "Congress Makes Permanent IRA Charitable Rollover Exclusion." Of course, this does not mean the exclusion cannot be taken out of the tax code by Congress later. It just means that it does not need reauthorization to stay in the code.

While this is a great benefit for elderly people trying to spend down their estates, it is important to remember not to start the spend down process without first consulting an estate planning attorney. Dealing with the estate tax and reducing the size of an estate should be handled as part of a larger estate plan.

Using the charitable rollover exclusion might not be the best idea for everyone, so talk to me  about other options that might be better for you and your estate.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 20, 2015) "Congress Makes Permanent IRA Charitable Rollover Exclusion."

A Billion Dollar Will Contest Looms in China

One of China's wealthiest men recently passed away at the age of 93. He left behind a will that gave almost all of his assets to charity. His sons are contesting the will.

Hong Kong real estate magnate Yu Pengnian passed away with a fortune believed to be worth US$1.55 billion. Throughout his life, Pengnian gave generously to charity. He created a will that would continue that charitable giving.

All of his assets, except for the contents of two safes given to his grandsons, were directed by will to go to a charitable foundation. His two sons were left nothing in the will. Those sons have filed will caveats with the probate court overseeing the will, which is essentially filing the same thing as a notice of intent to challenge the will.

Ejinsight reported this story in "Heirs gird for court battle over late billionaire's fortune."

It is possible that we will see many similar will contests all over the world in the coming decades as a recent trend has seen the extremely wealthy pledge to leave at least half of their estates to charitable causes. With billions of dollars at stake, it should come as no surprise that the families of these wealthy philanthropists might not always be pleased with giving so much away to charity.

By giving all of his money to charity and leaving nothing for his sons, Yu Pengnian might have made an avoidable mistake. It might have been better to leave something of value to his sons and include a no-contest clause in the will.  (No contest clauses are not enforceable in Florida)

Even if there is a no-contest clause in Pengnian's will, which is unknown, it would not have stopped the sons from contesting the will as they receive nothing from it now. On the other hand, if they succeed in challenging the validity of the will, then they will each receive half of the assets of the estate.

If you would like to discuss how to safeguard your estate plan, please contact my office for a consultation.

Reference: Ejinsight (Dec. 10, 2015) "Heirs gird for court battle over late billionaire's fortune."

 

Your Feline (Or Whatever) Lasting Legacy

People frequently use their estate plans as a way of continuing to support things they love after they pass away. One woman in Italy recently did so by bequeathing her home to stray cats.

The late Fiorella Scannabissi of Bologna, Italy loved cats. During her lifetime she took in many of the city's strays.

As The Local reports in "Bologna's Cats Inherit Plush Apartment," she loved the stray cats of the city so much that she left her top-floor, seven-room apartment to them. No, this is not a case where the neighbors might consider going to court to stop a messy situation.

The cats will not be living in the home.

Instead, Scannabissi left instructions for her home to be sold by the local council. The proceeds from the sale will be donated to the city's cattery, which takes care of the local strays.

What this illustrates is the flexibility of estate plans.

This is just one example of what can be done in an estate plan to make sure that what you support in life continues to receive support after you pass away. For Scannabissi it just happened to be stray cats.

If you love something else, you can use your estate plan to continue support it. Doing so often is not very complicated, especially if you have the advice and creativity of an experienced estate planning attorney who can structure your estate plan to further your goals.  I would be delighted to help your plans. Please set up a consultation to discuss your lasting legacy.

Reference: The Local (Dec. 3, 2015) "Bologna's Cats Inherit Plush Apartment"

Charitable Giving Puts Public Library Back on the Map

The Stanley and Elaine Ball Charitable Foundation granted the Taneyhills Library $350,000 to renovate the children's area and to create a technology conference room. Taneyhills Library Board Chairman Kenton Olson said the children's library is what needed to be refurbished the most. "Our future is in our children, so we thought it was appropriate that it would be the children's library that we would emphasize. And the one area of the library that I think that gets a lot of use and needed some real updating," Olson said. Olson said he hopes the renovation will get children excited about going to the library again, as well as make the library appealing to older children such as tweens and teens.

The (Branson, MO) Tri Lakes News reported, in "Branson library receives $350,000 grant for renovation, tech upgrades," that as a result of a generous gift from The Stanley and Elaine Ball Charitable Foundation, the Taneyhills Library intends to create a destination for young families and children—"a place where we can begin to foster a love of books and learning."

The gift will also fund the creation of a state-of-the-art technology conference room that will feature laptops, charging stations, a smart board, a big screen TV and conference phones.

The library has a 20-by-30-foot area that will be converted into the technology room, which will provide a facility for use by home-schoolers, business seminars, training sessions, and discussion groups. Olson said that hopefully it will also be a draw to the library.

Olson said the remodel wouldn't have been made possible without the generosity of the Stanley and Elaine Ball Charitable Foundation. It was the belief and passion for what these upgrades could do for the library that impressed the foundation committee in its decision to grant the money. The library hopes that this gift will help put the library "back on the map," increase visibility, and up use of the library.

Stanley Ball, who was once mayor of Branson, was a generous person. He took care of his family—then left the rest to do wonderful things like this for the communities that were so good to him.

I would be delighted to talk with you about charitable giving in your planning. Whether you gift a little or a lot, it could make a big difference to the work of your favorite charity.

Reference:  The (Branson, MO) Tri Lakes News (October 23, 2015) "Branson library receives $350,000 grant for renovation, tech upgrades"

Making Charitable Contributions Tax-Wise

While you're alive and have philanthropic goals, give appreciated assets held in a taxable account to charity. For charitable bequests, designate your IRA or tax-deferred employer retirement plan. Why? Suppose a hypothetical Al Cole wants to give $10,000 to charity this year. Instead of cash, he donates $10,000 of ABC Corp. stock that he bought for $2,000. As long as Cole's holding period is more than one year, he'll get a full $10,000 charitable tax deduction. Yet those shares might be worth only $8,000 to Cole after paying tax if he sold them himself. The retirement planning and estate planning benefits are big. Say Cole has $1 million of securities: $500,000 in a taxable account and $500,000 in a traditional IRA. Cole wants to leave $500,000 to charity and $500,000 to his son Bob, who is in a high income tax bracket. If Cole leaves the taxable account to charity, Bob will inherit the IRA. Bob will have to take distributions, which will be highly taxed on top of his other income. Instead, Cole can leave his $500,000 IRA to charity. The charity or charities can cash in the IRA bequest and owe no tax, as they are tax-exempt. Now Bob will inherit the $500,000 taxable account. He won't owe any income tax on money he withdraws. He also won't owe any capital gain if he happens to sell securities in the account right away, before they gain more value. That's because he gets a cost basis step-up to market value on those assets.

Investor's Business Daily's recent article, "How You Can Squeeze Tax Breaks From Charitable Giving," says that this maneuver works very nicely if the taxable account holds appreciated securities. A Partial Payout strategy applies whether you want to bequest all or just some of your IRA. Experts suggest that it's better to use your IRA for donations in your estate plan. But you have to decide how you want to do it.

Consider the following scenario as an example: Ida Bass has a $500,000 traditional IRA, and she wants to leave $50,000 to charity from that IRA. The rest of the IRA is to be split evenly between her two children (Many IRA beneficiary forms require percentage allocations for multiple beneficiaries). Another way to do it would be for Ida to just leave 10% of her IRA to charity. The IRA form could designate that each of her kids will inherit 45% of the amount in the account at her death. This would leave the dollar size of her charitable bequest indefinite—potentially leaving more to the charity if the IRA grows or less if its value decreases.

Whether you implement the fixed amount or the percentage approach, problems can arise. Those who will inherit the balance of the IRA need to ensure that the charity is paid in full before September 30^th of the year after the death of the donor. If you do that, those getting the balance can stretch out required distributions of the IRA balance and extend their tax deferral. However, if you miss the September 30^th deadline, the taxable distributions will be accelerated. So individual beneficiaries should be aware of what they need to do if a charity also is on the form.

One other idea is to split the IRA. Bass could transfer $50,000 from her $500,000 IRA to a new IRA account, so that her favorite charity would be the beneficiary of the new IRA. That way her children won't have to worry about the charity if they want to claim the maximum tax deferral from the IRA they inherit.

Please arrange a consultation to speak with us and to learn more and to see if this strategy, or another charitable giving strategy,  is right for you.

Reference: Investor's Business Daily (October 02, 2015) "How You Can Squeeze Tax Breaks From Charitable Giving"

Hear Ye, Hear Me - On Wednesday, January 28, 2015

Please join me this Wednesday for an update on Estate Planning 2015.

The presentation will be held at Horizon Bay at 360 Montgomery Road, Altamonte Springs 32714 from 4:00 to 6:00 p.m.

There is no charge to attend but reservations are requested so we can have plenty of room and materials for all.

Call my friends at Horizon Bay at 407-786-5637 or register on my website.

Bring your questions and come see me this week.

 

UK Historic Wills Are Available Online - Will Yours?

 

Wills can tell a lot about what people value. Looking through old wills can show how values might have changed over the years. The UK has recently aided that effort by making its archived wills available electronically dating back to 1858.

 

We often hear about the estates of recently deceased celebrities. Anyone can read the newspaper or search Google to find out the details of Michael Jackson's estate. However, the estates of historic famous people are more difficult to find. It often requires going to the library and pouring over history books.

 

 In the United Kingdom, however, some historic wills have recently been made available online for people to search through. The Independenthas the story in an article titled "New digital archive will allow public to view wills of historic names."

 

The database includes many famous names, such as Winston Churchill and Charles Dickens. This is an interesting project and well worth a look for anyone who is interested in the lives and deaths of historic figures.

 

 Closer to home, in the United States, something like this would need to be done on the state level.

 

One important message for modern estate planning is that wills are public.

 

 When filed with a probate court, wills become available for the public to access. While it is not as easy to access wills in the United States as it is in the United Kingdom, it can still be done.

 

 Thus, if you want your estate to remain private, you should not rely on a will. Please consider a consultation to explore your options.  Visit my website for more information and to schedule an appointment.

 

 

 

Reference: The Independent (December 27, 2014) "New digital archive will allow public to view wills of historic names"