GUIDE TO PLANNING YOUR ESTATE - Ozark Christian College

FINDING GOD’S PLAN OF STEWARDSHIP FOR YOUR ESTATEAs you begin to plan orreview, it is important that youstewardship.have diversified our investmentsJust as they were ready toand have seen them grow? Are weunderstand God’s plan of steward-make their deposit in the bank,going to be condemned because ofship for your estate.their real estate agent said, “Youan unsuccessful investment?don’t understand stewardship. YouWhat is stewardship?We find the answer in thecan’t put that money in the bankand be a total steward. To be aLarry and Linda grew up in atotal steward, you have to considerchurch which taught that steward-things like leverage. Invest yourship was giving 10%. They under- 2,500 in an apartment house. Thestood this basic concept of stew-growth will be on the full value,ardship. And they were doing justthough you have invested onlyfine with their concept until they 2,500. And as a bonus, you canheard a sermon that said thatdeduct the interest and all repairs,stewardship was 100%. As youngcreating a tax advantage, becauseChristians, they were confused.the apartment house can be depreciated.”Is good stewardship 10% or is it 100%?One year they earned 50,000.They understood that a gift of 10%,or 5,000 (which we call a tithe) isstewardship. And they gave anadditional 500.00 to other charitable interests that year. That wasalso stewardship.Larry and Linda also read inthe Scriptures that stewardship ismoderation of lifestyle. After theirtithe, gifts, and family budget, theyhad 2,500 remaining. In terms of100% stewardship, they knew thatthey must be stewards over that,too.So they took the 2,500 totheir local bank. The bankerassured them that a certificate ofdeposit, paying the highest interestallowed by law and guaranteed byan agency of the federal government, would be safe, secure, andliquid. An investment in a certificate of deposit would be goodSo Larry and Linda spent theScriptures. With one exception,rest of the day driving up andScriptural reference to 10% givingdown the street, trying to find an(a tithe), is to first fruits or income.apartment house to purchase.They passed a brokerage firm.But there is another form ofmoney, capital. As we study theTo practice 100% stewardship, theyScriptures concerning capital, wechecked it out, too. Their brokerfind that God is the owner of 100%.told them, “If you put 2,500 in anIt is recognition of His ownershipapartment house an apartmentof all capital that is the basis forhouse and you need money nextour stewardship.month, the real estate commissionwill wipe you out. You might haveto sell at a loss, or you might notbe able to sell at all. What youreally need to do is invest in aStewardship does notinclude ownership.As stewards, we areonly caretakers.mutual fund. It will grow in value,and you can market it any time youwish.”Remember the 2,500 Larryand Linda had to invest? Regard-Do you see where we’reless of whether they invest it in anleading you? What is 100% stew-apartment house, the bank, stocks,ardship? Are we going to bebonds, mutual funds, or life insur-judged on whether or not we haveance, it will accumulate and be-used the greatest safety in ourcome part of their estate. It isinvestment, have taken advantagecapital, which God owns.of tax planning available to us, or5

WHAT CONSTITUTES A GIVING LIFESTYLE?Lifestyle GivingWe touch our families,friends, business associates, andOur lifestyle is made up of theeven the persons on the street withway we budget three areas of ourwhom we have shared ourlives. our time, our talents, ourlifestyles. As they see within ustreasures.something they desire, they comeWe spend part of our time incloser to a personal redemption,business, part with family, part webecause they have been touched byspend for ourselves in enjoymentour lifestyles.of life and working to becomeEven after death, our Chris-better persons. And part of ourtian lifestyles will live on in thetime we give away.lives of those we have touched,The same is true of ourtalents. Part of them we use inbusiness, part for family, part wewho have adopted the Christianlifestyle.As it pertains to estate plan-give away, and part we use forning, having a giving lifestyle saysourselves. We spend our financesthat a Christian estate plan is notin the same ways.one that gives 10% to a charitableThe differences between ourorganization and the remainder tolifestyles are the differences in ourwhomever we wish. Tithing is abudgeting of these three areas ofconcept of income, not a conceptlife. And the difference betweenof capital stewardship. That putsour lifestyles and the lifestyle ofyour estate and gift design in anthe person on the street is found inentirely new light.the value system we place on thesebudgets. Our value system isbased on a redemptive lifestyle.6The Christianestate plan is onethat recognizes Godas owner of allproperty, anddistributes thatproperty to thosewho will continue touse it to propagatethe Christianlifestyle.

PEOPLE ARE MORE IMPORTANT THAN DOLLARSThe estate planning processinvolves the transfer of property.In our attempts to avoid probatethan dollars.How do you keep this fromYou have accumulated yourestate by your labors and God’sblessings. And whether yourConservatorshipSome thoughts forconsideration:Personal Representativeestate has a positive or negativeimpact on the people and organi-Consider naming an individualzations with whom you are in-who does not have a vested finan-volved is very important.cial interest in your property, or aA parable in the Scripturespersonal representative of yourasked his father for his inherit-estate or trustee of any trust whichance. The son did not recognizeyou establish.when a family member, placed inresulted in the waste of his inher-this position of responsibility,itance in riotous living. He foundmust make decisions that may nothimself in a deplorable condition.be acceptable to or popular withother family members.father who greeted him with openarms. He placed a ring on his finger and killed the fatted calf forThe division of householdgoods and personal effectsthe celebration of his son’s return. The sale of the family homeBut family relationships were The continuation of thestrained. His brother did notwelcome him, though the fatherfamily business The interpretation of a willassured the brother that hisseemingly in conflict withinheritance was still intact.what mother or father hadThis parable provides anshared with another familyinsight into the family problems ofestate planning. It illustrates thefamily relationships may also occurwhen a child must go to court andbe declared the conservator of aparent, in a time of incompetencyprior to death.Many family problems arisethe impact of money upon his lifeRepentant, he returned to hisInterpersonal problems inbank trust department, to serve astells about a young man whohis stewardship responsibility, andest in the property.happening in your family?and save taxes, we often lose sightof people.who does not have a vested inter-There are costs and restrictions of the court. Decisions mayneed to be made concerning thechoice of nursing care, propertymanagement, and “preserving theinheritance” for the other children.These are decisions that maybetter be made by a bank or trustcompany, or an individual whodoes not have a vested interest inthe property, holding a durablepower of attorney.member The attempted enforcementproblem of distributing too muchof lifetime promises mademoney to children before theyto family members, whichhave learned to be responsible inmother and father didn’tmanaging property. It also illus-get around to putting intotrates the problems in interper-their estate plansonal relationships that may arise.We must keep our perspective; people are more importantThese are areas that canbetter be handled by an individual7

Letter of InstructionsYou could divide 100,000 incash equally to any number ofpeople. But how do you divideequally among three children, theantique table that was given to youas a wedding present by yourfavorite aunt?It is important that you clearlyexpress your desires for eachunique item of personal property.These desires may change. Therefore, it’s impractical to do this inthe will. A letter of instructionswritten in your own handwritingand outlining your desires forpersonal property distribution mayleave the least room for interpersonal conflicts.GuardianshipThe guardianship of minorchildren is an important people-married, to buy a fast car, ora different complexion at the deathwhatever else seems important atof a parent. For example, to a son,that age.it is our money and we have theIt might be well to “postponeprivilege of using it for his benefit,financial death” by establishing aas we deem best. But at ourtrust which maintains the propertydeaths, to him it becomes hisuntil the youngest child reaches anmoney, though it is in trust. If aage of greater maturity, for ex-guardian, serving as trustee,ample, 25. If there are mental orrestricts the use of that money forphysical disabilities, the trust canhis benefit, it leaves an opening forcontinue for the benefit of theconflict. A bank or trust companydisabled child.may be able to better serve in thisIf there are no disabilities,charitable distributions can bemade at this time. The remainderposition.Lifestyleof the estate can be distributed tofamily members in a series ofpayments, for example, one-thirdat age 25, one-half the remainderat age 28, and the remainder at age30.What about the spendthriftchild, who has been unable tomanage the money that he or shehas earned? What impact willmoney have upon his or her incentive?TrusteeHow do you give property topeople so that it will help them toIt’s often important that thebecome better individuals? Andplanning decision. Should prema-trustee be someone other than theture death occur, the lifestyles ofthe question is not only “how,” butguardian, because money takes onalso “how much.”your children will be stronglyinfluenced by the guardians younominate. We will talk more aboutthis later.TrustIn most states, the legal agefor inheritance is 18 years. Howmuch money can a child receive atthat age, without affectinglifestyle? Eighteen is the age of acollege freshman, the time of thefirst romance or the excitement ofsports cars. With an inheritance,the child might leave school to get8

We do know what you can give your family: A strong spiritual heritage,based in the Scriptures andPossibly the greatest inheritance youcan leave your children’s children is:confirmed by a Christianlifestyle A wide circle of friends andexperiences An honorable and justname A good education Opportunity for success Protection A strong church in which toworship, A Christian educationalsystem, teaching a child notonly how to earn a livingbut how to live a life, and A mission field on which toThe Scriptures clearlysay that givensufficient time, mothand rust will creep inand destroy any otherinheritance. But thisis an inheritance thatfadeth not away.serve.However, the only true protection comes from understandingthat God supplies all of our needs“according to His glorious riches inChrist Jesus,” when we seek firstthe kingdom of heaven, and arehelping to build His kingdom.You must decide whether ornot you can give anything morethan this, or if additional gifts willcarry burdens or responsibilitiesthat stifle initiative.In the Old Testament, we readthat a wise man leaves an inheritance to his children’s children.But, it does not tell what kind ofan inheritance we are to leave.Peter, in the New Testament,talks about an inheritance. . . onethat is undefiled, that fadeth notaway, reserved for you inheaven.9

TOOLS AVAILABLE FOR PERSONAL ESTATE PLANNINGThere are many tools The Willavailable to you forBasic to every estate plan is athe planning of yourestate. We want to will. It is a legal document draftedduring your lifetime, while you areshare with you a brief competent, which can accomplishoutline of some of many things.those that you can use It provides opportunity forto accomplish youryou to give a final testigoals and objectives. It can nominate the personyou wish to serve as guardian of minor children andother persons for whomyou have custodial responsibility. It empowers the personalrepresentative to carry outthe terms of your will,especially relating to themony of your Christianability to sell, dispose of,faith.and liquidate property andIt revokes all previous willsto continue the operation ofthat you have made.business interests.It authorizes payment of all It establishes trusts for thedebts and expenses relatedbenefit of minor children orto your final illness.other individuals for whomIt authorizes the paymentyou have income responsi-of taxes by the estate.bilities.It disposes of your personal It names the trustee of anyproperty according to yourtrusts established anddesires, either throughempowers that person todirect instructions in thecarry out the terms of thewill, or by reference to atrusts for their duration.letter of instructions. It makes in-kind or fixed- It can be used to waivebond.dollar distributions tofamily members or chari table organizations.regulating the execution andIt distributes the remaindervalidity of the will. It is importantof your estate to yourthat you retain competent legalindividual and charitablecounsel, familiar with the laws ofbeneficiaries.your state of residence, to draftIt names a personal repre-your will.sentative who is responsible for entering the willinto probate and makingdistribution according toyour desires expressed inyour will.10Each state has strict laws

Joint Ownership of PropertyFor smaller estates, jointA TrustA trust can be used to:ownership of property may be anexcellent estate planning tool. It Avoid estate taxes,avoids probate and provides an Provide management fororderly transfer of property be-property in case of disabil-tween two individuals.ity,However, care must be taken Protect minor children fromnot to place too much property inpremature distribution ofjoint ownership, eliminating theproperty,use of tax saving opportunities Avoid ancillary administra-available with other estate planningtion of the estate when youtools.own real property in moreExcept for small estates, theuse of a trust is usually morethan one state, desirable.In other words,a trust can do justabout anythingthat you design itto do.Durable Power of AttorneyThe realities of life dictateDistinguish separate prop-that we must give consideration toerty from communitywho will be in a position to manageproperty when you moveproperty in case of mental orfrom one state to another,physical disability prior to death.Relying on family members or. . .and for many other purposes,including income tax planning.friends to act under court-appointed conservatorship is usuallyunwise. It may affect interpersonalA trust can be confidential,relationships. And unnecessarycan be use to avoid probate, andcosts and restrictions are oftencan provide coordination of yourimposed.entire estate planning process. It isThe alternative is to grant theeasy to establish and easy topower to manage your property inchange.case of disability to an individualWhen a trust is used as a keyor a bank trust department. Thisinstrument of your estate plan, it iscan be arranged through a powertypically combined with a simpleof attorney designed to be in effectwill that transfers all remainingduring incompetency.property to the trust at the time ofdeath.The trust should also becombined with a durable power ofattorney. This allows the individual holding the power to placeproperty into the trust should youbecome incompetent.11

Durable Power of Attorneyfor HealthcareRetained Life EstateYou can transfer real estate toLife Insurance ContractThe life insurance contractanother individual, retaining a lifehas many uses in the estate plan-can be granted to an individual toestate. The life estate gives youning process.make decisions relating to healthfull use of the property duringcare during disability. This poweryour life. This includes the right toshould be granted to an individuallive in the property, or rent andwhom you trust to hold yourreceive the proceeds of the rental.personal care and well-being as aAt termination, the property isplanning tools are used, there arepriority.available to your beneficiaries.liquidity needs to:A separate power of attorneyA durable power of attorneyLiquidityEven when the best estateThe life estate agreement canfor health care does not giveeither be revocable (changeable) or Pay final expenses,authority to the named individualirrevocable (not changeable). If the Pay death taxes, orto declare your inability to act foragreement is irrevocable, the Provide a distribution toyourself. However, it does grantproperty cannot be sold withoutone family member sospecific authority to that individualconsent of the holder of the re-assets can be distributed toto consent to or refuse treatmentmainder interest. Also, the divi-a family member involvedfor you, if you are physically andsion of the proceeds will be basedin a business or farm.mentally unable to make thatupon the value of the remainderdecision.interest at the time of sale.Directive to PhysiciansPayable on Death Accounts,Totten Trustsway to guarantee that this moneywill be available, in the rightamount, at the time needed.Protection for DependentsYou should also consider adirective to physicians. This is theLife insurance may be the onlyThese are vehicles peculiar tostatement by you during a time ofthe financial industry. You retaingood physical and mental healthfull control over the propertyused for the protection of depen-that you do or do not wish to beduring your lifetime, and designatedents when there has not beenkept alive by heroic means, if therea beneficiary of the account at thesufficient time to accumulateis no hope for survival.time of your death. The benefi-assets. A life insurance policyciary has no control over or accessdesigned to provide cash whento the property during your life.needed most, may be the only wayThese vehicles do not providea young family can guaranteemanagement of property in case ofsufficient assets for the survivingmental or physical disability. Theyspouse and children.are only probate avoidance devices.12Life insurance is effectively

TOOLS AVAILABLE FOR CHARITABLE ESTATE PLANNINGWhen you have made thisYour charitable giftCharitable Remainder Trustdecision,thetaxadvantagesofawill be made becauseCharitable remainder trustsof your concern for charitable transfer and the integration of these transfers into yourcan be established during youryour charitable total estate plan can be of greatlifetime or through your estatebeneficiaries, and advantage to the overall plan.plan at death. They can be used tobecause you believe it Several tools are available.achieve income, estate, and gift taxis God’s plan ofadvantages.When you make a lifetimestewardship for your The Charitable Gift Annuitytransfer, you receive an income taxestate to share part ofcharitable deduction. You alsoYou can transfer a sum ofthat which ismoney, during your lifetime oravoid capital gains tax on apprecientrusted to you. through your estate plan at death, ated property. And the property isto a charity, requiring that they paydistributed outside the probateyou, your spouse, or anotherprocess.beneficiary an income for life.A portion of the income willbe tax-free, some may be treated ascapital gains (when appreciatedproperty is transferred), and theremainder will be taxed as ordinaryincome.If you make a lifetime transfer, you receive an income taxdeduction at the time of the transfer, though you maintain incomefrom the annuity for life.Inaddition, a portion of the capitalgains tax on appreciated propertycan be avoided when lifetimeCharitable Life EstateAgreementPreviously in this section, wediscussed the life estate agreement. When the transferredproperty is a personal residence orfarm and the remainderman is acharity, definite income, estate andgift tax advantages are achieved.And the transferred property isnot subject to probate.transfers are made.The charitable gift annuity canbe designed to avoid probate. Italso achieves federal gift andestate tax savings.13

TOOLS AVAILABLE FOR BUSINESS ESTATE PLANNINGThere are additional estatePartnership Agreementsplanning tools available to theowner of a closely held business.Many advantages of theseSimilar benefits can beachieved by forming a partnershiptools are related to the income taxwith family members. This canstructure of the business. Someallow family members to partici-that may be beneficial in estatepate in the appreciation of theplanning, may have income taxbusiness. Like incorporation, thisdisadvantages. Their use may alsois a very complex area of planning.be contingent upon the relation-Again, you should rely entirelyship of the business estate to theupon your legal and tax counsel.personal estate.IncorporationManypeople own andoperate smallbusinesses, andfamily membersare often involved. Theincorporation ofthe business, combined with aprogram to make annual

The Estate Design Process As a good steward, it is important to carefully plan your estate. May we offer the following steps to help you begin your planning? Step 1: Set the priorities of your estate plan. Step 2: Become familiar with the estate planning tools available. Step 3: Gather all the necessary and pertinent data you will use in your .