Planning ahead is not easy.
Committing to a friend’s party a month from now is too much of a strain. Even setting clothes out for the following day or deciding what to pack for lunch — forget about it.
So when it comes to prepping your assets for a fortuitous future, it falls somewhere between choosing a day to go to the dentist six months in advance and doing your taxes: It’s tedious, time-consuming and easy to put off till the last minute.
But these estate planning pros say that’s the worst thing you can do. Estate planning corners many markets of your life: wills, trusts, even charities.
Personal assets aside, when it’s time to factor in the Jewish community into your arrangements, it’s important to remember the basics of estate planning.
Former Philadelphia District Attorney Lynne Abraham, now a partner at Archer in its Philadelphia office, said estate planning is so crucial, and saving for retirement and putting money away is essential — the earlier, the better.
“First of all, so many people put off estate planning until very late, and sometimes they don’t plan at all,” she said, which is one of the biggest mistakes.
Illnesses, accidents or unforeseen circumstances can happen to anyone, rendering you incapable of even making a plan.
For the less superstitious, keep in mind that if you have a spouse, plan your estate together. As straightforward as that may seem, Abraham said she used to see many instances where only one spouse pays the bills and the other is blissfully unaware. When that breadwinning spouse dies, the other has no idea how to manage assets.
“So often one spouse dies and the other comes in and doesn’t know anything what the other has done,” Abraham said.
And if you can’t find the deceased’s original will, many states won’t accept any other form — like writing it out on another piece of paper.
“You have to make sure you go to an attorney who does estate work and can help you with an estate plan,” Abraham said, noting that not every lawyer is a financial planner.
Frequently in estate plans are charitable gifts, either giving outright or in a lump sum. Abraham said it’s important to make the decision of when you want to start giving now.
“People have to really start thinking of where they want their money to go,” she added.
Of course, if you’re looking to donate one of your assets after you’re gone but it turns out you need to sell the item now out of necessity, it is your property first and foremost.
“People have the right to give their money to whomever they wish,” Abraham said, like of Warren Buffett’s future contributions to charities over his children’s inheritances.
“The earlier you can get to an experienced estate planner and put your plan to paper, the better — and remember, you can always change it,” Abraham said.
The Jewish Federation of Greater Philadelphia has several ways to plan a gift to the Jewish community.
And when it comes to future generations, leaving a legacy of prosperity can be arranged through philanthropic endowments.
Rachel Gross, director for planned giving and endowments of the Jewish Federation, said there are different types of endowed gifts.
Donors can choose to have their gift go toward any community effort they prefer, like Jewish education, projects in Israel or the elderly.
“Everyone has something they’re interested in,” she said. “They’re as different as people are.”
You can make an outright gift that’s planned over a period of time, use the assets in your IRA, or give a charitable gift annuity or trust. There’s also the option of putting a bequest in your will.
“When you set up a bequest you might say to Jewish Federation — you might set up a fund that does something specific, or you might instead make an unrestricted gift that would be just to Jewish Federation for its general purposes,” she said. “Any time you make a gift you can be as broad or specific as you wish, as long as the organization is willing to accept it.”
As much as the Jewish Federation receives through bequests, Gross said a common misconception is that this is something only very wealthy people do.
“In fact, people on all income levels have an estate of some amount, and they can make a gift from that estate,” she noted. “The other misconception is that in order to make a planned gift you have to part with your dollars today, when in fact most people are making their plans through their estate planning. They’re keeping their money during their lifetime while they need it.”
Bequests are the most common and most flexible gifts, Gross reiterated, because if there are no assets left in your estate the gift won’t go through.
“You’re never using assets that you’re going to need,” she added.
Milton Abowitz has more than 50 years of experience practicing estate planning and probate law in Philadelphia.
In his time, however, he’s discovered that fewer people are looking to give to charities.
“That’s because the tax laws were a great incentive for people to make charitable gifts in estate planning because the government offers goodies for charitable gifts you can’t get as a private person,” he said. “But it requires irrevocable gifts.”
The highest charitable rate right now, he said, is 39 percent plus state and local taxes.
“There was a lot more interest in charities when the income tax rates were 70 percent,” he noted.
He said a lack of interest was also due to the 2007 recession, so people did not like the idea of not being able to get their money back if they need it.
However, Abowitz said giving charitably is significant, and it’s important to see an official who can help — and who knows what they’re doing.
“It’s wonderful to do that,” he said. “Someone with a large estate — over an $11 million dollar estate would have a lot of incentive to do that because the federal estate tax will take 45 percent of that money, and with a charity you can make that gift benefit charities you’ve given to in your lifetime.”
Abowitz noted that his practice is small and most of his clients don’t exactly acquire $11 million. As such, “they would have to be philanthropically motivated, and the tax motives aren’t really that encouraging.”
Although he sees less and less in his practice, he said charitable giving in still critical.
“Charities do play a vital part in the makeup of our country. Charitable giving should be encouraged.”
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