Legacy Planning, Once Removed

There are many ways for a client to incorporate charitable giving into planning, during life and upon death. That charitable giving can be a significant part of the client’s legacy, and it can result in tax advantages.

In a prior episode, Murphy discussed outright gifts and gift agreements. But some clients are not ready to decide which charities to benefit, nor when and how. For those clients, a donor-advised fund (DAF) might be a good option. In a DAF, the client transfers funds to a fund within a public charity, which might be part of a community foundation or financial institution.

A DAF can offer flexibility and simplicity for the donor. But there are some limitations to a DAF that donors should keep in mind as they consider which charitable vehicle to use. On this episode, McGuireWoods attorney Hunter Glenn discusses the advantages and limitations of this popular strategy.

Many clients ask about generation-skipping planning, or dynastic planning – ways to benefit future generations in a tax-efficient way.

This episode reminds listeners of the scheduled “sunset” of the GST tax exemption at the end of 2025 and steps to consider in light of those changes in the law. Donors, beneficiaries and trustees should take this opportunity to make sure all their records are complete regarding the GST tax status of any trusts. Steve recently wrote about these concepts in the ACTEC Law Journal and in a shorter essay in the journal Trusts & Estates.

This information will be critical when needed, which might be years from now. Although this information might be hard to track down, it will only get more difficult to collect later.

A significant change in tax law is scheduled to occur at the end of 2025: effective January 1, 2026, the estate, gift and generation-skipping transfer tax exemptions, currently $10 million per person (to be indexed for inflation), are scheduled to be cut in half, to $5 million (to be indexed for inflation). Starting in 2026, the ability for individuals to make tax-free gifts is scheduled to effectively be cut in half.  

Many clients are concerned about this scheduled change in the law, and they are considering whether and how to take advantage of current law while they can. This episode provides a brief summary of the scheduled change in the law, some potential solutions, and some disadvantages or pitfalls to keep in mind. As Steve summarizes, it is best to start that conversation now, well in advance of the 2025 deadline.

Clients often ask about ways to incorporate charitable giving into their planning, during life and upon death. Charitable giving can be an important part of the client’s legacy and can have tax advantages as well. There are a number of strategies, but the simplest option is as an outright gift. But outright gifts might be simple to a fault — once the funds are in the charity’s hands, the donor might not have any ability to question the use of the funds, including if the charity dissolves.

This episode explores the recent case of Derblom v. Archdiocese of Hartford that addressed a gift to a school that later closed.

If the donor is concerned about use and oversight of the gift after it is made, a gift agreement can be a helpful tool. This episode provides some thoughts on how to use a gift agreement to carry out the donor’s wishes.

On this podcast, Steve talks about the best methods and structures to transfer wealth to ensure that the funds are used for their intended purposes. He also talks about ways to pass along values to beneficiaries or the next generation — values like hard work, humility, responsibility and respect. In this episode, Steve explores how golf (or activities like golf) can be a great environment for passing along those values. 

In this litigious and uncertain world, clients are increasingly concerned about asset protection — how to make sure assets are used for their intended purposes and for the benefit of the intended beneficiaries and not diverted to a creditor or other third party. Clients are not only concerned about formal creditors, they are also concerned about individuals who learn about the assets and seek to take advantage of the beneficiary. Trusts and gifts, if properly structured, can provide significant protections from these creditors and predators, while still providing for flexibility to the beneficiary.

On this episode we talk about the potential advantages of transferring wealth, but also the potential pitfalls — and the terrible irony that transferring wealth in the wrong way, at the wrong times or for the wrong reasons can sometimes have negative consequences. 

In this episode, we explore the sad situation of a beneficiary who suffers from substance abuse. In this case, the donor may fear that a gift or trust might enable destructive behavior. But if structured in the right way in terms of access, control and flexibility, the trust could even facilitate treatment and recovery.

Many clients ask about a particular kind of trust called a “dynasty trust,” “perpetuities trust” or “generation-skipping trust.” There is no set way to draft these types of trusts — rather, these terms only emphasize the intent of the trust to benefit future generations.

This episode discusses those trusts — or rather, their common features or elements, and how to incorporate these aspects into the terms of a trust related to access, control and flexibility. The episode also addresses options for funding and administering the trust for tax and nontax purposes.

On this podcast, Steve has emphasized that the estate plan is designed to carry out the intent of the testator or settlor. With that in mind, it is especially important for the client to communicate those wishes, so that the trustee, beneficiaries and other interested parties understand the settlor’s intent in situations that might arise, such as a beneficiary’s request for funds to purchase a home or for the beneficiary’s support or education.

Sometimes the trust document is not the ideal place for the settlor to include more specific instructions — the language in the trust agreement often is complicated by legalese, or by tax and other practical considerations. Some clients prefer to communicate those wishes informally or rely on the trustee to make the right decision. But many clients would benefit from leaving a separate letter, sometimes called a “Trust Letter of Wishes,” that expresses the settlor’s intent in the settlor’s own words.

This episode explores the Trust Letter of Wishes, walks through some important limitations and guiding principles for the letter, and offers suggestions on how to use such a letter to communicate the settlor’s intent.

For parents with young children, naming the guardian who will raise their children upon the parents’ passing can be one of the most important and foundational questions of an estate plan. And in fact, because this decision is so personal and important, many clients find it daunting — and as a result, they might delay making the decision, or even delay putting in place their estate plan altogether. This episode explores some common questions about the naming of a guardian and provides helpful tips for clients who are considering who to name and how to approach this important decision.