Thursday, May 31, 2012

Did You Know?

By: Laurie Valentine-COO & Trust Counsel 

· That between 60% and 70% of all adults in the United States has never written a Last Will and Testament? Making a Will is the single most important act of Christian financial stewardship we will ever take.

· That for those who have not written a Will, the state in which they reside has a plan of asset distribution written for them? Here in the Kentucky that plan is called the “Kentucky Intestate Succession Statute”. There is a good possibility that Kentucky’s “Will” sets up a plan of distribution that doesn’t meet your family’s needs or your wishes regarding how your assets will pass at your death.

· That the court will decide who will rear any minor children if both parents are deceased and they have not made a Will or included a nomination of guardian provision in their Will for their children? This is a far more important issue than where your assets will go.

· That Kentucky’s plan for asset distribution does not include your church or any other Christian ministry? You also forfeit the option of creating provisions that will benefit both your family and the Lord’s work.

· That without a properly drawn Will, the death taxes and cost of administering your estate may be higher, thereby reducing what will be available for your family?

· That by having a properly drawn Will, you get to choose who serves as executor and guardian for your children? You also get to decide who gets what and when they get it!

· That by having a properly drawn Will you are helping to ease family friction at your death? This is especially important at a time when your loved ones are grieving your loss.

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Tuesday, May 29, 2012

Your Own Foundation

By: Barry G. Allen- President & CEO

The Kentucky Baptist Foundation was established in 1945 and exists today for you and your church.

It exists for you as an individual or family so you do not have to incur the initial and on-going administrative costs and responsibilities inherent in having your own private family foundation. As a result you and your family, now and into the future, regardless of your level of wealth, can accomplish your philanthropic goals through an arrangement with the Kentucky Baptist Foundation.

In addition to avoiding the administrative costs and responsibilities of a family foundation, there are three other benefits of an arrangement with the KBF. First, there is a privacy benefit. A private family foundation must file detailed and public tax returns on grants, investment fees, trustees’ names and staff salaries. Through an arrangement with the KBF the names of donors can be kept confidential and distributions can be made anonymously. Second, a private family foundation must distribute 5% of its net assets annually; through an arrangement with the KBF there is no annual distribution requirement. Third, there is a tax advantage. The tax deduction limit for gifts of cash to a family foundation is 30% of one’s adjusted gross income; it’s 50% through an arrangement with the KBF. The deduction limit for gifts of securities or real property to a family foundation is 20% of one’s adjusted gross income; its 30% through an arrangement with the KBF.

The KBF also exists for your church for the same reasons in terms of not having to incur the initial and on-going administrative costs and responsibilities associated with having its own church foundation. In addition, through an arrangement with the KBF your church can facilitate the estate stewardship interests of its members in sustaining and enhancing the financial future ministry of the church and other charitable causes near and dear to the members’ hearts.

Call us toll free for information about how the KBF can become your foundation and your church’s foundation for charitable giving.

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Monday, May 28, 2012

E-Devotional-Week 16


NET WORTH-WEEK 3


HOW MUCH SHOULD YOUR NET WORTH BE?

By: Barry G. Allen- President & CEO

Last week you calculated your current net worth.  We suggest you periodically update this calculation as your circumstances change.  As you reduce your indebtedness, your net worth should increase.  Regularly compare your net worth to your financial goals to determine what progress you are making in achieving those goals.

How much should my net worth be? There are several different formulas financial planners use to determine the appropriate level of one’s net worth at different phases in one’s life cycle.  The different life cycle phases are: independence/young adult phase; establishment phase – wedding to birth of first child; childbearing phase; childrearing phase; child launching phase; empty nest phase; retirement phase; single partner phase – death of a spouse.

To oversimplify this determination, let me suggest for your consideration the formula presented in the popular book, The Millionaire Next Door.  It suggests this formula to compute your expected net worth: multiply your age times your realized pre-tax annual household income from all sources except inheritances.  Divide by ten.  This, less any inherited wealth, is what your net worth should be.

Here’s an example: age 30 times annual household income of $50,000, divided by 10 equals an expected net worth of $150,000.  If you’re short of this expected amount, let me suggest you contact a certified financial planner to assist you in developing a plan for corrective action in the future.

Prayer Focus: Ask God to help you better to live beneath your means so you can accumulate your net worth for the accomplishment of His purposes for your possessions.

Next Week: How Much Does A Person Need?

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.


Monday, May 21, 2012

E-Devotional- Week 15

NET WORTH-WEEK 2 


DETERMINING YOUR NET WORTH

By: Barry G. Allen- President & CEO


Remember from the previous lesson your net worth is the difference between the current value of everything you own (assets) and the current balance due on all your debts/obligations (liabilities).

How do I determine my current net worth? The best method is to prepare a statement of your net worth. To facilitate and simplify this, contact our office for a net worth worksheet.

First, list the value of each asset you own. The value listed should be its current market value, which is the value at which it could be sold. The total of this list represents your total assets. If you are married, list individually owned and jointly owned assets.

Second, list the current balance due on each debt you and/or your spouse owe. The total of this list represents your total liabilities.

Third, subtract your total liabilities from your total assets the result of which is your net worth. Hopefully, the balance is positive, which means your assets exceed your liabilities.

Prayer Focus: Ask God to help you to commit back to Him the resources He has entrusted to you, and to pledge to Him to continue to be serious about financial planning and money management from a Christian perspective.


Next Week: How Much Should Your Net Worth Be?

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Tuesday, May 15, 2012

Gone in 90 Days

By: Barry G. Allen-President & CEO 

A widower arranged to meet with Laurie Valentine, our trust counsel, and me to inform us of his desire to demonstrate through his estate plan his love for Christ and his family. He was seeking our assistance in how best to accomplish his estate stewardship objectives. He and his late wife had tithed out of their incomes all their lives, and he wanted to continue that faithfulness out of the accumulated assets with which the Lord had blessed them. He testified to us, “I’ve trusted the Lord all of my life to provide, and He has blessed me far beyond my expectations.” What an example of the biblical stewardship to which each of us is called!

This gentleman had owned a small business, and along with his and his wife’s frugal lifestyle and stewardship faithfulness, had accumulated a nice nest egg for their retirement years. He attributed his success to his faith in Christ, common sense, desire to learn, self confidence, honesty, integrity and a supportive wife.

Neither of his two adult children was interested in the business. Furthermore, he did not feel either of them had the skills or the temperament to manage their portion of his estate. Thus, he was seeking a solution whereby he could provide his children the benefits of their portion of his estate without giving them control of it. He told us if he gave them control it would be gone in 90 days.

After reviewing several options with us and his advisers, he concluded a Charitable Remainder Annuity Trust (CRAT) was the best solution. Through the CRAT he would receive tax advantaged income for his lifetime; at his death the children would receive income for their lifetimes; and at the death of the second to die, the balance of the trust would establish a permanent endowment the income from which would be distributed in perpetuity to Sunrise Children’s Services as a lasting legacy of his and his wife’s love of Christ and His mission in this world.

If you have a similar circumstance in your family, give us the privilege of assisting you.

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Sunday, May 13, 2012

E-Devotional- Week 14


WHAT IS YOUR NET WORTH? WEEK 1 INTRODUCTION


By: Barry G. Allen- President & CEO 

“Be sure you know the condition of your flocks; give careful attention to your herds.” (Psalm 27:23)

You cannot plan where you are going if you do not know where you are.

Why is it important to determine your net worth? To know without a doubt where you are financially is absolutely necessary before you can begin to do any serious financial planning to accomplish your goals, dreams and desires. In fact, the first step in financial planning is to determine where you are now, that is, determining your net worth.

The next four lessons will focus on your net worth. What is it? How do you determine it? How much is enough? What does it have to do with the Christian discipline of financial stewardship?

What is the definition of net worth? According to Webster, worth is monetary value, or the equivalent of a specified amount or dollar figure. Your “net” worth is the difference between the current value of everything you own (assets) and the balance due on all of your debts/obligations (liabilities).

Prayer Focus: Ask God to deliver you from one of Satan’s most devious plots, namely, the concept that your net worth belongs to you and not to God.

Next Week: Determining Your Net Worth

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Sunday, May 6, 2012

E-Devotional- Week 13

TAXES PAYABLE AT YOUR DEATH
By: Laurie Valentine- COO & Trust Counsel 
Estate planning is an important part of every Christian’s stewardship responsibilities. A Christian estate plan is one that you develop by determining God’s will for (1) how your assets should be distributed at your death and (2) how your affairs would be managed in the event you become incapacitated during your lifetime.

This lesson provides information about death taxes and how to plan to reduce, defer and/or eliminate the taxes that may be payable at your death.

Scripture References: Matthew 22:15-22.

Please read this passage in your Bible now.

What Taxes May Be Payable At My Death?
If you die a resident of Kentucky there are two potential death taxes that may be due---the Kentucky Inheritance Tax and the Federal Estate Tax.

What is the Kentucky Inheritance Tax?
The Kentucky inheritance tax is a death tax that may be owed to the Commonwealth of Kentucky by some of your beneficiaries if you die a resident of the Commonwealth. It taxes the beneficiary on the value of what he or she inherits from you.

The Kentucky Inheritance Tax rates range from 4% to 16%.

Assets that must be reported on the Kentucky Inheritance Tax return include individually-owned and jointly-owned bank accounts, stocks, bonds, mutual fund shares, business interests, real estate and real estate interests, debts owed to the deceased person, household goods and personal effects, automobiles; life insurance payable to your estate; interests in trusts; and the value of gifts you made within 3 years of your death.

The portion of a beneficiary’s inheritance that is exempt from taxation depends on their relationship to the deceased person. Your spouse, parents, children, grandchildren, brothers and sisters, and qualified charities are 100% exempt from Kentucky Inheritance Tax, no matter how much they inherit from you. The first $1,000 of what a niece, nephew, daughter-in-law, son-in-law, aunt, uncle, or great-grandchild inherits from you is exempt. All persons not specifically listed in the previous two sentences are granted an exemption on only the first $500 of their inheritance.

What is the Federal Estate Tax?
The federal estate tax is a tax imposed on the transfer of the “taxable estate” of any deceased person who is a citizen or resident of the United States. Your “taxable estate” is the value of your “gross estate” less all allowable deductions and plus the amount of your “adjusted taxable gifts.”

Your “gross estate” consists of all assets, property and interests in property that you own or own an interest in at the time of your death. That includes individually-owned and jointly-owned bank accounts, stocks, bonds, mutual fund shares, business interests, real estate and real estate interests, debts owed to you, household goods and personal effects, automobiles, life insurance, qualified retirement plan survivor benefits, and individual retirement accounts.

Your “adjusted taxable gifts” are the total amount of gifts you made after 1976, other than those qualifying for the gift tax annual exclusion, the exclusion for payment of tuition and medical expenses, the marital deduction or charitable deduction.

Deductions allowable on the federal estate tax return include the unlimited marital deduction and the unlimited charitable deduction.

The unlimited marital deduction provides your estate with a deduction equal to the value of all assets and interests in property that pass from you to your surviving spouse as a result of your death. The deduction is “unlimited” in that there is no limit on the amount that can be deducted---no matter whether the value of what is passing to your spouse is $1,000, $100,000, $1,000,000 or $10,000,000.

The unlimited charitable deduction provides your estate with a deduction equal to the value of all assets and interests in property that pass from you to a qualified charity such as your church, association or one of our Kentucky Baptist or Southern Baptist agencies or institutions at your death. The deduction is “unlimited” in that there is no limit on the amount that can be deducted.

The federal estate tax rate is 35% for persons dying in 2012.

An estate tax credit known as the unified credit amount shelters the transfer of the first $5,120,000 of estate value for persons dying in 2012. Therefore, if the value of your taxable estate is equal to or less than the unified credit amount, your estate will owe no federal estate taxes no matter who receives your assets at your death.


To estimate your federal estate taxes use the following worksheet:

Add up the market value of all of your assets:

Stocks, Bonds, Mutual Fund Shares                                      $___________
Notes and Debts Due You                                                     $___________
Real Estate                                                                             $___________
Bank Accounts (Checking, Savings, CD’s, etc.)                   $___________
Business Interests                                                                   $___________
Personal Property (jewelry, household goods, autos, etc.)     $___________
Life Insurance (face value/death benefit)
Retirement Accounts (401(k), SEP, pension, IRA’s, etc.)     $___________
Trusts You Created or Over Which You Have Control         $___________

Total Assets (your gross estate)                                              $___________

Subtract from your gross estate the following:

Final Debts and Estate Settlement Costs                                  (___________)
Transfers to Your Spouse                                                        (___________)
Transfers to Charity                                                                 (___________)

Add the value of your taxable gifts made after 1976         $___________

Amount Subject to Tentative Tax                                           $___________
  (“Taxable Estate”)

Tentative Tax*                                                                        $___________

Minus Gift Taxes Paid Since 1976                                          (___________)

Minus Estate Tax Credit**                                                      (___________)

Estate Tax Payable                                                                  $___________

* Taxable Estate                                  Tentative Tax (Before Estate Tax [Unified] Credit)
   $5,120,000 to Infinity                                  $1,772,800 plus 35% of excess

** Estate Tax Credit (“Unified Credit”)
     For persons dying in 2012               $1,772,800 (shelters $5,120,000         taxable estate)
           
Remember tax evasion is illegal, but tax avoidance is good stewardship.

Prayer Focus: Take time now to pray for God’s guidance in developing a plan of estate distribution that will result in your being a good steward of the financial resources with which God has so richly blessed you.

Next Week: Budgeting Basics for Today’s Christian Adult


For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.

Thursday, May 3, 2012

“Special Needs” Trusts

By: Laurie Valentine-COO & Trust Counsel 
Creating a plan to benefit a disabled child after your death, without causing the loss of vital government benefits, requires care.

Leaving a share of your estate outright to a disabled child could result in the child losing government benefits he or she is currently receiving from Medicaid or other sources. The inheritance becomes an “available resource” that must be spent down before the child will become eligible to re-apply for the government benefits.

Likewise, setting up a standard testamentary trust under which the trustee is directed to use income and/or principal for the disabled child’s health, support and maintenance will also endanger governmental benefits. The trust may also be subject to cost of care claims, Medicaid liens and Medicaid estate recovery at the child’s death.

The better alternative is a “special needs” or “supplemental needs” trust. Under this type of trust the trustee has total discretion on whether to expend any of the trust funds for the disabled child’s benefit. And, expenditures are limited to non-necessities and supplemental services such as dental, medical and drug expenses not provided through governmental benefits; physical, speech and occupational therapy; special equipment not provided by other sources; vacation and travel activities; social, recreational and entertainment opportunities; and/or training and education activities.

The total discretion granted to the trustee means the beneficiary has no legal right to demand distributions. As a result, the trust assets and income are not “available resources” and, therefore, don’t effect the beneficiary’s eligibility for governmental benefits.

Restricting the use of trust funds to items that will improve the quality of the disabled child’s life (non-necessities) protects the distributions from being deemed “in-kind” income that could reduce some government benefits.

An alternative to a separately managed special needs trust is the “pooled special needs trust”. These are established and managed by a nonprofit association, which maintains a separate sub-account for each beneficiary while pooling the assets for investment purposes. At the disabled beneficiary’s death, the remainder can either remain in the pooled trust to be used for other disabled beneficiaries of the trust, or be set up to distribute to the state an amount equal to the benefits provided by the state during the beneficiary’s lifetime, with the balance, if any, distributed to other family members. 

(502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser. 

Tuesday, May 1, 2012

Jury Duty

By: Barry G. Allen- President & CEO

I’ve just completed two weeks of jury duty. It was the second time in eleven years I’ve served; I was never summonsed during the first 30 years of my residency. I am appreciative my employer, the KBF, has a very accommodative policy related to jury duty for its employees.

Jury duty is a responsibility for which most citizens have ambivalence. On the one hand we dread the inconvenience and the absence from our daily jobs and routines. On the other hand we recognize the vital importance of the process in facilitating the equitable administration of justice in our community to our fellow citizens – and – we must confess, if we were party to a lawsuit, we would want the jury to include people like ourselves deciding the outcome.

I was selected to serve on the jury of a guardianship case in which we, the jury, had to determine whether or not to take away from an individual all or part of his rights in his personal and financial affairs. What an awesome responsibility that was!

My experience on this jury confirmed everything we in the KBF do to educate, encourage and enable individuals and families to put a plan in place and to execute the necessary document(s) BEFORE IT’S TOO LATE to avoid the human and final trauma and cost associated with the court procedure required for a guardianship trial.

The key document is a power of attorney by which you grant someone of your choosing the power to make personal and/or financial decisions in your behalf should you be temporarily or permanently unable to make those decisions for yourself.

There are three ways the KBF can provide educational assistance in this realm of advance planning: (1) private consultation, (2) provide a brochure on “the right to make informed decisions” and (2) an educational seminar in your church.

Please call us toll free to make the arrangements for a private personal consultation session, request the brochure and/or schedule a seminar for your church or church group. 

For more information, please call us at (502) 489-3533 or toll free in KY at 1-(866) 489-3533

The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.