The Ten Biggest Estate Planning Errors

By: Laurie Valentine- COO and Trust Counsel

1.  Not executing a Will.  If you don’t make a Wall, Kentucky will do it for you.  Your assets may not go where you want and, if your estate is big, unnecessary taxes may be paid.

2.  Wanting just a “simple Will.”  Some people leave their spouse everything regardless of the estate’s size because the spouse pays no estate taxes.  For estates over the estate tax exemption ($5,000,000 for persons dying in 2011 or 2012), that could cost your heirs.

3.  Putting everything into joint tenancy.  While that avoids probate, joint ownership between spouses has the same danger as a simple Will.  If you own property jointly with others, like children, “your” property may become subject to the claims of the child’s creditors and you may get taxed on your own property if the child dies before you.

4.  Thinking that avoiding probate will avoid taxes.  It doesn’t always.  There are advantages to avoiding probate, but saving taxes isn’t generally one of them.

5.  Leaving property to one child to “work things out.”  If you leave your assets to one child, they are not obligated to give it to other members of your family.  It may even cost them in gift taxes to redistribute your assets as you would have wanted.

6.  Letting your children “take care of” your grandchildren.  In larger estates, it may cost less for you to leave property to grandchildren directly rather than letting your children do it through their own estates. 

7.  Failing to consider how your affairs will be handled if you become incapacitated as the result of a stroke, accident or illness.   If you don’t plan, a costly guardianship may be required to give someone authority handle your personal and financial affairs.

8.  Not using trusts to help beneficiaries handle their inherited wealth.  You can ease beneficiaries into the management of inherited wealth with the use of testamentary trusts. 

9.  Not planning for taxes that may be due at your death.  Children may be forced to sell important family assets at reduced prices if you do not have a proper plan in place.

10.  Procrastination.  The government will love you for this.

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.

She Gave All She Had To Live On

By: Barry G. Allen- President & CEO

        Remember that incident recorded in Luke 21:1-4 and Mark 12:41-44 when Jesus observed the poor widow putting her copper coins into the temple treasury? What a comparison Jesus made that day to the others who were putting their money into the treasury as well! Mark’s version reported “Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a fraction of a penny. Calling his disciples to him, Jesus said, ‘I tell you the truth, this poor widow has put more into the treasury than all of the others. They gave out of their wealth; but she, out of her poverty, put in everything – all she had to live on.’”

        In terms of the coins she used this woman made the smallest gift, but to Jesus she made the most significant gift to God’s work. What are the truths Jesus would have us learn from this experience? First, no one is excluded from the privilege of making a worthy gift to our Lord. Second, the gift that counts is the gift that costs. Third, it’s not the amount but the proportion. Fourth, it’s not the size of the gift but the size of the sacrifice. Fifth, to God the depth of our giving is not dependent upon the depth of our pockets but upon the depth of our love and commitment to Him.

        Giving is a matter of the heart. The poor widow demonstrated a heart of faith and love. She deprived herself of necessities in order to give to the cause she loved, and she did it believing God would not overlook her needs. God has honored this poor widow’s legacy by her place in Holy Scripture. Have you given Him your heart? He is not asking us to give all we have to live on. But, if we want to be commended by Him, we must give Him our heart like she did.

Bob & Trula Johnson- "You Can’t Outgive The Lord"

           Bob and Trula began using the consultation and fiduciary services of the Foundation in 2000, upon the recommendation of Dr. Bill Whittaker, the President of Clear Creek Baptist Bible College.  Their interest in assisting financially deserving ministerial students began with the death of Bob’s mother.  In addition to requesting memorial gifts in lieu of flowers at her death, they established a perpetual scholarship endowment for Clear Creek students in memory of Bob’s parents.  This endowment is the remainder beneficiary of several charitable trusts the Johnsons have established with the Foundation.
       
          Trula was born in Knoxville, Tennessee, and educated at the University of Tennessee and Transylvania University.  She trained as a medical technologist in Louisville and as a cytology screener at the Cleveland Clinic.  She worked first at Knoxville’s St. Mary’s Hospital, then at the miner’s hospital in Harlan.  In the late 1950s, she transferred to the Lexington Clinic.

Bob was born in Jessamine County, Kentucky, and raised in Fayette County.  Following his service in the U.S. Navy, he attended the University of Kentucky.  After graduation, Bob worked four years for Shely Construction as a field superintendent and then 14 years as an electrical engineer for Kentucky Utilities.

Trula met Bob during a rainstorm when her landlady called Bob, who was a friend, to restore their electricity.  Bob says jokingly, “I didn’t know what I was getting into that night.”  Six years later they married, and what an interesting life they have enjoyed together as global citizens.
           

Bob became a resident project engineer for an engineering consulting firm that brought them to Pakistan, South Vietnam, New York City and Saudi Arabia over the next decade.  They retired to Knoxville, and Bob earned an MBA from UT.

Feeling too young to retire, Bob became a project engineer for the U.S. Agency for International Development, and they spent the next several years living in Indonesia and Egypt.  In 1988, they fully retired to Knoxville to be near Trula’s aging father and Bob’s ailing mother, who lived in Lexington.  In 1993 they moved to Lexington.         

During a recent visit with Laurie Valentine and Barry Allen, Trula and Bob acknowledged that the Lord had been so good to them, their parents had been such giving people, and they had discovered this truth: “You can’t outgive the Lord.”
           

Over the past eight years Trula and Bob have established a number of charitable remainder annuity trusts (CRATS) and one charitable remainder unitrust (CRUT).  They have funded these trusts with gifts of rental property, appreciated stocks and cash.  They also have charitable bequest provisions in their estate planning documents.          

Between the charitable gifts they will have made during life and those that will be made at death, the Johnsons’ Christian legacy will be perpetuated through the missions and ministries of ten different religious, educational and benevolent ministries from Kentucky to Tennessee and to the ends of the earth.  At the same time, the Johnsons have made provisions for their family.  We commend them for their prayerful, careful and thorough planning the results of which will be generosity toward God and toward their family.

         
            May others emulate Trula and Bob’s Kingdom-minded stewardship and their use of the consultation and fiduciary services of the Kentucky Baptist Foundation.

More For Christ Via CP Endowment

By: Barry G. Allen- President & CEO

            The Cooperative Program enables us Kentucky Baptists to accomplish more for Christ together than we ever could on our own.  CP funds provide the foundational support for statewide, nationwide and worldwide missions and ministry efforts.

            Traditionally, the Cooperative Program is supported primarily by the collective giving of the churches.  However, there are other ways for you to support the Cooperative Program directly through the Kentucky Baptist Foundation.  Let me encourage you to consider one or more of these as you prayerfully plan your longer term stewardship goals.

            If your goal is to make a gift at death, then consider a bequest in your will or a beneficiary designation of life insurance or retirement assets.  If your goal is to avoid capital gains on the transfer of real estate, then consider a real estate gift.  If your goal is to avoid the potential double taxation at death of your retirement assets, then consider gifting those assets at death.  If you goal is to make a simple gift now, then consider an outright gift of cash or appreciated securities.  If your goal is to make a gift larger than you ever dreamed possible, consider a life insurance gift.  If you desire flexibility in timing the decision as to what charities will benefit from your gifts versus the tax advantaged timing of your gifts, consider a donor advised fund.  If your goal is to make a gift now, but receive in return a fixed income for life, consider a charitable gift annuity.  If your goal is to make a gift now and create a hedge against inflation over the long term, then consider a charitable remainder unitrust. If your goal is to reduce the cost of passing assets to your heirs, then consider a charitable lead trust.

            A legacy gift to the KBF for the CP Endowment Fund is a perpetual investment with eternal implications that will be working literally 24/7 to connect people all over the world to Jesus Christ.  Please call us to assist you.

Charitable Giving As Part of Your Business Exit Strategy

By: Laurie Valentine- COO & Trust Counsel


     Business owners nearing retirement must consider how they will “exit” their business. While some will transfer ownership to a family member, for many the transition out of the business will be through its sale.

     A charitable gift of a portion of the business, as part of the exit plan, can provide several benefits: reduction of what may be a significant capital gains tax liability; a charitable income tax deduction based on the market value of the gift; a potential increase in your income if you use a life income charitable gift; and a means of demonstrating your love for the One who entrusted and blessed you with so much.

     Jane and Sam Jones, ages 65 and 68, have owned ABC Corporation for 40 years. They have decided it is time to retire and plan to “exit” through a sale of their business. ABC’s current market value is $5,000,000. The Jones’ cost basis is 0, which means an outright sale will result in $750,000 of capital gains taxes, leaving $4,250,000 for Jane and Sam to invest. Investing the sale proceeds to earn 5 percent a year gives them $212,500 per year in income.

     Adding a charitable gift of some of their ABC stock to their exit planning, before a deal is struck to sell the company, could be beneficial to Jane and Sam. A gift of 30% of the stock ($1,500,000) to a 5% charitable remainder unitrust reduces their capital gains tax liability. Their gift entitles them to a charitable income tax deduction of $538,635, which will provide additional income tax savings. The unitrust will pay Jane and Sam five percent of the value of the trust assets, as revalued each year, for the rest of their lifetimes ($75,000 in the first year) and the remainder of the trust will be distributed, at the survivor’s death, to the charitable organization(s) they name in the trust agreement allowing them to set up significant future support for Kingdom causes important to them. The combination of the unitrust income and the income from investing their net sale proceeds ($2,975,000) results in potentially more income for the Jones’ each year ($223,750 in first year assuming 5 percent earned on sale proceeds).

     Exiting a long-owned business provides a unique stewardship opportunity for business owners.

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.

New And Improved Connectivity

BY: Barry G. Allen- President & CEO

What a pleasure and a privilege it is to communicate to those individuals, families, churches and church-related organizations to whom we are seeking to encourage, educate and enable about solutions to the stewardship issues related to faith, family and finances.  We use a variety of communication channels because of the variety of channels used by those we seek to serve.  Those channels include personal visits, telephone, email, group presentations, direct mail, the Western Recorder, a quarterly newsletter and the internet.

            As the ways and the speed with which people communicate continue to change dramatically, we are adapting to those changes in order to stay connected with and to add to our constituents.  Did you know almost 80% of Americans have internet access in their homes?  Did you know the fastest growing group of Facebook users is people age 55 and older?

            I am excited to announce we have just launched a new website.  It is much more user friendly, more interactive, has more useful information relevant to a broader multi-generational audience and is integrated with our new Facebook presence and blog.  It was designed and will be maintained using the latest technology.

            Let me encourage you right now to click on the site at www.kybaptistfoundation.org and browse.  Whether you are seeking information for yourself or for your church or organ

ization, you will be impressed immediately with the simplicity of the home page from which you can navigate through the channel or channels in which you have an interest.

            From the website you can access easily our Facebook page, which includes regularly changing articles and updated news.  Or, you can access Facebook directly at www.facebook.com/KentuckyBaptistFoundation.  Either way, click “like” and enter your email address in the “subscribe” box so you will receive the automatic updates.  If you decide later you do not want the automatic alerts you can unsubscribe at anytime.

            Laurie and I will be writing the blogs and would welcome the opportunity to converse with you at www.kentuckybaptistfoundation.blogspot.com , or click “blog” from Facebook.

            Let’s stay connected!

Beyond Checkbook Giving

By: Barry G. Allen- President & CEO  

           Most Christians tend to support the mission of their church and other charitable organizations by writing a check and placing it in the offering plate or sending it through the mail.  Checkbook giving also tends to be giving out of one’s income without regard to certain non cash assets the Lord has entrusted to us.

            If you think about it for a moment, the noncash assets the Lord has entrusted to you likely have greater value than the cash assets He has entrusted to you. Noncash assets consist of real estate, stocks, bonds, mutual fund shares, business interests, retirement plan assets and life insurance cash surrender values. These non cash assets cannot be placed in the offering plate on Sunday morning, and may require the assistance of a professional adviser in making charitable gifts.  Using noncash assets for charitable giving typically is done as part of one’s overall estate and financial planning and may take advantage of certain tax-advantaged methods to accomplish one’s giving objectives.

            Noncash assets can be given in a variety of ways and at various times over one’s life.  They can be given outright, by bequest in a will or trust, by beneficiary designation of retirement plan survivor benefits and life insurance death benefits, and by payable on death provisions of bank and brokerage accounts.

            Since all of our possessions belong to the Lord, who has entrusted them to us to manage and to use according to His purposes, it behooves us to consider prayerfully “giving beyond our checkbooks.”  Furthermore, the financial resources required to advance the Kingdom in the future depends upon it.

            There are two ways the KBF can be helpful in educating and enabling you to move beyond checkbook giving.  First, Laurie Valentine is available to you by telephone or a personal visit to provide helpful information and to answer your questions.  Second, Laurie and I are available to conduct a seminar in your church or older adult group.  Please call us; we want to help.