A modest proposal: You can’t take it with you, so use it to help good cause


o, here’s the deal. You can’t take it with you. None of it. Nothing. Naught. Nada. Zilch. Zippo. As important as your money, real estate, mutual funds, IRAs, stock, cars, trucks, 4-wheelers and fishing poles may be to you in this life, they will be useless in the next. 

So, what’s a prospective decedent to do?

Much of estate planning is driven by the stage of life the person is in at the time the planning is conducted.

With respect to married couples with young children, most hold their assets jointly with right of survivorship, so at the death of the first spouse the surviving spouse becomes the sole owner. At the death of the second spouse, the assets often get equally divided among the children, or to a trustee for their benefit until they reach a designated age. When the children are young, this approach makes perfect sense as most parents want to ensure that their kids are adequately provided for until they are out on their own.

But what about when the kids are no longer kids? Or if the person  has no spouse or no children? What then? Most couples with children continue to name them as the contingent beneficiaries (recipients of the couple’s entire estate after the death of both spouses) in their estate planning documents even after the children are well into adulthood and have families of their own. 

Persons with no children often divide up their estates among siblings, nieces, nephews and distant relatives who may have had little or no interaction with them.

Unfortunately, sudden acquisition of unearned wealth is not always what it’s cracked up to be, as many of us are simply incapable of handling a windfall wisely. As a consequence, you may not be doing your adult children any favors by leaving them the bulk of your estate.

Let me suggest a different approach. 

If you are married with kids, once the kids are out on their own, consider naming your favorite charity or foundation as one of the contingent beneficiaries in your estate plan. For example, you could dedicate a percentage of your estate (i.e., one-third) to charity and the balance to your children. Another approach would be to leave a sum certain (i.e., $100,000) to your children and the balance to charity. If you want to involve the kids in the giving process, your will or trust could allow the children to select the charity to receive the bequest or direct them to establish a fund in the family name with a community foundation. They may actually get into it. Giving away somebody else’s money can be fun.

If you have no kids, consider naming the charity as the sole beneficiary of your estate after the death of you and any spouse or domestic partner you want to provide for. Your nieces, nephews and second cousins will never miss it.

Of course, there are more sophisticated ways of being philanthropic in one’s estate planning. A charitable remainder trust allows a donor to make a tax deductible contribution to a charity or foundation while still  living but retain the income stream from that contribution during the donor’s lifetime. 

One advantage of the charitable remainder trust strategy is that if the donation is in the form of a capital asset such as a security or real estate, there is no capital gains tax on the transfer to the charity or upon sale of the asset by the charity. Check with your favorite charity, foundation or tax adviser for more details or for suggestions on other methods of tax-efficient giving.

Except for the very wealthy, virtually no Alaskan has to worry about federal or state estate taxes. As a general rule, in 2015, only single persons with estates in excess of $5.43 million and married couples with combined estates in excess of $10.86 million are subject to federal estate taxes. Alaska has no state estate tax.

And since most of us no longer need to worry about a portion of our estates passing to the government, why not instead consider dedicating a portion of your estate to the creation of a legacy with your favorite charity or foundation? What the heck. Go out with a bang.

Dan Westerburg is a former Homer resident who currently practices law in Arizona. He was a member of the Homer Foundation Board of Trustees for several years.


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