WRITING A WILL - Your First Step to a Good Estate Plan

If your nonprofit organization is trying to encourage its donors to include your charity in their wills, here are some facts that you might share with them. I recently wrote this article at the request of a Texas nonprofit to share with its donors.

Recently, I received a very unpleasant shock when I learned a friend and colleague had suddenly died. There was no warning or long-term sickness to prepare his family and friends. We were all stunned when this seemingly vigorous man was so quickly taken out of our lives. It made me stop and wonder, "Was he ready?" Are any of us really ever ready? All we can do is try to have our personal and financial lives in order to minimize the difficulty for ourselves and for our families.

No one is ever going to tell you that estate planning is fun. But one of the bitter facts of life is that we are going to die someday, and the better we prepare for that eventuality, the more we will be able to control the outcome…at least the financial outcome for our heirs.

The basic tool of estate planning is, of course, the will. Surprisingly, it is estimated that only about 30% of the people in the United State have a valid will. I have heard more excuses for not preparing a will than you can imagine, starting with the popular "I hate dealing with lawyers" to "my estate is too small to worry about." Let me say one thing that is true for everyone:

Having a valid will makes settling your estate easier, faster, cheaper, and will allow you, and not the State, to control the distribution of your assets.

If that is not sufficient reason for preparing a will, here are some facts about what will happen if you have no will at your death:

• A surviving spouse will receive all community property, unless your spouse at your death is not spouse #1. Subsequent marriages may result in your children rather than your current spouse inheriting the community property.
• If you hold separate property at death (property that has been excluded from your community property), the surviving spouse will generally receive only a one-third life estate for any real estate. The children will actually inherit the real estate, even if the surviving spouse is the mother of those children.
• If you have neither a spouse nor children who survive you, without a will the court will decide who will receive the estate assets after reviewing the facts.
• Without a will, the settlement of larger estates will require that the court oversee the entire administration, a very time-consuming and expensive process.

Now that I have, hopefully, given you some good reasons for going to the trouble of making a will, you need to consider how you wish to distribute your estate. Of course, you will want to make sure your loved ones are provided for, but why not consider leaving one or more charitable bequests to continue the support you have given to worthwhile charities during your lifetime?

Recent studies indicate that over 70% of Americans make charitable gifts during their lifetimes, but only 8% include a charitable bequest in their wills. Why is this? I think it may be because charities are reluctant to bring up the subjects of dying and charitable estate gifts to their donors. Perhaps you have been supporting a charity through annual gifts. If you would like to remember that charity in your will, there are a number of ways of doing so while still making sure you provide for your heirs.

One of the easiest ways to make an estate gift to a charity is through a bequest in your will. If you are writing a new will, a provision for a charitable bequest can be included. If you already have a will and do not want to re-draft it, a simple codicil can be written that provides a bequest to the charity or charities of your choice. When including a charity in your will, it is important to use the correct and complete name. If you are unsure, call the charity's development office and ask.

Any competent attorney can provide the correct wording for your bequest. Your bequest may be styled in several different ways, depending on your preference:

• It may be for a specific dollar amount, for example, $5,000;
• It may be for a percentage of your estate, for example, leaving 5% of your entire estate to ABC Charity;
• You may also make the charity the beneficiary of the residuum of your estate, which means after all specific bequests are paid by your executor, if anything remains it will be given to the charity;
• You may include a contingent bequest, which means that should the person to whom you leave the bequest predecease you or choose not to accept the bequest, the charity would receive it instead.

Although most charities prefer unrestricted bequests so that they can use the bequest for the most appropriate use at the time they receive it, you may state that you want the bequest to be used for a specific purpose. I would caution you, however, to make sure that you consult with the charity before finalizing your will to make sure that the charity is willing and able to use the funds as you direct. You should also be sure to provide language that allows the charity to use the bequest for other uses if the purpose you name is no longer appropriate. For example, if you ask that your bequest be used for a particular program, by the time the charity receives the bequest that program may have been changed or eliminated because it was not longer needed.

Writing a will is the first step in establishing a good estate plan. It may be all you need or you may need to consider other estate techniques to be sure your estate assets are distributed in the way you wish. When you start the process, remember to review other assets that should work in concert with your will, for example:

• Beneficiary designations on insurance policies
• Beneficiary designations on retirement plans
• Ownership of investment accounts, bank accounts, etc.

While you are in this process, please do not forget about health issues, and ask your legal advisor about a health care power of attorney and (in Texas) a directive to physicians.

Although getting your estate plan set up may be time consuming and frustrating during the process, the peace of mind and sense of control you will enjoy when it is completed will more than make up for the effort. Work with your legal and financial advisors to come up with a plan that works for you, your family, and your friends and let them know you cared enough to be ready when the time comes.