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Frequently Asked Questions

Gifts from Your Will/Trust

What happens if I die without a valid will?

Some 60% of Americans die without a valid will. This is unfortunate in most cases, because state laws will take over and will distribute your probate estate in accordance to a prescribed formula — possibly in ways that you would not choose. Any charitable interests you wanted to benefit will not occur.

When do I need to change my will?

One thing is certain as we go through life and that is change.

The circumstances of life change constantly. If you have taken steps to write a will, you can be certain that your circumstance and the makeup of your estate will change from time to time. It is important that you do not procrastinate to get your will amended or even rewritten as these changes in life occur. Here are some common events that should nudge you to change your will: marriage, divorce, a new baby, stepchildren, named heirs pass away, you move from a common-law property state to a community-law property state or vice versa, you dispose of or purchase significant assets, guardianship is no longer needed for your adult children, you change your mind about your bequests to heirs, you wish to add or change a charitable beneficiary.

Consider revising your will using a codicil or contacting your financial advisor.

Do I need an attorney to write a will?

Some states allow an individual to compose a will. If it is properly witnessed and signed, many Probate Courts will accept such a will.

However, most people have no idea how to get started with such a task. They wonder if they will adequately cover all the bases in a self-authored document.

A will is a very important legal document, and it is wise to employ the expertise of a qualified attorney. A will is one of the least expensive legal documents you would pay for, but a well-written document could save your heirs much more in dollars and hassle.

What is the role of an executor or personal representative?

An executor or personal representative is the person you assign the responsibility to manage and distribute your estate in accordance with your will. An executor’s work will be monitored by the Probate Court. An executor does not need to be an expert in finances, probate law, or taxes. He or she can and should hire such experts that are needed for assistance. A good executor will be honest and organized, possess good common sense, and be willing to serve in this capacity. Most people will name their spouse or an adult child, or some other close heir. If possible, name someone who lives nearby and who is familiar with your financial matters. That will make it easier for the person to do chores like collecting mail, selling assets, and finding important records and papers.

What is the Probate Court?

This is the court that determines the validity of a will and provides judicial oversight over the distribution of the estate. If there is no valid will, then the Probate Court will appoint an administrator of the estate to facilitate the estate’s distribution in accordance with state law.

What are my non-probate assets?

Non-probate assets are any assets in your estate that will pass to heirs outside of the Probate Court. Examples include jointly held property such as real estate, jointly held bank accounts, and assets that will pass to heirs based on a death benefit beneficiary designation that are prestated in a life insurance policy or qualified retirement plan (such as an IRA).

Additionally, some people title all their property to a living trust, and at death, the named trustee will distribute or manage assets in accordance with the trust document. The trust and assets possessed by the trust are not reviewed by the Probate Court. In states where probate fees are expensive, a living trust can save on those costs. Also, those who own property in another state may want to consider a living trust so that they do not have to deal with two Probate Courts.

What is a codicil?

This is a simple amendment to a will, which avoids the cost and complication of rewriting an entire will. The codicil must be signed and witnessed or notarized as is the original will.

Download a sample codicilOpens new window.

Giving from Your Retirement Plan

How do I arrange a gift from my retirement plan?

Simply contact your IRA or retirement plan administrator and request a copy of the Change of Beneficiary Form. You can fill this in as you wish and include Fontbonne for a portion or all of the remainder of your plan’s assets.

What are the tax implications of a gift of retirement plan assets?

For gifts at death, any portion of your retirement plan assets that are given to a qualified charity will also qualify for income tax, inheritance tax, and federal and state estate tax deductions as applicable to the size of your estate and your state of domicile. Any assets coming out of your plan to your heirs may be subject to all of the taxes mentioned above.

Gifts of Stock and Appreciated Assets

How do I arrange for a gift of my stock?

It is important that you contact us so that we can assist you with transfer instructions. If you own securities in a brokerage account, we can help you set up an electronic transfer of the shares to our brokerage account. If you possess actual stock certificates, we can tell you how to sign the certificates over to us and fill out a stock power form.

What are the tax advantages of a gift of stock?

Assuming you are giving long-term (owned for 12 months or more) appreciated securities, you will receive a charitable income tax deduction equal to the fair market value of the shares. For common stock this is typically the mean value on the date that we take control of the shares you give. You will pay no capital gains tax. Gifts of stocks are deductible up to 30% of your adjusted gross income the year you make your gift. Any excess amount can be rolled over into the next tax year, for up to five additional tax years if needed.

Will you sell the shares I give you?

It is generally our policy to liquidate any donated stock shares immediately after receiving them, so that we can use the cash proceeds to support the overall mission of Fontbonne University.

Can I give closely held stock that I own?

In many cases yes, and considerable tax benefits can result. However, giving closely held stock is more complicated than giving publicly traded securities and may be subject to certain transfer restrictions. We stand ready to assist you with your gift intention. One prerequisite to our acceptance of a gift of closely held stock is that the business or the shares have had a recent qualified appraisal. Please contact us so that we can walk you through the process.

Gifts of Life Insurance

How do I arrange a gift from my life insurance?

Simply contact your life insurance company and request a Change of Beneficiary/Ownership Form. Designate us as the new owner and beneficiary of your policy.

What are the tax implications of a gift of life insurance?

If you give your policy to us while you are still alive, you will receive an immediate income tax deduction for the current value of the policy. In order for you to get this deduction when the charity is the policy owner, you make donations to Fontbonne University so we have funds to pay the insurance premiums. Put another way, the donor covers the premium payments that the charity now makes on the gifted policy by making regular additional monetary gifts to the charity. If you retain ownership of the policy, benefits payable to us at death can save you federal and state estate taxes depending on the size of your estate and your state of domicile.

Charitable Remainder Annuity Trust

Who can serve as trustee of my annuity trust?

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

How would the assets in my annuity trust be invested?

Typically, such a trust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. An annuity trust may also hold tax-free bonds.

Is it better to give cash or appreciated securities for my unitrust?

Gifts of cash or appreciated property yield the same result for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

How will income from my annuity trust be taxed?

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal.

Can I name my children as income beneficiaries?

Yes, subject to certain limitations.

What are the tax deduction implications of my charitable remainder trust?

A Charitable Remainder Annuity Trust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

Charitable Remainder Unitrusts

Who can serve as trustee of my unitrust?

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

How would the assets in my unitrust be invested?

If the assets in the trust are liquid such as cash or securities, typically a unitrust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. If the trust assets are primarily nonliquid assets such as real estate or personal property, the trust may be held for growth in capital appreciation rather than current income. At some later date, the nonliquid assets could be sold (avoiding capital gains taxes) to be reinvested to produce income for the income beneficiaries.

Is it better to give cash or appreciated securities for my annuity trust?

Gifts of cash or appreciated property yield almost the same results for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

How will income from my unitrust be taxed?

Can I give real estate or other property to a unitrust?

In most cases, yes. The value of the trust principal will be determined by a qualified appraisal of the property. However, real estate or other property may not be producing income and thus the income beneficiaries may receive no or very little income until these assets are sold and reinvested to produce income.

Can I include my children as income beneficiaries?

Yes, subject to certain limitations.

What are the tax deduction implications of my Charitable Remainder Unitrust?

A Charitable Remainder Unitrust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

Charitable Bargain Sale

What if the property has a mortgage or other lien on it?

The mortgage or lien can and should be paid off prior to the bargain sale or with the sale proceeds received by the previous owner. This produces the best tax benefit to the donor/seller. If the charity assumes the lien or mortgage, then this is considered taxable income to the donor/seller.

Why not sell my property and make a gift from the proceeds of the sale instead?

When you enter into a bargain sale you receive an immediate infusion of cash from us. This may help bridge the gap between residence sale and purchase of a new residence, or other immediate needs for cash while a sale of your appreciated property is pending.

Can I choose the appraiser who determines market value of my property in the bargain sale?

Yes, in fact, we may also choose to conduct an appraisal for our due diligence purposes, but part of a bargain sale is asking you to choose a qualified appraiser to evaluate the market value of your property. A qualified appraiser not only helps both of us determine your fair market value, but is required by the IRS when you file for a deduction from the bargain sale transaction.

Retained Life Estate

Do I have any option other than having the charity take possession of the house should I want to move out of the property prior to my death?

If you negotiate a provision in the Retained Life Estate contract for the right to lease the property for the remainder of your life estate, you can keep the additional money. You remain responsible for the taxes, insurance, and maintenance expenses spelled out in the agreement with the charity.

Who is responsible for building modifications, additions and custom items like a workshop, extra garage, or swimming pools?

You are. Most likely the RLE contract will contain a provision that requires you to get prior approval from the charity to make such improvements.

Can we move out and then back in?

Yes. The use of the asset is yours. Should you decide to lease for a while and then move back in, this gifting concept allows for that.

Can we use our second home to create a Retained Life Estate?

Yes. As long as the property qualifies under the IRS rules, it can be used to create this type of donation arrangement (i.e., you don't take depreciation or own it in a corporate structure, etc.) Check with your accountant to make sure it qualifies. Motor coaches and yachts qualify as second homes.

Charitable Lead Trusts

Will I be able to claim an income tax deduction when I set up my Charitable Lead Trust?

Maybe. If the trust is structured a certain way, you’ll be eligible to claim an income tax deduction in the year you set up your trust. However, that means that all of the trust income in following years will be taxed to you as well. Most donors structure their CLTs in a way that does not yield a current income tax deduction so that they don’t have to worry about income tax issues in the future. In both cases, you are able to provide wonderful support to Fontbonne and to pass trust appreciation to your family free of gift and estate tax. We can provide you and your advisors with information that will help you decide which type of CLT will work better for you.

Can I name my grandchildren as beneficiaries of my Charitable Lead Trust?

Yes, you may list your grandchildren as beneficiaries. Due to the generation-skipping transfer tax, there are more complications related to a lead trust with grandchildren as beneficiaries than one that passes assets directly to children. Most legal professionals would prefer the use of a Charitable Lead Unitrust if grandchildren are named as beneficiaries.

How long will my Charitable Lead Trust last?

There is no minimum or maximum term for your Charitable Lead Trust under federal law, although applicable state law may require such a trust to end eventually (typically after several decades). However, if you want to maximize the benefit to Fontbonne and minimize transfer taxes, we can help you determine the optimum term to accomplish your goals. Generally, the longer the term, the lower the taxable gift to your remainder beneficiaries and the higher the benefit to Fontbonne University.

Can I establish a CLT for less than $1,000,000?

Yes, although the higher the amount the greater the potential tax benefit to you and benefit to your heirs.

How does a Charitable Lead Trust help Fontbonne University?

A CLT can act as a cash gift to us while providing tax advantaged planning to you and your heirs. Cash gifts may support any of the areas that you are most passionate about at Fontbonne University.

The gift planning information presented on this site is intended as general. It is not to be considered tax, legal, or financial advice. Please consult your own personal advisors prior to any decision.

Planned Giving

Frequently Asked Questions

Frequently Asked Questions

Gifts from Your Will/Trust

Giving from Your Retirement Plan

Gifts of Stock and Appreciated Assets

Gifts of Life Insurance

Charitable Remainder Annuity Trust

Charitable Remainder Unitrusts

Charitable Bargain Sale

Retained Life Estate

Charitable Lead Trusts

Planned Giving

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