The YSU Foundation, in celebration of National Make-A-Will Month, is pleased to provide this enlightening commentary from Attorney Lawrence Richards, a local attorney specializing in estate planning and tax law. Make-A-Will Month is a time to reflect on your estate plans and how you can impact your community through charitable giving.
Guest Author: Attorney Lawrence Richards
August is National Make-A-Will-Month. The purpose is to stress the importance of estate planning and the power of planned giving. Approximately 65% of American adults do not have a will. This means that when they die, their estate is probated under the laws of intestate succession, meaning when someone dies without a will.
The primary benefit of having a will is that the individual gets to decide where their assets go upon their death. If an individual dies failing to make a will, then the state will determine how your assets will be distributed. It may well be that the laws of intestate succession result in a different scheme of distributing the individual’s assets than what the individual would want upon their death.
People frequently tell me that they do not want to make a will because they are not sure how they want their assets to be distributed. I always tell them that they are better off making a will now even if they are not absolutely certain how they want their assets to pass. They are probably much closer to having the assets distributed the way the individual would want than if they had to rely upon the state rules of intestate succession. I also explain that the will can always be changed as the facts and circumstances of a person or the person’s family changes.
I find that frequently people do not want to see their children receive their assets until they are fully mature. Many individuals want to provide that their assets will remain in trust and that their children receive one-third of the assets at age 25; one-half the balance at age 35; and the balance at age 45. People find these ages to be three different stages of life and that frequently when an individual is 25 years of age, he/she may be single with no children and relatively little responsibility. At age 35, individuals are frequently married with children, have a mortgage on their home, and are worried about the education of their children. At age 45 most individuals are definitely in the process of educating their children, trying to pay off their mortgage, and providing for their retirement. Thus, these are different stages of life and people have different responsibilities at those ages.
I have worked with dozens of people who want to help society and, in particular, those individuals who have not been as fortunate or blessed as they have been. As people age, they frequently realize how lucky they have been to have had the opportunities that they have had and want to make opportunities available to others. That is the primary reason for individuals making charitable bequests when they are doing their will.
Many people like the idea of planned giving. However, they feel that the amount of money they have is not sufficient that they could leave enough to make an impact on society. Many individuals feel that they would be hard put to give more than $5,000 or $10,000 to a particular charity. They tend to think that those individuals making planned gifts tend to be wealthy people because they think of Henry Ford and the Ford Foundation and Andrew Carnegie whose foundation was instrumental in providing financial help to establish public libraries. They then think of the current people who are making substantial charitable contributions such as Bill and Melinda Gates with the Gates Foundation and Warren Buffet who has said that virtually his entire estate is going to pass to charity. These people tend to think that because they are not in the same category as those individuals, they should not be giving anything to charities. I explain to them that even modest gifts can help a charitable organization tremendously and that charities receive more money from modest bequests than they do for those relatively few wealthy individuals who leave large amounts. I also explain that when the charities invest their funds, they can take out a reasonable amount each year to use for charitable purposes while allowing the corpus to grow and not only to keep even with inflation, but to increase the real value of the funds for the future.
Paul McFadden, President of the YSU Foundation talks about when Youngstown University became a state university in October, 1966. At that time there were 14 charitable bequests that were being administered by Youngstown University. When this conversion to a state university took place, President Howard Jones wanted to set aside those 14 funds so they could be used in the future for scholarships to the new Youngstown State University. The value of those bequests has risen greatly. Those 14 original scholarships from 1966 have grown to the point when in the 2023-2024 academic year, 25 students received scholarships from those 14 bequests. Looking at some of those original 14 scholarships, one can see how much they have grown. Tom Pemberton established a scholarship with $12,000 on December 3, 1956. As of June 30, 2023, the value of that fund was $76,139. John R. Roland established a scholarship on June 24, 1957 with $2,500 and the value of that fund today is in excess of $23,500. Clarence Strouss established a scholarship for $5,000 on January 28, 1958 and the value of that fund today is approximately $21,000. Katherine McDowell Wilson established a scholarship fund with $40,000 in August 1958. The value of that fund as of June 30, 2023 was over $209,000. Seeing how these bequests have increased so greatly over a period of 60 years drives home the point that small bequests can grow into larger funds and can benefit society multiple decades after being originally established. Roy T. Bell, Dean of College of Commerce and Finance, at what used to be the Youngstown Institute of Technology wrote an article in 1928 emphasizing the above by stating “large oaks from little acorns grow”. Those 14 individuals who contributed bequests in the 1950’s have seen those acorns grow into large oaks.
When making bequests of deferred compensation plans such as pension plans, profit sharing plans, traditional IRA’s, and 401(K) plans, there are tax benefits since the charities receive the proceeds of these deferred compensation plans and do not have to pay any income taxes. However, if an individual’s beneficiaries received the proceeds, those individuals would have had to pay income taxes on the amount of the deferred compensation. In addition, many of those individuals would have to also pay state income taxes on those distributions when they live in states that have an income tax. It is easy to see how people that are in a relatively high tax bracket, i.e., 35-37% for federal taxes and maybe 5% for state, see that their charities that receive the benefit of the entire contribution rather than family members who may have received only 60% of the value of the deferred compensation since they would have had to pay income taxes. I think this is a strong motivational tool for many individuals.
Creating your will may feel daunting, especially with so many factors to consider. But the truth is, there is no better way to define your legacy, protect and provide for your loved ones, or make a lasting impact on the community through charitable giving, than by writing your will! In doing so, you can change the course of your loved one’s future, instead of letting the State determine how your assets should be distributed. All you have to do is finalize your wishes in writing, and add your signature, to make a significant and lasting difference in the lives of those around you. Please take some time during Make-A-Will Month to consider your estate plans. You may be surprised to find it is not as daunting as you thought it would be!
Attorney Lawrence Richards is a member of the YSU Foundation Board of Trustees. For any questions to the YSU Foundation, please contact us at 330-941-3211.