What Legal Documents Does An 18-Year-Old Need?

Many homes across America now have new adults in their midst. People who were high school seniors just a year ago, but are now, according to the law, fully-grown adults. While some families are planning to send their students off to college in the fall and others are sending these new adults into the workforce, few parents think about their new legal needs now that they’ve had their 18th birthday.  Buying dorm furniture, picking out meal plans and buying new work clothes are important, but it’s also important to think about what legal documents your new eighteen (18) year-old adult may need. You could be in for a terrible realization when something has happened to your child and you find out you are no longer able to make decisions on their behalf.  It may be hard to admit it, but you have an adult in the house and that adult needs adult legal documents.

What are the documents the new adult needs? Here are four essentials.

1. A Last Will and Testament. While a new adult may not own very much at this point in his or her life, it is still prudent to consider executing a fairly basic Last Will and Testament. This will appoint a person or persons as Executor who can handle any final matters in the event of an untimely death. No one knows exactly how their estate may look upon death, so having someone appointed in a Will to deal with any final legal matters could make it much easier for those left behind.

2. A Durable Power of Attorney for Healthcare (DPOAHC). Up to this point, a parent has generally been able to make medical decisions on behalf of their children without any issues. Since the child is now eighteen years of age, the parent is legally no longer able to do so. With a DPOAHC, the young adult appoints someone who can make healthcare decisions for them when they are unable to. It is important to ensure that this document contains the necessary HIPAA authorizations so health privacy issues do not arise. 

For example, Johnny is away at college. He’s involved in an accident that requires hospitalization, so he is taken to College Town General Hospital where he is rendered temporarily incompetent due to the medications given to him.  Johnny’s roommate calls his parents to let them know. After they arrive at the hospital, the doctors pose some critical questions about Johnny’s treatment, but there is no one authorized legally to make decisions. In this case, the decisions are left completely up to the medical staff to make in the moment. If it appears that the period of incompetency will extend for some time, his parents do have the option to pursue a conservatorship. However, this can be time intensive when quick decisions are vital. A properly-executed DPOAHC that appoints one or both of the parents as Johnny’s agent takes care of this issue.

3. A Durable Power of Attorney For Financial Matters (DPOAFM). While a young adult’s business relationships may be fairly limited or so intertwined with their parents that there are no issues with gaining access to your young adult’s business records, it is still prudent to have a DPOAFM. Similar to the DPOAHC, in this document a child can appoint an agent to make financial decisions on his or her behalf. This instrument may be useful in dealing with banking, insurance or other business matters when your child may need some assistance. Most DPOAFM are written so that the person named as the Agent may take action whether the child is deemed incompetent or not. This way, the parents could still deal with issues at the local bank even if their child is attending school or working hours away.

4. Educational Records Release. The Family Educational Rights and Privacy Act (FERPA) requires that students who are eighteen or older must provide written consent before their educational records are provided to a parent or guardian.  Most schools have their own version of this form, so check with your student’s school about getting a copy of it. Having access to this information will keep the parent or guardian informed about key deadlines (i.e. financial aid, scholarships, dorm deposit deadlines, etc.) as well as the student’s academic information.

Even though that new 18 year-old in the house may still seem like the same kid as last year, it is important to be aware of the changes brought about the moment he or she blew out the candles on his/ her last birthday cake. These four basic documents will cover most of the legal issues that a new adult may encounter, keeping parents informed and empowered to help if the need should arise.

NOTE:

Out-of-State Issues 

If a child will be working or attending school out of state, it is important to ensure that any legal documents the child executes will be recognized as valid in the same state as the school or workplace is located.

Military

If you have a child entering the military, the respective branches of the military provide basic legal services to its members. Encourage your child to check with their command staff about meeting with a military attorney.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Bless The Next Generation

One of the resources the Foundation offers Tennessee Baptists is “6 Reasons Estate Planning Conversations Should Start in the Church.” It deals with the important topic of what church members should bet considering as they plan for what they want to leave behind after they are one day called home. First among these is the Biblical command to “Bless the Next Generation.”  

Throughout the Bible, God instructs the current generation to bless the next generation. Undoubtedly, the greatest blessings we can leave our children and grandchildren is a saving knowledge of Jesus Christ and sharing with them how they can have a relationship with Him that will give them eternal life. But we can also bless them by providing resources as well.

Proverbs 13:22 says: “A good man leaves an inheritance to his children’s children.”

This verse should be at the forefront of our thinking as we choose how we use the resources God has given us in our everyday life.  As we look to bless our descendants, we must consider what we want today alongside what we want for our future. Often, our desire for instant gratification pales in comparison to the legacy we want to leave for family and the Gospel.

Another verse about blessing the next generation is found in Psalm 78:4. It says:

“We will not hide them from their descendants; we will tell the next generation the praiseworthy deeds of the Lord, His power, and the wonders He has done.”

What we do with our time and resources while we are on this earth can positively impact future generations and expand the impact of the Kingdom of God to those that will come after us. Making a charitable gift from our estate is a way to pass on the blessings we have received to carry on the work of sharing the Gospel of Christ. It is also a significant sign to our families of our faith and the value we place on the work of the church.

A recent Lifeway Research study found that nearly 84 percent of Southern Baptist Churches did not receive an estate gift in the year preceding the poll. I have talked with many pastors and church administrators and have found this statistic to be true. Many in our congregations are passing from this life, but when they leave this earth the church is being left out of their estate. Think of the impact on sharing the gospel if even half of church members would leave just 10% of their estate to their church or other Baptist cause to carry on the work of the Gospel!

What about you? Do you have a desire to “bless the next generation?” Have you thought about leaving part of your estate to your church for future ministry? We stand ready to help you put your faith into action and help you design an estate plan that can benefit your family and impact the Kingdom of God. Give us a call and let us help you get started.

Today’s plans. Tomorrow’s impact! That is what the Tennessee Baptist Foundation is all about. Be a blessing to the next generation.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

We are Called to be Good Stewards

Throughout scripture, followers of Christ are called to be good stewards. Merriam-Webster defines stewardship as the careful and responsible management of something entrusted to one’s care. In essence, being a steward is being a manager, and we have included this principle in our resource, 6 Reasons Estate Planning Conversations Should Start in the Church.

Most of us like to think that we “own and control” all that we have. Our society is built on the idea that gaining more and more wealth will solve every problem. This type of thinking runs counter to what God’s Word states. God is the creator and owner of all things, and He has only given to each of us a portion of his abundance to manage while we are here on this earth.

Jesus’s parable of the talents, found in Matthew 25:14-30, gives insight into what God expects of each of us as we are accountable for what He has entrusted to us. In the parable, the master gives his three servants money to manage while he is gone on a journey. Now each servant got a different amount based on their ability. As you may know from the story, two of the servants invested their money and returned double to the master when he returned. To them the master said, “Well done, good and faithful servant, you have been faithful over a little and I will set you over much. Enter into the joy of your master” (vs 21 and 23). But the servant who was given the least did nothing with what he was given and gave the master back the money with no interest. This servant was rebuked by the master because he did not steward well the money he was given.

Church leaders need to set the example. As you consider everything under your care, what kind of steward are you? God has given us all resources for us to manage during our life. Are you doing all you can to make an eternal investment in the Kingdom of God? 

While I hope all of you are tithing and giving from the assets you have today, I want to challenge you to think differently about stewardship and pray about developing an estate plan to make an eternal impact with assets from your estate after you are gone. Being a good manager does not stop when we die. At the Foundation, we believe it behooves all of us to make a stewardship plan from our estate.

The Tennessee Baptist Foundation is ready to help you as you lead your church and help your members steward well the resources God has given them, both now and later.

Download our free resource 6 Reasons Estate Planning Conversations Should Start in the Church.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Don’t Forget About the Beneficiary Designations

Designating a beneficiary to receive an account or insurance policy is one of the easiest ways to transfer assets after your death. IRAs, employer-sponsored retirement plans, annuities, and life insurance policies are the typical types of assets that allow you make such a designation. However, it is also easy to make the designation and then never think about it again, or maybe never get around to making a designation. And by not re-visiting these forms occasionally or completing them in the first place, you may find your assets passing in a much different way than you had planned or would like. 

An account with a beneficiary provision is not controlled by the terms of a Last Will and Testament nor a Revocable Trust. The named beneficiary or default beneficiary will receive the account irrespective of what the provisions in your other estate planning documents may say. Thus, you can have expertly-crafted estate planning documents that clearly show your intentions, but are rendered useless because the assets have passed according to the beneficiary designation form, even if it is obviously contrary to your intentions. 

So it’s important to keep up with your beneficiary designations! Here are four tips to keep in mind: 

1. Name Beneficiaries. It’s important to name beneficiaries on the types of accounts that allow them. Most beneficiary designation forms have default provisions that will control if you do not make a designation otherwise. Many times, the “default” provisions may not actually be what you want to have happen. If an account lacks a beneficiary, oftentimes, the custodian will simply pay the asset to the person’s estate. By doing so, the assets may be tied up in probate for some time before a beneficiary receives the funds. It could also be that the person’s estate may pass differently than how the person wants the particular asset to pass. Finally, with retirement accounts, there may also be unfavorable income tax implications for an estate to receive the asset rather than a named beneficiary.

To illustrate, John bought a life insurance policy prior to marrying Mary. He has never named a beneficiary for the policy.  If you asked him, he would say that he wants his wife Mary to receive this particular policy’s proceeds upon his death, since she will need the funds for her financial well-being after his death. John has children from a previous marriage. In his Will, John divides assets up among Mary and his children. If John never names Mary as his designated beneficiary and the policy passes by default to his estate, any money that John wanted Mary to have will now be divided among Mary and his children, thus giving her less money than John intended for her to have after his death. By naming Mary as the beneficiary of the policy, she will receive the life insurance proceeds as well as her portion of the assets that pass through his estate and are controlled by John’s will. 

It is also important to note that depending on the composition of your financial estate, you may be able to do much of your estate planning through beneficiary designations, so you do not want to ignore this opportunity and simply let these assets pass by the form’s default provisions.

2. Name Contingent Beneficiaries. Most beneficiary forms generally allow you to name primary beneficiaries and contingent beneficiaries. Having contingent beneficiaries named will help you in case your first beneficiary(ies) predeceases you. 

In the same example above, John did name Mary as his primary beneficiary, and since his estate plan divides all of his other assets equally among his children if Mary dies before him, he named his children as the contingent beneficiaries. Mary did die before John. At John’s death, rather than his children having to wait for his probate administration to reach a point at which it could pay out the insurance proceeds (under the default rules of paying the policy to his estate), the children were able to file the proper paperwork and receive the funds shortly after John’s death because they were named contingent beneficiaries. 

3. Stay Current On Your Named Beneficiaries. Life changes on you, and sometimes these changes require you to re-visit your estate plan, including your beneficiary designations. While a designation made ten (10) years ago was the correct one to make at that point in time, today’s circumstances may now make that designation out-of-date or even irrelevant. Continuing with the story of John and Mary, John named Mary as the primary beneficiary of his life insurance policy and his children as the contingent beneficiaries. Mary dies before John. Then, one of John’s children dies, being survived by two of John’s grandchildren. If John wishes for his grandchildren to take that portion that their deceased parent would have taken, he will need to change his beneficiary form to name the grandchildren on the form. Otherwise, it is highly likely that only those children alive at John’s death (and not any heirs of deceased children) will actually inherit this policy, a result John did not intend. 

4. Coordinate Your Beneficiary Designations With Your Other Estate Planning Documents. As you approach your estate planning, you have to consider both those assets that are going to be controlled by your Will or Revocable Trust and those assets that will pass according to a beneficiary designation. You need to thoughtfully consider how each asset you own is going to pass to your families, friends, and charities and then make appropriate provisions in the documents that will control these particular assets in order to actually accomplish your intentions.  

Going back to John as a widower, John’s life insurance policy has a face value of $ 1 million. All of his other assets that will be controlled by his Will total $500,000. John named his children as the beneficiaries of the life insurance policy. John decides to write a new Will after Mary’s death that provides for a $1 million charitable gift to his church. Without changing his beneficiary designations on the life insurance, the gift to the church will only be funded with a maximum of $500,000 as the gift can only be as large as the assets in the estate. Thus, since the life insurance will be paid directly to his children, the terms of John’s Will do not control how the life insurance is to be paid. Accordingly, none of these proceeds will be used to fund the gift. While $500,000 is still a nice gift to make, it does not truly reflect the full scope of John’s charitable inclinations. John can instead designate the church to be the sole beneficiary of his life insurance policy in order to make the $ 1 million gift. 

As the story of John and Mary illustrates, there are many potential pitfalls to avoid as you consider how to properly designate beneficiaries for certain types of accounts. It is important to remember that proper estate planning requires a holistic approach in evaluating all your assets and the unique manners that each of them will be passed along at death. 

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Estate Planning for the Blended Family

More and more families in the US today are blended, meaning that one or both partners have at least one child from a previous marriage or relationship. In fact, sociologists estimate around 2,100 blended families are formed in the United States each day. While many of these people may have experienced a divorce in an earlier marriage, with life expectancies on the rise, more and more couples are also marrying in their golden years after having lost a spouse, so the expectation is there will be even more blended families (as a percentage of the population) in the future. 

When it comes to estate planning for blended families, there are competing interests that provide some unique challenges. While a spouse wants to ensure his/her surviving spouse receives an inheritance after his/her death, he/she usually also wants to make sure that his/her children (for purposes of this article, any reference to children will assume they are the children of only one of the spouses and not of the current marriage) also receive an inheritance. Many times, both parties have substantial assets prior to marriage, and these assets were often accumulated during a previous marriage to the children’s other parent. Thus, the parent wants to make sure that at least some, if not all, of these assets go to the children of the previous marriage.  

Without proper planning, a surviving spouse may become the new owner of all the assets the deceased spouse brought to the marriage, even to the extent of the complete exclusion of the deceased’s spouse’s children. However, by utilizing the strategies below, a person can find a balance between the dual goals of caring for the surviving spouse and caring for the children. 

1. Prenuptial Agreement. One of the most effective ways to accomplish both goals is through a prenuptial agreement (prenup). A prenup is a legal agreement a couple makes prior to marriage that provides for how their marital estate will be divided in the event of divorce or death. While some people consider prenups “pre-divorces,” and while it is true prenups are used during divorce proceedings to control the disposition of assets, they are also valuable in estate planning for predetermining how property will be distributed at the couple’s respective deaths. Under Tennessee law, a surviving spouse has certain statutory rights of inheritance that supersede those of a child, irrespective of the terms contained in the will of the one who died. Those rights are usually waived in a prenup, thus ensuring only the terms of the person’s Last Will and Testament control what happens after he/she dies. With a well-drafted prenup, a couple can ensure their respective children’s inheritances are protected in the event of their deaths. Through this process, they can also identify assets they will own together to ensure the surviving spouse also receives assets. 

2. Trusts. Some spouses may need the financial support of the assets of a deceased spouse after the deceased spouse is gone, yet each spouse wants to also make sure that his/her children receive something from the estate. To solve this issue, a person can design a trust funded upon his/her death that takes care of the surviving spouse during his/her lifetime. Then, at the death of the surviving spouse, the remaining assets in the trust are distributed to the children. The trust provides a mechanism in which these two competing interests can be balanced. 

3. Beneficiary Designations. Another solution for leaving an inheritance to both the spouse and children is through proper designations on beneficiary forms. Many assets — such as life insurance policies, retirement accounts and annuities — allow you to designate a beneficiary to specifically inherit that particular asset. Thus, if a spouse owns these types of assets, he/she can utilize beneficiary designations to allocate how these assets will be distributed upon his/her death. Due to federal laws that protect inheritance rights of spouses, the spouse may have to grant permission for a designee other than himself/herself to be named. 

Estate planning for blended families can be complex, but utilizing some of these techniques may help in finding the right balance between the surviving spouse and children. Because of these complexities, it is very important to seek the advice of competent counsel prior to entering the new marriage to ensure the best and appropriate strategies are in place. 

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Missed Opportunities

Have you ever been cleaning out a drawer and found a valuable coupon that just expired, only to realize you had just purchased something at that store a week prior? I have, and I am sure this has happened to many of you at one time or another. You missed an opportunity to save some money.

Many pastors do not realize there are missed opportunities in their pews each Sunday. Every week faithful members come to study God’s Word and be encouraged. Many of them have the capacity and the heart to do something great financially for their church, but they have not been asked and do not know how. As church leaders, we need to be more proactive and sharing with our members how they can give and impact the next generation of believers.

For most of us, the largest single monetary gift we can make to our church is one that will come from our estate after we are gone. Unfortunately, this does not happen very often. Statistics reveal that only 2 percent of Christians leave an estate gift for their church. Why? Is it because they do not believe in the work of their church or the Kingdom of God? Of course not. The reality is, they have not considered it because no one showed them how.

Rick and Helene are members of a local church in Middle Tennessee. They are working to build the Kingdom here now and have a vision to continue God’s work after they are gone. Rick says they began the process not fully understanding all the opportunities and details that go into an estate plan, but they wanted to be intentional about supporting their family and Kingdom work after they passed. 

“We originally decided to put together an estate plan when we created our first will just before we left for our first international mission trip to Kenya, Africa. We wanted to create a basic framework for an estate plan that would provide for our children as well as provide an ongoing way for our estate money to continue to provide ministry assistance after we are gone.”

When Rick and Helene discovered the opportunity to give a portion of their estate to ministry, it simply made sense, they explain.

“As the process of creating an estate plan was explained to us, the opportunity to leave a small portion (actually a tithe) of our estate to continued ministry really appealed to us. And it made a lot of sense. We have been faithful tither for all of our married life and we wanted to continue to do that through our estate plan,” Rick says. “As we have been involved in a variety of ministries through our local church, international missions, and sponsoring children through Compassion International, we have been incredibly blessed. We had a desire to bless these ministries after our deaths.”

No matter the size or location of your church in the great state of Tennessee, you have many like “Rick and Helene” in your congregation that want to do more. Do not miss the opportunity to educate your members on how they can give to bless the next generation.

The Tennessee Baptist Foundation is here to help you nurture the faithful members of your church and share with them the benefits of putting a sound faith-based estate plan together, just like Rick and Helene.

Give us a call today. Let’s work together on the opportunities in front of us.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Why Understanding Your Assets is Crucial to a Successful Estate Plan

My grandmother made the best apple pie I have ever tasted. Watching her take the ingredients and put them together just so was a sight to behold — especially since she did not have all the ingredients written down! When she passed away, she handed the recipe down to my mother, but neither she, nor my sister or even my wife could replicate it. Their pies were pretty good, but they still did not taste like my grandmother’s. Why? We did not have all the ingredients!

The same can happen with an estate plan. You can develop a pretty good plan, but if you don’t know all the ingredients (i.e. assets), it may not turn out the way you intended. Knowing what makes up your estate is very important, because what you desire to accomplish with the distribution of assets at your death depends on the type of assets to be distributed.

You have several classifications of assets in your estate, including liquid assets (checking and savings accounts) and non-liquid assets (real estate, investments, retirement plans and life insurance). While all of these assets make up your estate, they are handled differently when distributed upon your death. 

Let’s look at two asset examples:

  • Personal property – These assets are part of your gross estate and the portion of the estate handled in the probate court. They are distributed to the person(s) you name in your Last Will and Testament (LWT). It’s one of the easier assets to handle.
  • Life insurance – This asset is also part of your gross estate, but it is not a part of your probate estate. Life insurance passes to a named beneficiary after your death.

You may ask, “What’s the big deal? Why do I need to be concerned about asset classifications?” It becomes a big deal when your intentions, based on what you have written in your LWT, are not accomplished because you did not consider the types of assets you have and how they are passed to beneficiaries. The bulk of your estate could actually pass outside the terms of your LWT. Let’s explore how this plays out:

Let’s say Mrs. Jones is widowed with two grown children. She has an estate made up of $20,000 in a checking account, some furniture ($5,000), a vehicle ($5,000) and a life insurance policy worth $100,000, in which each child is 50 percent beneficiary of the policy. If we add all these together, her estate would be worth $130,000. In her LWT, she wants 30 percent of her estate to go to her church and 70 percent to go to her children. Therefore, she intends, based on the amount of assets she has, that $39,000 will go to the church and $91,000 will go to her children.

Based on her assets and how they are classified, however, will her wishes be carried out in that way?

Per the beneficiary designation calling for the policy to be divided equally between her children, the life insurance will go to her children and will not be a part of her probate estate. The children, therefore, receive the $100,000.

What assets are left? The remaining assets $30,000 make up her probate estate. Based on her LWT, the church would then receive 30 percent of the probate estate ($9,000) and the children would receive 70 percent ($21,000). The church, therefore, ends up with $9,000 and the children receive $121,000 total. Is this what she intended? Not per her LWT. She did not take into account that the life insurance would pass to her children outside her probate estate.

This scenario often occurs in estates. Life insurance, retirement accounts and annuities normally are controlled by your beneficiary designations and not your LWT. If Ms. Jones had assessed the type of assets she owned, she could have made different decisions to carry out her true wishes.

So how can you avoid issues like this? Download our 10 Minute Estate Auditthen contact us and we can walk you through the process of putting your Estate Plan in order. We’re ready to help!

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Increase Giving Through Qualified Charitable Distributions

One of the newer avenues of charitable giving is called the Qualified Charitable Distribution (QCD), which comes from the IRAs of persons who have to take Required Minimum Distributions (RMD). Though this has been an option for a number of years, we are seeing more people learning about and taking advantage of being able to support their favorite charities (like their church) from their IRAs. For more details on how this type of giving works, see my article here.

As a leader in the stewardship ministries of your church, you have a great opportunity in front of you to encourage a means of giving that not only saves taxes for all eligible persons, but also provides support for your ministries utilizing resources that may be currently untapped. Church members who are eligible for the QCD recently received a notice from their IRA provider regarding the amount they are required to take out of their IRA for 2019, so now is a great time to promote this way of giving while it is still fresh on members’ minds. Whether through your church newsletter or a special series of announcements, the key is to start raising awareness. Many people are not even aware of this option, so it’s important to educate them. If you’d like assistance developing your communication plan, please give us a call. We’d love to help you develop your strategy in gathering resources for your Kingdom work. 

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

The Danger of the Joint Bank Account

Joint account ownership is a convenient way to own a bank account or other financial account with someone. Key benefits include the fact that all owners of a joint account can conduct business on the account. It is also useful that there is a right of survivorship among joint owners, meaning if one of them dies, the surviving owner is now the owner of the account and does not have to go through the probate process in order to have access to the money. For these reasons, married couples generally hold most of their bank accounts as joint owners. 

While joint accounts generally work well for married couples, when a spouse dies, the survivor has to be mindful as he or she considers adding someone else as a joint owner on bank accounts. The very advantages of jointly owned accounts for married persons may actually become detriments when owning an account jointly with a non-spouse. There are several potential issues with this setup:

1. Unintended inheritance. Under standard joint account terms, the non-spouse joint owner will usually become the new owner on the assets in the account if the original survivor dies, irrespective of what his or her estate plan directs. For example, Sally has three children. Her son Johnny lives in the same town. For convenience, Sally adds him to the account, so he can “write checks and talk to the bank” if a need arises. She also has a will that directs her Executor to divide her estate equally among her children. However, by the terms of the joint bank account, the money in the account will bypass the provisions in the will, so whatever money was in the account at Sally’s death now becomes Johnny’s, and he still takes a third of his mother’s estate. This was not Sally’s intention, but based on his joint ownership, Johnny is now the new legal owner of the money and does not have to divide it with his siblings. 

2. Unexpected creditors. A creditor has the right to access bank accounts owned by a debtor to pay for a debt on which the debtor has defaulted, regardless of how the debtor became an owner. Thus, if Johnny has a creditor looking for assets to seize, the joint account with Sally can be taken for Johnny’s debt, even though Sally had nothing to do with the debt. Additionally, if Johnny divorces, there is a possibility the joint account could be brought into the divorce proceedings. Even if Sally can successfully prove the account is not part of Johnny’s marital estate and keeps the money, the favorable result may only come after the stress and expense of intervening in Johnny’s divorce. 

3. Unforeseen access. When you add someone to an account, the person gets full clearance and rights to the account. Thus, it is extremely important that the new owner can be completely trusted. Sometimes access to the funds can be too great of a temptation for someone. If a situation arises in his or her life in which he or she needs money, the new joint account can become a source of those funds. Even if he or she expects to repay the money, the fact is the money may never come back into the account. And the new joint owner has done nothing wrong legally. After all, he or she is a joint owner. 

Are there any good solutions to allow someone to help the survivor out with his or her banking? There actually are two good remedies that carry less risk than full-on joint ownership:

  • Utilize a Power of Attorney (POA). Through a POA, the survivor grants a person (known as an Agent or Attorney-In-Fact) either general or limited authority to transact any business that the survivor can or could do on his or her own. The Agent has access to bank accounts (usually along with other financial assets) but is never the owner. Thus, since the Agent is not an owner, the survivor’s Last Will and Testament will still control the ultimate disposition of the bank accounts, and none of the Agent’s creditors will have access to the survivor’s funds.
  • Name the person as an authorized signer on the account. This gives the person access to the account without being an owner. An authorized signer requires a special designation on the account’s signature card. Financial institutions will have specific procedures to make this type of appointment. 

Is joint ownership with a non-spouse always a bad idea? No. In fact, when used properly, it is not. Joint ownership can be an effective way to ensure someone gets an inheritance and an efficient technique in avoiding probate court. The key is to ensure the survivor is fully informed of the advantages and disadvantages before making this important decision. 

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Your 2019 New Year’s Resolution: Start a Legacy Ministry in Your Church — Part 2

Last month we discussed making a New Year’s resolution to create a legacy ministry in your church and what that would mean for your church. For review, a legacy ministry is:

A way to expand the stewardship conversation with believers beyond tithes and offerings. It’s a tool by which Christ followers plan their estates to not only take care of their families at death, but to also establish a legacy that supports the work of the Kingdom—through the local church and beyond.

Studies reveal when a person makes a contribution from securities (stocks, bonds, mutual funds, etc.), total contributions to churches and other nonprofit organizations increase at a greater rate than from gifts of just cash. Most of the time these are larger gifts, and they are not from assets we typically utilize each month for our household operating expenses. These types of gifts can feel smaller when compared to a cash gift. Most of the time we do not think about these assets when we think about giving, but when we do, it reminds us of the wealth we have that has been provided to us by God.

By creating a legacy ministry in your church, you are helping members think about the legacy they can leave for future generations to propagate the Gospel and make a significant impact for the Kingdom of God. There are several other benefits for the church as well, including:

  • A new income stream for collecting resources to engage in the Kingdom work to which it has been uniquely called in its community
  • A steady and consistent income stream to support Kingdom work
  • Another avenue to develop the spiritual discipline of stewardship among members

This type of ministry provides benefits to members who make contributions as well, including:

  • Additional lifelong income created by utilizing a typically non-income-producing asset during the donor’s life before then benefiting the church
  • Immediate income tax deduction as a charitable contribution
  • Reduction or elimination of capital gain taxes and inheritance taxes, because the asset is transferred to the church 
  • A new way to carry on the Gospel of Christ

As a leader, how do you begin a legacy ministry? The Tennessee Baptist Foundation (TBF) is here to help you walk through the process by:

  • Helping you determine how the concept of stewardship through estate planning fits in the overall Kingdom strategy of your church 
  • Helping you identify and train leaders who will communicate the ministry to the church
  • Using specific examples of how your congregation can leave a legacy
  • Helping develop policies and build an infrastructure
  • Providing ongoing assistance as we work with staff and church leadership 

Begin the new year with a new ministry that will help your church gather new resources to fund its mission. The TBF is ready and willing to be a partner with you. Give us a call today (615-371-2029).

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More
1 2 3