MSOE’s Director of Planned Giving, Scott Weaver J.D., discussed this scenario recently with Milwaukee-area attorney Bradley Kalscheur, partner in the Wealth Planning Services Practice Group at Michael Best & Friedrich. He explains how estate planning can protect your assets and potentially reduce your taxes:

“Many people hesitate to create an estate plan because they are concerned about the cost to prepare the plan. One consideration is that by having a properly drafted estate plan, the costs of administering an estate will be reduced. Most estate planning attorneys meet with clients to develop the plan, and at the end of that meeting can give clients an estimate of the cost to complete the plan. If that estimate is more than a client is willing to pay, most attorneys would not bill the potential client for that first meeting. But, the client at least has some knowledge of what is entailed in the estate planning process.

Without an estate plan, assets pass to heirs according to the laws of intestacy, which vary in each state. There are several disadvantages of intestacy. First, only a limited share of estate assets may pass to desired beneficiaries. Second, those heirs have no control over the appointment of the personal representative and the person appointed must post a bond. Lastly, if there are minor children, there is no control over the appointment of their guardian.

By contrast, there are several advantages in having a will or living trust:

  • First, by having a will or trust, a person has the ability to consider a beneficiary’s individual characteristics, circumstances and needs. Some children may have special needs, some may have independent means and may not need as much of an inheritance as others, while others may need asset protection from creditors (like a potentially divorcing spouse).
  • Second, by having a will or trust, personal and/or real estate property may be left to non-family members like a favorite charity or friend.
  • Finally, by having a will or trust, a person is able to choose the person who would serve as personal representative of the estate and guardian of minor children.

If a person wants to leave money to someone other than family, having a will or trust is not the only mechanism to accomplish that gift. A more tax effective vehicle to leave a gift to charity is by naming the charity as a beneficiary of an individual retirement account (IRA). An IRA is subject to both estate tax by inclusion in the participant’s estate, and the beneficiary is subject to income tax when distributions are made. If the IRA is left to a charity, the estate would receive a charitable deduction, and the IRA would not be subject to income tax because the charity is a tax-exempt entity. Any beneficiary designation on an IRA needs to be properly coordinated with your will and/or trust.”

All of these options require a certain level of knowledge and understanding. MSOE is here to help you initiate this process and/or to work with you if you decide to leave a planned gift to the university. Please contact Scott Weaver directly if you have any questions about planned giving and MSOE. Scott’s direct number is (414) 277-7148 and his email is weaver@msoe.edu.