Begin Your Legacy

What comes to mind when you hear the term "estate planning"? 

If you're like many people, you know it has something to do with having a will. You’d also be correct if you said it involves making certain other types of arrangements affecting what happens once your life has ended.

A good estate plan goes further and addresses many aspects of your current situation, as well as how to thrive in the years to come. Consider this definition of estate planning:

Estate planning is the process of caring for yourself and your assets while you are living, and planning for the orderly transfer of assets to other persons and organizations– both during your life and afterward.

Why do estate planning?

Very few people wake up in the morning and wish they could spend the day working to create an ‘estate plan.’ However, creating (or updating) a plan is among the most important things you can do. When you do, you can:

• Ensure the wealth you have accumulated over your lifetime goes exactly where you want it to go and when. If you don’t have a will or living trust, the state will impose a distribution plan for you, which may or may not match your wishes.
• Give directions to be followed in case you become incapacitated and can’t make decisions for yourself.
• Organize your affairs and designate who will handle them when you are gone.
• Appoint a guardian for minor-aged children.
• Provide for any special needs your loved ones may have.
• Minimize possible estate taxes and probate fees.
• Specify the type of funeral arrangements you would like.
• Remember and provide for friends, pets, and organizations you care about but are never a part of the default state distribution scheme.

By planning, you also make things easier for your family. If something happens to you, it will already be a very difficult time for your family and other loved ones. How wonderful it will be if they know exactly what you want to have happen and have the means at hand to follow your wishes. Consider the planning you do now to be your final future gift to your loved ones.

While estate planning can entail some difficult choices and means confronting uncomfortable issues, it does provide a sense of relief and peace of mind when it is done. You’ll know that you have done your best to plan and provide for yourself and for loved ones, as well as for the causes you’ve cared about during your lifetime. There is great satisfaction in knowing what your legacy on earth will be. 

Our Mission San Luis Rey Franciscan community has partnered with FreeWill.com to make this peace of mind possible and free of charge.  When you visit https://www.freewill.com/sanluisreyparish you will be able to complete all of the necessary documents referenced throughout this section to ensure your estate planning is complete and represents your wishes.  Some estates that are more complex may need to consult an attorney.

The Key Elements of an Estate Plan

Related to your final wishes

• Will. A valid will is generally type written, dated, and signed by you as well as two legally competent witnesses. States differ as to the exact requirements for a valid will and whether a handwritten will, with or without witnesses, is valid. The probate court oversees the administration of a valid will at death to carry out your instructions. The court charges probate fees to administer an estate and the documents and proceedings are public record.  
• Revocable Living Trust. This replaces the will as the main document disposing of your property. You might hear it referred to as a “living trust” or “RLT.” The trust is created while you are living, and the power to change and even revoke it can be retained. Most often people serve as the trustee for their own revocable living trust. A living trust requires that you actually transfer your property into it for it to be effective. A living trust allows assets to pass to heirs outside of the probate process, potentially saving probate fees, and keeps your affairs private.

Typically, if a living trust is recommended your estate planning lawyer will also suggest a will as a backup document, to transfer any assets that weren’t included in your trust at the time of your death.

• Beneficiary Designations. Your will or living trust does not control the distribution of assets such as your IRA, commercial annuities, and some other assets at death. Your IRA or annuity administrator will distribute these types of assets according to a beneficiary designation form on file with their office.  These are the forms you fill out when you establish IRAs or other types of retirement plans or purchase a commercial annuity or life insurance policy. This form directs the administrator as to who will receive whatever remains upon your passing. You can also request a beneficiary designation for a bank or investment account. Since your will and living trust do not apply to these important assets, these beneficiary designations can have a profound impact on how your overall estate is distributed and should be part of any coordinated plan.

Provide for physical or mental incapacity

• Power of Attorney (POA) for financial matters. This document grants to someone you trust the ability to act on your behalf for a variety of potential transactions and responsibilities. You decide when the POA will become effective and the extent of the authority granted. A POA is only effective during your lifetime and automatically terminates at your death.
• Health Care Power of Attorney (HCPOA) for health care decisions. This document appoints someone to make decisions for you regarding medical treatment if you are not able to make these decisions for yourself. It allows you to specify who is in charge of making critical treatment decisions and, perhaps more importantly, who does not have that authority.
• Physician’s Order for Life-Sustaining Treatment (POLST). This document describes what health care treatment you want in case of an emergency. You work with your doctor to document your wishes regarding resuscitation and other life-sustaining procedures.

Managing and distributing your wealth

You might conceive of the estate planning process as constructing a pyramid from the ground up. Primarily, you want to do what you can to ensure your own well-being. In so doing, keep in mind that it's not selfish to look out for yourself! Only by meeting your own needs now and in the future are you able to build the next level of the pyramid.

If you’re fortunate enough to accomplish some important basics, you’re then in a position to provide for family members and other loved ones. Thereafter, if you have the desire and the means, it becomes appropriate to think about a legacy you can leave for causes dear to you in addition to family and friends.

We hope that you will consider arranging a gift to one or both of the Franciscan communities at Mission San Luis Rey when you create (or update) your estate plan. We realize that we will never replace family members and other loved ones in your plans, and we wouldn’t want to. Part of your planning process is to consider how much to leave to individual heirs; what remains can be used to fulfill your charitable dreams and desires.

If you would like to support one or both of the Franciscan communities at Mission San Luis Rey through your will or living trust, click here for sample bequest wording you can share with your attorney. Or consider a gift by beneficiary designation also known as a "bequest substitute". It has many of the same advantages as a bequest while being among the most tax-wise ways to give.

How you can give to one or both of the Franciscan communities at Mission San Luis Rey.

It’s really never too early – or too late – to do retirement planning.

On the one hand, the younger you are, the more you benefit from a longer period of time to accumulate assets and invest them, as well as think about how best to spend them once you finally retire. Even if you make some mistakes in the process or become preoccupied with other matters for a year or two, time will generally be your friend.

If, on the other hand, you’ll soon be retiring or have perhaps retired already, you’ll want to use the time and resources you have wisely. Still, with a few adjustments here and there, you may well be able to make your retirement years more enjoyable.

Whatever your circumstances, be sure to consult professionals with expertise in areas such as:

• investments
• taxes
• budgeting and cash management
• various types of insurance
• estate planning 
• medical, social, and other services geared toward older persons

With this in mind, we offer the following list of basic points to consider. Don’t forget to check out number 5 at the end of the list!

1.  Determine how you’d like to spend your retirement years. Although many people travel, devote more attention to family and friends, increase their volunteer involvement, or concentrate on hobbies and leisure activities, you should feel free to settle on your own mix of passions and pastimes. Just remember that retirement can have several phases as you age, so allow for both the development of new interests, as well as the possible need to accommodate eventual changes in health and mobility.

2.  Try to get a good sense of what your desired lifestyle will cost. In large measure, this will be a function not only of what you want to do but also where you live – both the part of the country (or the world) in which you choose to settle and the nature of the four walls you’ll be calling home. Recognize too that you won’t necessarily live in the same place throughout retirement. Moreover, continue to budget for things that are elements of your life currently such as personal and health care expenses (Medicare won’t cover all of them!), food, clothing, transportation, emergencies, and our seemingly constant companion: inflation.

3.  Save as much as you reasonably can and invest appropriately. True, particularly if you have in mind a modest lifestyle in retirement, it’s possible to “over-save.” Yet people often underestimate – sometimes significantly – what their desired lifestyle will cost. Others may be quite realistic about what they will need but have difficulty putting enough aside over the years or fail to manage responsibly whatever wealth they have been able to amass. Whatever your situation, building your nest egg should be a high priority.

4.  To the extent possible, maximize the financial resources you can draw upon in retirement. A number of options exist, among them:

Defined-benefit pensions – These are traditional pensions and even though fewer and fewer workers have this perk, it is quite a valuable one, as your employer covers the full cost and what you receive will usually be very reliable. Payments are fully taxable as ordinary income.

Defined-contribution plans – These are sponsored by employers and generally take the form of so-called qualified retirement plans, such as 401(k) and 403(b) plans, or some types of IRAs, such as SEP and SIMPLE IRAs. These plans feature limits on how much can go in each year and are typically funded with some combination of contributions made by your employer and pre-tax portions of your salary or wages. Account balances grow tax-free, but distributions are fully taxable as ordinary income.

Traditional IRAs – Depending on your level of income, traditional IRAs can be funded with your own pre-tax money or, less commonly, after-tax money. Traditional IRAs can also receive money “rolled over” on a tax-free basis from employer-sponsored plans, such as 401(k) plans. Account balances grow tax-free. When distributions from a traditional IRA are taken, they will be taxable as ordinary income in proportion to the amount of pre-tax money you contributed or rolled over.

Roth IRAs – These, too, are funded with your own money, specifically after-tax dollars. This means that both earnings and distributions come out tax-free. Also, whatever remains in the account grows tax-free. Note: Some employers offer Roth 401(k) plans, although these are relatively rare.

Tax-deferred annuities – As the name suggests, after-tax money of your own that you invest in these products grows tax-free. Any increase in value beyond the amount you invested is taxable as ordinary income when distributed.

Individually owned savings and investment accounts, certificates of deposit, etc. – These are funded with after-tax dollars, plus whatever you earn is taxable. Some of these investments produce capital gains, which are generally taxed more favorably than interest and other sorts of ordinary income.

Employment – For some people, “retirement” means continuing to work a bit longer, albeit on a part-time basis. Similarly, working full time for an extra year or two can make additional assets available for use in connection with one or more of the options above.

Social security benefits – Despite concerns about the long-run health of the social security system and the size of benefits one can count on, this extremely common form of retirement cash flow definitely needs to be taken into account.

Non-financial assets – Things that save you money can be just as valuable as a stream of payments. Examples would include good health, smart purchasing, and having loved ones nearby and available to help when needed.

Regardless of the combination of options you assemble and draw upon, be sure to seek competent professional guidance, as the tax rules can be complex and subject to change and the investment challenges considerable. For instance, decisions about things such as when to begin drawing social security payments or whether to roll retirement plan assets into an IRA will require careful planning.

5.  Don’t overlook ways to support one or both of the Franciscan communities at Mission San Luis Rey that result in retirement cash flow. Especially if you are precluded from making additional contributions to your IRA or qualified retirement plan, a charitable life income plan can be an attractive supplement to existing arrangements. Here are some of your choices:   

• If you are age 70½ or older, you can make a Qualified Charitable Distribution (QCD), also known as a charitable IRA rollover, to one or more of the three organizations at Mission San Luis Rey directly from your traditional or Roth IRA of up to $100,000 per year, and the gift will not be counted in your income. Once you are 72 or older a QCD will satisfy your annual minimum required distribution and permit a tax-free gift of up to $100,000 to one or both of the Franciscan communities at Mission San Luis Rey. Separately, drawing on assets in an IRA or a qualified retirement plan to make current gifts to one or both of the Franciscan communities at Mission San Luis Rey can sometimes make sense for anyone over age 59½, although careful planning is required. 

Finally, because retirement planning vehicles such as defined-contribution plans, tax-deferred annuities, and many IRAs contain income that has never been taxed, you’ll want to devote attention to your beneficiary designations. Previously untaxed amounts left to family members and other individuals will be taxed when received by them but are not subject to tax when received by one or both of the Franciscan communities at Mission San Luis Rey. Likewise, tax savings can be combined with providing for heirs when certain retirement plan assets are used for a gift annuity or a charitable remainder trust at the end of your life.

Now that we’ve given you plenty to think about, please let us know if we can be of any assistance to you and your advisors!

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