Friday, November 9, 2012

We Owe God a Death

I honestly thought this article would be a Part II. I then went looking for Part I. It was never written.

My own death is not a subject that I enjoy contemplating, but as it is written, “We owe God a death.” I am over 60 years old and I still do not have a will. Generally young couples get a will after the birth of the first child in order to establish custody in the event of their death. For example, if my parents died I would have been raised by my father’s older brother and his wife. If my aunt and uncle died, my parents would have raised their two daughters. Since we never had any children custody was not an issue. My wife and I hold everything in joint tenancy or are designated as sole beneficiary in financial instruments such as insurance policies or tax deferred retirement accounts (think 401K). If one of us dies everything goes on as before, at least from a financial/legal viewpoint. But what if we both die? I asked my accountant that question 25 years ago. I was informed the State of Maryland would give ½ of our assets to each of our parents after they took their cut. Since we had just purchased a house, our net worth was somewhere around zero, I did not view this as much as a problem.

Time keeps marching on. The situation has changed. If you do the things that are taught by the well known financial literacy teachers, or even pay attention to this humble blog, you will eventually accumulate enough capital to make your will a serious issue. About one year ago, a man from the Missionary Alliance regional office appeared at our church one Sunday. He is a retired bank president now working for the Alliance as an estate planner. At no cost, he will sit down with a couple in the church and walk them through the process of estate planning until the finished document is ready to go an attorney. Of course, he is hoping the Missionary Alliance will eventually benefit from his ministry.

We started meeting with this man whenever he happened to be in town. There is no way you can complete this process in a single sitting. Then, due to my mother-in-law’s death, activity was suspended for a few months. Well, we are back on track. The final documents were reviewed and approved by my CPA. Yesterday they were scheduled for review by a panel of experts that does such things for the Alliance. I expect our package is now on its way to the attorney.

I really needed this guy to kick start my efforts towards drafting a will. Even a simple will is complicated. The “what if,” scenarios are endless. What if this guy dies before that guy? Then what. What if that guy dies before you? Then what? Who gets Grandma’s silver? The list is endless. I really don’t think I could have done it without someone asking me the right questions. Normally, this is done by the attorney drafting the will who is charging his client by the billable hour. This man offers a great service to his church district. May he be blessed!

Then there are tax considerations.

Please pay attention to this paragraph if you have a 401-K, a 403-B or have a serious amount of money in conventional IRAs. The use of the Charitable Remainder Trust is not limited to evil rich people. I have TSP account, the Government equivalent of a 401-K. My wife rolled a 403-B she inherited from her father into a Beneficiary IRA. These are pretax dollars. When they exit these protected accounts, they are subject to taxation at regular income rates. If upon my death, the funds from my TSP are rolled into a Charitable Remainder Trust my wife will get a tax deduction since these funds are now the property of the Christian and Missionary Alliance Church. The church is obligated by the terms of the trust to pay my wife an annual income of at least 5% of the trust’s net assets for as long as she lives. Since upon my death payments from my pension drop significantly even though I will be paying a substantial monthly premium so that my wife will have a survivor’s benefit, I expect she will need this additional income. Upon my wife’s death this income stream will be diverted to our heirs and assignees for the next 20 years. At the end of this time, the church gets to keep the balance. If they do a good job managing our money this could be a significant sum.

This is my simple attempt to describe a complex legal vehicle. I would encourage you to consult a CPA and an attorney before making any irrevocable decisions.

Until we die our TSP account and Beneficiary IRA will constitute our last line of defense in retirement. These tax deferred instruments are marked, “In case of emergency, break glass.” If these accounts still exist after our death they will become a blessing to others and ultimately a gift to our Lord.

Dixi, custodiam. Psalm xxxix. (from the 1928 Book of Common Prayer)

LORD, let me know mine end, and the number of my days; * that I may be certified how long I have to live.
Behold, thou hast made my days as it were a span long, and mine age is even as nothing in respect of thee; * and verily every man living is altogether vanity.
For man walketh in a vain shadow, and disquieteth himself in vain; * he heapeth up riches, and cannot tell who shall gather them.
And now, Lord, what is my hope? * truly my hope is even in thee.
Deliver me from all mine offences; * and make me not a rebuke unto the foolish.
When thou with rebukes dost chasten man for sin, thou makest his beauty to consume away, like as it were a moth fretting a garment: * every man therefore is but vanity.
Hear my prayer, O LORD, and with thine ears consider my calling; * hold not thy peace at my tears;
For I am a stranger with thee, and a sojourner, * as all my fathers were.
O spare me a little, that I may recover my strength, * before I go hence, and be no more seen.

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