Election 2020 and Federal Transfer Taxes

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Terry and I voted this week. Lots of factors to consider. For me, the main consideration was not the candidates’ personal appeal but the principles they and their party publicly uphold. Neither is perfect.

In all the conversation about the 2020 election and its impact on our lives, I’ve heard neither the presidential nor vice-presidential candidates mention federal transfer taxes, sometimes euphemistically or inaccurately called death taxes or inheritance taxes.

It can be complicated, so consult your tax advisor for specific details. Here’s a brief summary:

Federal transfer taxes include estate, gift, and generation-skipping taxes. The federal estate tax applies to the transfer of property at death. The gift tax applies to transfers made while a person is living. The generation-skipping transfer tax is an additional tax on a transfer of property that skips a generation. https://absolutetrustcounsel.com/

When my father died in 1983, the estate value one could pass to loved ones without incurring any estate tax was $275,000. That amount is called the estate tax exemption. In 1983, anything over the exempted amount was taxed at 60%! When my mother died in 2019, the exemption was $11.4 million. Neither Mom nor her children had anything to worry about in that regard.

Today that exemption amount is $11,580,000. Per person. It can be doubled for a married couple under what’s called the unified federal gift and estate tax exemption. So if a married couple plans their estate properly, their combined assets of up to $23,160,000 can be inherited by their loved ones, with no estate tax. That’s incredible! Any excess is taxed at 40%.

It’s estimated that over 99% of Americans will not be affected by estate tax. At least not if the rules stay as they are now. But as a result of the Tax Cuts and Jobs Act of 2017 (TCJA), the federal unified estate and gift tax basic exclusion amount is scheduled to sunset back to $5 million after December 31, 2025, absent future legislation. That’s still a formidable number.

Who establishes the amount of this exemption? The United States Congress, of course. It has fluctuated between a low of $40,000 (1940-‘41) and today’s high of $11.58 million. Some states also have a state estate tax and/or state inheritance tax. Texas has neither.

Here’s a news flash for you: A future Congress and President may impose greater taxes on wealth transfers by reducing the transfer tax exemption amount to a much lower level and/or by increasing the transfer tax rates on amounts in excess of the exemption.

If you haven’t already voted, among other topics, you may want to consider which presidential and congressional candidates are more likely to reduce this exemption and enact other changes in order to raise taxes for expanded federal spending. Most of us mere mortals still won’t have to worry if the $5 million amount is not changed. But it could easily drop. Precipitously.

Although it’s our privilege and responsibility to pay taxes of all kinds, Jesus wisely defined the parameters when he said, “Give to Caesar (the government) what belongs to Caesar, and give to God what belongs to God.” Matt. 22:21

We at Legacy Deo understand those words of Jesus to mean that Caesar, the government, should get no less but no more than he/it is entitled to receive. The federal government agrees, by declaring that gifts to churches and other qualified charitable organizations are exempt from income, estate, and gift taxes, as allowed by Internal Revenue Service regulations.

Working with your tax advisor, Legacy Deo can provide information and assistance for your estate planning and charitable giving consideration and implementation. Go to www.legacydeo.org.

You, your family, your favorite charities, and even our country will be blessed as a result!

Twelve More Rules for a Good Old Age–Adapted

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Today’s article is a continuation of the first “Ten Rules for a Good Old Age” shared with you on May 14. Here we go:

  1. If your spouse is still alive, be intentional about expressing your love. Say “I love you!” as often as possible. Enjoy your time together now. Don’t wait till later. She/he is one of God’s most important gifts to you. Thank Him daily and openly express your love. If your spouse is no longer with you, remember with a thankful heart the years and times you shared.
  2. Avoid using the phrase “In my time.” Your time is now. As long as you’re alive, you are part of this time. You have been younger, but you are still you now, having fun and enjoying life.
  3. Stay positive about today. Some people embrace their golden years, while others become bitter and surly. Life is too short to waste your days in the latter mode. Spend your time with positive, cheerful people, it’ll rub off on you and your days will seem that much better. Spending your time with bitter people will make you older and harder to be around.
  4. If possible, avoid living with your children or grandchildren. It’s fine to live close to family but we all need our privacy. They need theirs and you need yours. If you’ve lost your spouse, then find a place in the midst of others with whom you can readily identify and share similar values. Move only if you feel you really need the help or do not want to live alone.
  5. Try not to abandon your hobbies. If you don’t have any, find one. If physically and financially possible, you can travel, hike, cook, read, and dance. You can adopt a cat or a dog, grow a garden, play cards, checkers, chess, dominoes, golf. You can paint, volunteer at church or your favorite charity. Find something you like to do and spend time having fun with it.
  6. Even if you don’t always feel like it, try to accept invitations. Baptisms, confirmations, graduations, birthdays, weddings, conferences, funerals. Try to go. Meet people you haven’t seen in a while, go to museums, walk through a field. The important thing is to leave the house from time to time. Get out there. If humanly possible.
  7. Talk less and listen more. Some people go on and on about the past, not caring if their listeners are really interested. That’s a great way of truncating conversations. Listen first and answer questions, but don’t go off into long stories unless asked to. Speak in courteous tones and try not to complain or criticize too much. Always find some good things to say as well.
  8. Pain and discomfort go hand in hand with getting older. Try not to dwell on them but accept them as a part of the cycle of life everyone goes through. Try to minimize them in your mind. They are not who you are, they are something that life added to you. If they become your entire focus, you lose sight of the person you used to be and still are.
  9. If you’ve been offended by others, forgive them. If you’ve offended someone, apologize. Don’t drag resentment around with you. It will make you sad and bitter. It doesn’t matter who was right. Someone once said, “Holding a grudge is like taking poison and expecting the other person to die.” Don’t take that poison. Forgive and move on with your life.
  10. If you have a strong belief, savor it. But be wise when trying to convince others. People will make their own choices no matter what you tell them. Guided by the Spirit, live your faith and set an example. Actions speak louder than words.
  11. Laugh. Laugh a lot. Remember, you are one of the fortunate ones. If you’re over 70, you’ve been blessed with life, a long one. Many never get to be your age and never experience a life of fulfillment. But you have. Try to find the humor in your daily circumstance. Laugh at yourself.
  12. Take no notice of negative comments people say about you and even less of what they might be thinking. Let them talk and don’t worry. They likely have no idea about your history, your memories and the life you’ve lived so far. There’s still much to be written, so get busy writing and don’t waste time thinking about what others might think.

With all these tidbits of advice in mind, don’t forget to remember God’s promise: “Those who hope in the LORD will renew their strength. They will soar on wings like eagles; they will run and not grow weary; they will walk and not be faint.” Is. 40:31

Two Important Tasks

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Credit: Carlos Muza on Unsplash

Last year I created an Excel spreadsheet for the purpose of planning a family budget for the next ten years. For this purpose, our immediate family is Terry and yours truly.

My thought is that someday I’ll probably want to retire from full time employment. Because I began working for pay from the time I was about 12 years old, and still do so today, fully retiring from gainful employment will be a big step in my life. I’m not ready yet. But it will happen someday.

Be that as it may, I believe it’s not only important but critical for individuals or couples approaching the end of their working career to take a close look at anticipated income and expenses to see how the two match up. So that’s what I did.

The expenses on our list include generous contributions for our home congregation and other favorite ministries and charities; home mortgage, including PITI; auto expenses, including payments, insurance, maintenance, and gasoline; utilities, including water, gas, electricity, cable TV, internet, and cell phones; health and life insurance premiums; groceries, occasional restaurant meals, clothing, and routine household expenses; family birthday and Christmas gifts; travel and vacation allowance; federal taxes; medical expenses; savings; unexpected and miscellaneous expenses.

The sources of income on our spreadsheet include salary, estimated to terminate at an approximate point in time; retirement plan/pension payments; social security checks; income from IRAs, 401(k)s, 403(b)s, and annuities.

I planned for gradually increasing expenses with income adjusted by loss of current salary, followed by stable but slightly increasing revenues. As long as the difference between these two numbers is positive on the revenue side, we should be alright. That’s certainly the plan.

This process is closely related to estate planning myth #6: “No need to make a list of what I own. My family will be able to find it all.” Here’s the reality. This myth is the result of indifference, laziness, lack of care and concern for loved ones. It takes time and effort to create a budget and at least as much time and effort to make a list of assets and liabilities.

To assist in this process, we at Legacy Deo have created what we call the “Red Book.” It’s designed to help record in writing your assets and liabilities; account numbers and balances; contact information for each account, including address, phone, user name, and password; location of important legal and financial documents, etc. This is a very significant document!

Request your free electronic Red Book at mailto:info@legacydeo.org or call (512) 646-4909. You’ll be glad you did. And while you’re at it, get busy on that budget. Both are important tasks!

A Memorable Retirement Observance

This past Sunday, March 31, Salem Lutheran Church in Tomball, Tex. observed the retirement of Pastor Doug Dommer and his wife Delo. Doug had served Salem for 38 years in a number of roles in support of two senior pastors, Wayne Graumann and Tim Niekerk.

The celebration was inspirational. It began with an informal hour of sharing by women and men who had known and worked with Doug over the years. Speakers included one of his brothers; a couple young pastors whom Doug had influenced and mentored over the years; a woman staff member who introduced video reflections of Doug’s sermons and gave her own testimony of Doug’s support and encouragement for women using their God-given gifts; and his former senior pastor. Terry and I were invited to honor Doug’s wife Delo, a wonderfully gifted and talented woman.

That informal hour was followed by a service of worship during which Doug preached his farewell sermon, reflecting on his years at Salem and focusing on Philippians 1:3-6: I thank my God every time I remember you. In every prayer for all of you, I always pray with joy, because of your partnership in the gospel from the first day until now, being confident of this, that He who began a good work in you will continue to perfect it until the day of Christ Jesus.

A few memorable points from his sermon are these:

God’s grace always precedes our peace.
Many churches eat their pastors alive. Salem loves their pastors to death.
The work we do is God’s work. He began it. He will perfect it.

One of the most moving parts of the service was the final hymn, A Mighty Fortress. Immediately after the conclusion of the sermon, Doug went straight to the organ bench and played this hymn as I’d never before heard it played. By anyone. With no notes. Majestically. Worshipfully. Powerfully. Inspirationally. A mighty fortress is our God … the Kingdom’s ours forever!

The concluding moments included words of appreciation and affirmation from senior pastor Tim Niekerk, along with presentation of a cash gift. The amount was not disclosed, but the presentation left no doubt that its purpose was for the purchase of a new automobile.

During these two separate activities, appreciation for Doug’s ministry and Delo’s partnership was articulately and emotionally expressed. Yet throughout the morning it was clear that the real appreciation was directed toward our gracious God … Father, Son, Holy Spirit … for the gifts Doug and Delo have received and the way they have used them to be a blessing to the thousands of people they have influenced for Christ during their 38 years at Salem.

Well done, good and faithful servants!

Estate Planning Myth #1

In my work with Legacy Deo I talk to people about estate planning. Creating a plan is an important step for every person to take, regardless of age or financial status. It can be done by using a variety of methods of current planning for future gifts to family and charitable causes.

Almost every day I encounter people who have misconceptions about how, what, where, when, and why estate planning should occur. Accordingly, a large part of what I do is help people understand what is mythical and what is factual about estate planning.

This week I’m beginning a series on Estate Planning Myths, sharing one each month. Here’s Myth #1: “I’m not wealthy enough to consider planned giving. I just don’t have a large enough estate to worry about planning for the distribution of my assets when I die.”

Here’s the fact: Regardless of the size of your estate, what you have is God’s gift to you. As people entrusted with the management of whatever we have received as a blessing from God, you and I have the responsibility of carefully and prayerfully planning the distribution of what we have to the people and the causes we love.

Read the parable Jesus told in Matthew 25:14-30 about the varying amounts of money entrusted to the care of each of a master’s three servants. We’re not all equally blessed. What we do with what we have is important, no matter how much we have or don’t have.

Every heartfelt gift you and I make to our family and to our church or other charitable cause is helpful, no matter the size of the gift.

So whether your possessions are worth $10,000 or $10,000,000, take the steps necessary to be sure they are efficiently and effectively passed on according to your wishes.

That’s the essence of estate planning, also called planned giving. Legacy Deo can help!

Contact us at info@legacydeo.org or call us at (800) 880-3733 or (512) 646-4909 for a free Wills Planning Guide. You’ll be glad you did!

Advice to Retired Pastors

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Today’s article is titled Advice to Retired Pastors and Their Relationship to the New Pastors in Their Former Congregations by Rev. Fred C. Jacobi.

While you and I might not agree totally with these suggestions, they are worthy of consideration. I also understand that some pastors are easier to follow than others and that some succession plans simply don’t work as well as intended. Here we go:

  1. Stay away from the parish at least six months to a year, allowing the new man to “settle in.”
  2. Don’t attend Church Council or Voters Meetings. That’s the reason you retired!
  3. Refer all weddings, baptisms, funerals, etc. to the new pastor. The worst thing that can happen is for him to know you did something behind his back.
  4. If you attend a Bible Class he is conducting, keep a low profile.
  5. Treat him as your Pastor.
  6. Do not criticize him behind his back. You may think you have said something in confidence, but most often he will hear about it. He will obviously have some faults, but so did you!
  7. Do something that advances the ministry. Help with shut-in calls or become a Stephen minister.
  8. Treat him with respect.
  9. Let the vision and new ideas come from him and the church leadership – not from you.
  10. Feel free to help out with leading worship at other churches.
  11. If the new man feels uncomfortable with anything you are doing, back off!
  12. Sit down with him and assess your relationship from time to time.
  13. Allow him to do spiritual advising as much as possible.
  14. Keep him and his family in your prayers.
  15. Remember that each new pastor builds on the work of former pastors. Don’t allow members to extol their favorite pastor to the detriment of others.
  16. Enjoy your former congregation members, but remember they are friends, not your parishioners!
  17. Do everything possible to make the transition a smooth one.
  18. Go along with his new ideas about worship and ministry. Variety is the spice of life.
  19. Don’t talk about the way you used to do things.
  20. Do everything with a humble spirit.