Wed, 01 Feb 2023

Planned giving programs are an integral component of the fundraising strategies of the majority of successful nonprofit organizations. As your activities and advocacy efforts expand, so do your organization's annual costs. Therefore, it is essential to invest in fundraising instruments that will ensure the longevity of your company.

 

Because of this, organizations often focus on acquiring charitable bequests, providing their contributors with the means to create a will, and contemplating leaving them a gift in it. These donations enable NGOs to plan for the future with some guarantee that they will continue to raise funds for decades to come.

 

However, if your organization has California-based donors, a standard may not be ideal for them to leave legacies.

 

For many Californians, a revocable living trust (RLT), which is sometimes accompanied by a "pour-over" will, is preferable to a regular will because an RLT can protect assets from lengthy and expensive probate proceedings. This can result in your organization receiving a larger portion of the funding to help your group and its purpose.

 

Below, we'll outline the major distinction between a revocable living trust and a will and explain why it's kind to offer your California-based contributors an easy opportunity to create an RLT today.

 

California revocable living trusts against wills

Both revocable living trusts and wills allow individuals to designate the beneficiaries of their assets and property upon death. This includes charitable organizations. Probate - the court-supervised legal procedure of administering an inheritance after the maker of a will has died - is one of the most significant differences between the two schemes.

 

RLTs permit the property to bypass probate, but a will must go through probate.

 

last will and testament versus revocable living trust  

An RLT is put up by a person called the grantor. The grantor transfers money and property (such as a home or bank account) to the trust and appoints a trustee to administer the trust's assets by the requirements of the trust instrument. A beneficiary of the trust receives advantages from the trust's assets.

 

Often, the grantor is also the trustee and beneficiary, and they can utilize and access the trust's assets while alive. To guarantee a smooth transition of management of the trust funds following the grantor's incapacity or death, the grantor must also choose successor trustees and beneficiaries.

 

Numerous assets can be used to support an RLT, avoiding probate. Therefore, RLTs are an especially effective tool in California, with among the most complex, protracted, and costly probate procedures in the United States.

 

Two reasons to recommend RLTs over wills for your California supporters

When promoting legacy giving, there are two important reasons why California citizens should have a revocable living trust and why your organization should offer them the means to create one:

  1. Your organization and the heirs of a contributor may save money.

In numerous states, probate fees are small. For probate work, attorneys may charge an hourly or fixed fee. Executors may also be entitled to a minor fee as a percentage of the estate or "fair remuneration" based on the amount of labor they are required to perform; however, executors who are family members or close friends typically forego this cost.

But California's probate code has among of the highest statutory costs in the U.S.:

  • 4% of the estate's first $100,000
  • 3% of the following $100,000
  • 2% of the following $800,000
  • 1% of the following $9,000,000
  • 0.5% of the next $15,000,000
  •  

These costs are computed twice, once for the attorney and once for the executor, depending on the gross valuation of the estate before the payment of any obligations.

 

That means that on a $500,000 estate, your donors' heirs could lose $26,000 of their inheritance to statutory probate fees alone.

 

RLTs can minimize (or even eliminate) probate fees since assets transferred to an RLT during their lifetime avoid probate. Even while an RLT does not offer any tax advantages over a will, the cost savings can be substantial.

 

Additionally, because of California-specific regulations, a California RLT can shield your donors' assets from the state if it attempts to seize them to pay for healthcare expenses. If your donor anticipates needing long-term care facilities (as many of us do at some point), putting their assets in a revocable living trust ensures they will be handed on to their loved ones.

$158K is the average donation size in a revocable living trust.

 

By encouraging your fans in California to make RLTs, you can help them save money for their families. However, it might also assist your company.

 

72% of legacy donors on MinaWill make charity bequests as a percentage of their estate rather than a dollar amount; this ratio is even higher with RLTs (77%). And the greater their estate, the greater their contribution to your organization.

In addition, legacy contributors from California who use RLTs instead of standard wills contribute greater overall. The average size of all donations in an RLT for California MinaWill users is $158,000, compared to $130,000 for wills.

 

Regarding legacy giving, revocable living trusts are advantageous for both the donor and the organization.

  1. Your donor's heirs will receive their funds faster, and so will you.

California has one of the longest probate procedures in the nation. The duration of probate might range from eight months to many years. Since the beginning of the epidemic, the situation has only gotten worse, with court closures, IRS slowdowns, and a backlog of cases, in some cases adding months of delay.

 

This can cause hardship for loved ones who have been assured that estate assets will be available to assist with funeral expenses. In 2019, the national median funeral cost was over $7,600 and was frequently even more in states with a high cost of living, such as California.

 

James, a citizen of California, lost his father years ago and his mother just recently. At her death, his mother held five accounts in her name alone, which she handed him in her will.

 

She has also stipulated that the estate's assets should be utilized for the last expenses, including her funeral, because she did not want James to pay out of pocket.

 

However, her bank would not release her accounts until the court recognized James as the executor. And the court's backlog of cases will delay the evaluation of his legal documents by several months. James must now withdraw the funds from his account to ensure that his mother receives the proper funeral and burial.

 

Such accounts are not rare. But provide your supporters with estate planning options, including a revocable living trust tool for California residents. They can establish a revocable living trust and help prevent this tragic circumstance. James might have been identified as the replacement trustee, gained immediate access to his mother's accounts, and paid for her funeral with the money designated for that reason.

 

In addition, because probate delays the entire process of dispersing the estate's assets, it will take considerably longer for your organization to receive any legacies left to it. When a legacy donor leaves a gift in their RLT, the successor trustee can disburse it much more quickly, giving your organization the mission-critical money it requires.

 

The kindest thing you can do for your California-based fans is to visit the state.

On MinaWill, only 33% of California estate planners are constructing revocable living trusts instead of wills. Many are unaware of the benefits of RLTs and believe that a will is adequate.

 

With the persistent uncertainty of the epidemic and the likelihood of further government shutdowns (including in probate courts) around the nation, one of the sweetest things nonprofits can do for their donors is provide them with a simple option to create a revocable living trust.

 

This can save your organization and the heirs of your donors time and money by avoiding any delays that could cause California courts to back up and the high costs to which California law entitles attorneys and executors.

 

MinaWill is the only provider of planned giving solutions that makes it simple for nonprofits to accept gifts through revocable living trusts and is free for contributors. Request a demonstration of our tools today to learn how you may give back to your California-based community while raising vital funds or attend our webinar on November 3 to explore the significance of California RLTs in legacy giving.

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