We are very happy to send you this second issue of our new and informative Christian Steward newsletter, specially designed for the friends of Manhattan Christian College.

As we have counseled with some of our friends concerning their estate design, or making charitable gifts, we have found that they often want to be better informed in these important areas.

Therefore, we are happy to make this newsletter available to you on a regular basis. We trust it will be of interest and value to you.

In this issue of Christian Steward, we are beginning a series of articles that we trust will be valuable to you as you continue to develop your lifestyle of giving. In this issue and the next four issues we will share with you what we consider to be the five scriptural steps of developing a giving lifestyle.

And we are sure you will find the article on trusts to be of special interest. The Special Planning Report that we offer in this issue has already been of help to many individuals. We will look forward to receiving your request for this free report entitled, The Use of Trusts in Estate Planning and Charitable Giving.

The first basic step for a Christian developing a lifestyle of giving is to realize that in God's Word, the basis of all stewardship is work. Early in the Scriptures, Genesis 3:19 states, "By the sweat of your brow you will eat your food."

And certainly, no one can deny the wisdom of Solomon. In Proverbs 28:19 he states, "He who works his land will have abundant food, but the one who chases fantasies will have his fill of poverty."

In II Thessalonians 3, starting in verse 7, Paul talks about the necessity of work, and in verse 10 he lays down the rule that if a man will not work he shall not eat. Again in verse 12, he instructed them to ". . .settle down and earn the bread they eat."

Another interesting thought about labor is found in Ephesians 4. Begin reading at verse 20 to get the full impact of how labor is tied to spiritual life. And in verse 28, it concludes with, "He who has been stealing must steal no longer, but must work, doing something useful with his own hands that he may have something to share with those in need."

This passage gives us two interesting thoughts. First, the word stealing is used. In a recent year, it was estimated that approximately $137 billion was stolen from employers by individuals in the labor marketplace who simply didn't do the job that they were paid to do. This was greater than all other recognized crimes put together.

And the second interesting thought in this verse is that one of the reasons we work is to have something to share with those in need.

So important is work, as the basis of stewardship, that it appears in the Scriptures over 500 times. Therefore, at the basis of a Christian lifestyle also has to be the development of perfection in the marketplace in which we work. As Christians, are we not obligated to be the very best we possibly can, so that our labor will be worthy of those who seek it?

People do not seek our services because we are Christians, but they seek us out because we are the best we can possibly be. And we are the best we can be because it is part of our Christian lifestyle.

Thus, because of the compensation we receive for our labors, we are financially equipped for a giving lifestyle. Let's each examine our labors in the marketplace and see if they are consistent with our lifestyle of Christian perfection.

Continuing with our review of the various tools available in personal estate planning, we want to focus in this issue upon the use of a trust.

A TRUST

A trust is a flexible estate planning tool. It can be used to avoid estate taxes, to provide management for property in case of disability, to protect minor children from premature distribution of property, to avoid ancillary administration of the estate when you own property in more than one state, to distinguish separate property from community property when you move from one state to another, and for many other purposes, including income tax planning.

A trust can be designed to be confidential, can be used to avoid probate, and can provide for coordination of your entire estate planning process.

A trust is also easy to establish and easy to change.

When a trust is used as a key vehicle of the estate plan, it will typically be combined with a simple will. The will places all remaining property that you have not assigned to the trust during your lifetime, into the trust instrument at death.

The trust should also be combined with a durable power of attorney, which allows the individual holding the power to place any property into the trust at a time of incompetency that has not previously been assigned to the trust.

In other words, a trust can do just about anything that you design it to do.

TYPES OF TRUSTS

There are many types of trusts, all falling within two categories.

Revocable, which means that it can be changed, or

Irrevocable, meaning that it cannot be changed.

If the purpose of the trust is management, avoidance of probate, confidentiality, etc., then the trust can be revocable.

However, to accomplish tax savings, the trust may need to be irrevocable.

The trust can be partially or fully funded during your lifetime, or it can be funded through your will.

If you wish for property to avoid probate, or to be managed in case of disability, then the trust must be established and funded during your lifetime.

However, if the trust is designed purely to save estate taxes or to protect minor children or other dependents, it can be established through your will.

CHOICE OF TRUSTEE

The choice of a trustee for your trust is very important. If you establish the trust during your lifetime, and the primary purpose is the avoidance of probate and management in case of disability, you may wish to serve as your own trustee while you are able. You would appoint a successor trustee to assume responsibility at your death or in case of incompetency.

In the first issue of Christian Steward, we discussed the importance of selecting the right personal representative for your estate. Much of that discussion may be applied to the process of choosing your successor trustee.

The successor trustee can be a family member or trusted friend. However, it is important to consider potential conflicts in interpersonal relationships. Conflicts may arise when a beneficiary of the estate is asked to make decisions that affect his or her inheritance, as well as the inheritances of others.

Therefore, a bank or trust company might be a good choice. They are always there, they have experience, and they are usually not involved in the interpersonal relationships in which individuals, especially family members, may become involved. In short, they are a third party who does not have a vested interest in the property.

If you are concerned that there be a personal touch in the management of your trust, nominating an individual to serve as co-trustee with a bank or trust company may be a workable solution.

TRUSTS AND
CHARITABLE GIVING

A trust can also be a very valuable tool in your giving program.

With a charitable trust you may be able to:

Avoid capital gains tax on appreciated property.

Receive an income tax charitable deduction this year, just by guaranteeing that the charity will receive the property at your death.

Substantially increase your income from low or non-income producing property.

And there are many other valuable advantages, such as professional management of property, gift and estate tax savings, and probate avoidance.

IS A TRUST FOR YOU?

One of the most common questions asked is, do I need a trust?

Naturally, that depends upon your circumstances, but to help you answer this question, as it pertains to your own estate plan, we have prepared a Special Planning Report, The Use of Trusts in Estate Planning and Charitable Giving.

Please use the enclosed response card to request your copy. There is no cost or obligation.

Many of us think only in terms of giving cash. And cash gifts are important. Day-by-day, week-by-week and month-by-month, Manhattan Christian College, like most charitable organizations, relies upon these gifts for the operation and outreach of its ministries.

However, you may receive excellent tax advantages by also giving property, especially property which has appreciated in value, such as stocks, bonds, mutual funds or real estate.

When you give appreciated property, you can receive an income tax charitable deduction for the full fair market value of the property. You also avoid capital gains tax on the difference between the fair market value and your cost basis in the property.

Let's look at an example.

Mrs. Jones wants to make a gift to Manhattan Christian College. She currently owns stock valued at $10,000, which she purchased for $5,000.

If Mrs. Jones sold the stock, she would pay approximately $1,400 in capital gains tax, leaving only $8,600 to make her gift. She would receive an income tax charitable deduction for the gift, saving her approximately $2,400 in taxes.

If Mrs. Jones gave the stock to Manhattan Christian College, and we sold the stock, we would receive the full $10,000. Mrs. Jones would receive a charitable deduction in the amount of $10,000, which would save her approximately $2,800 in taxes. And neither Mrs. Jones or Manhattan Christian College would pay capital gains tax.

In this illustration, if Mrs. Jones donates the appreciated stock, Manhattan Christian College receives $1,400 more than if she sold the stock and gave the proceeds. And Mrs. Jones has $400 more, for a total benefit in tax savings of $1,800.

If you own property that has decreased in value, it is best for you to sell the property. You can use the capital loss to offset other gain, and give the proceeds of the sale to Manhattan Christian College.

This example may illustrate a plan that you could use in your personal giving program. We would be happy to discuss it with you, to see how it might relate to your specific circumstances. Please give us a call and let us know how we can help you.

If you have minor children, one of the most important reasons for you to have an estate plan is to name a guardian for minor children. It's impossible to replace us as parents, but if death occurs, someone must fill that place.

Whether you select someone whose lifestyle is compatible to yours, who will care for your children in the kind of family surroundings that you desire, or whether that person is selected by the probate court, is your choice.

If you have not already selected that individual, it will be one of the most difficult decisions you will have to make in the estate planning process.

There is little we can say to help you with this choice. However, the following guidelines may be of value.

• Individuals who do not have children may not make good guardians. You learn to be parents by being parents of babies, one-year olds, five-year olds, etc. This experience is very important.

• Most people who have two children want two children. For this reason, they might not wish to be guardians, creating a larger family.

• The age of the children of the family you choose as guardians is important. They should be the same general ages as your children, avoiding a two-family situation.

• And most important, make certain that the lifestyle of the people you choose is compatible with your Christian lifestyle, so your children will have the opportunity to continue to grow spiritually.

When you have made your choice and are comfortable with these individuals, you should discuss with them their willingness to serve.

The nomination of an alternate guardian is also important, should your first choice be unable or unwilling to serve when called upon.

In the last issue of Christian Steward we discussed the importance of selecting the personal representative for your estate. But just as important is keeping your estate plan and your personal decisions it involves up-to-date.

A friend recently moved to another state. And even though his will is valid in that state, the person whom he named personal representative now lives a considerable distance away. And whether or not it is financially feasible for him to serve is questionable.

A lady recently passed away, having a valid will, but it was drafted a number of years ago. In her will, she named a close personal friend and business associate as personal representative. But shortly after the lady died, he became ill. Would he be able to serve? The answer was no, and this caused considerable delay, confusion and some bitterness, as well as allowing some of the investments and estate matters to go unattended.

Who you name as personal representative of your estate is important, but it's also important that your will be kept up-to-date, making sure the person you have named is not only able to serve because of logistics, but also is physically and mentally able to perform the duties.