Stephen Hawking was among the most recognizable faces in science at the time of his death on March 14, 2018. Hawking, age 76, gained fame from his multiple appearances on shows such as the Simpsons and the Big Bang Theory, as well as from the many popular science books he wrote, including “A Brief History in Time.”
Hawkin was diagnosed with early stage ALS, or Lou Gehrig’s Disease, at the age of 21. ALS is the acronym for amyotrophic lateral sclerosis, a neurological disease. Unlike most ALS patients, Hawkins went on to live another 50+ years after his diagnosis and accomplished many great things. The ALS was a motivating factor for much of what Hawkins accomplished. He stated “Before my condition was diagnosed, I was very bored with life. There had not seemed to be anything worth doing.” With his realization that he life could be cut short at any time, Hawking poured himself into his studies, finished his Ph.D. and began his life work researching black holes and the theory of relativity.
By the mid-1970’s, he required pretty much full time care. In 1985 he lost the ability to talk. A California programmer developed a computer system that allowed him to speak using a clicker that selected words from a computer screen. When he lost control of his hand movement due to the ALS, he would control the computer through a cheek muscle attached to a sensor.
Hawking was able to amass a significant wealth though his employment at Cambridge, multiple best selling books, speaking fees and royalties from the movie about his life. It is estimated he was worth as much as $20 million at the time of his death. He will leave some of that wealth to his children, but a significant portion will go fund the charity he founded during his lifetime as well as the Stephen Hawkins Foundation, a foundation created by the Royal Institution of Great Britain. It will facilitate research into Cosmology, Astrophysics and Fundamental Particle Physics research as well as motor neuron diseases.
Charitable Remainder Trusts
There are many charitable planning strategies available to individuals. One very popular strategy is the charitable remainder trust or CRT. These are sometimes referred to as Capital Gain Avoidance Trusts, although they really just postpone the payment of capital gain taxes rather than avoid them. An individual with an appreciated asset such as stocks or real estate can contribute the property to a charitable trust. That trust can sell the property, and because it is a charitable trust, it will pay no capital gain tax on the appreciated value of the real estate or stock. The sale proceeds can then be invested. The trust pays an amount to the donor for either a period of time not to exceed twenty years or for the rest of the donor’s life. Upon the termination of the trust, the remainder gets paid to the donor’s favorite charities or perhaps a charitable foundation created by the donor. Some or all of the distributions paid to the donor can be used to purchase life insurance on the donor or the donor’s spouse, also leaving a legacy for his or her children or grandchildren, if desired.
Another popular strategy is the creation of a private foundation. This can be done while the donor is alive or upon the donor’s death. The foundation can be a trust or a public benefit corporation. Any assets that the donor contributes to the foundation during life or upon death are entitled to charitable deduction for tax purposes. The foundation can assist other public or private charities designated by the donor or a board of directors by making grants. Or the private foundation can conducts its own charitable activities such as providing scholarships, feeding and housing the homeless or assisting veterans return to the workforce (just to name a few possibilities). Often wealthy individuals will leave the amount that can pass estate tax free to their children and grandchildren, with any amount in excess of that to their private foundation. This would assure that their entire estate will not be subject to estate tax, as the assets passing to the private foundation will be eligible for an estate tax charitable deduction.
Ways to Learn More
If you are interested in learning ore about charitable planning, philanthropy, and estate planning, visit our website. Or you can call us at 951-888-1460 to schedule an appointment with one of our tax specialist estate planning attorneys.