For many people, charitable gifting is an important part of their daily lives. If you are among them, you may hope to make charitable gifting part of your estate plan as well. Charitable gifting can be handled in several different ways in your estate plan. The type of beneficiary, size and complexity of the gift, and the amount of control you want to have over how the gift is used will all impact how you make charitable gifts in your estate plan. With all of that in mind, let me offer some suggestions for how to include charitable gifts in your estate plan. To provide you with an idea of your choices, the estate planning attorneys at Legacy Care Law Firm discuss some common options for making charitable gifts in your estate plan.
Why Does It Matter How I Make a Charitable Gift?
Every gift or bequest you make in your estate plan should be carefully thought out, including the method you use to make the gift. Gifting to charitable beneficiaries can be particularly complicated because of the tax implications for you and the legal implications for the charity. Along with those concerns, many people are more concerned with how the beneficiary will use the assets when that beneficiary is a charity than they are when the beneficiary is a family member or loved one. For all of these reasons, extra care should be taken when making charitable gifts in your estate plan.
Consider Your Intended Beneficiaries
When it comes to incorporating charitable gifts in your estate plan, you need to narrow down your target beneficiaries to a select group. In addition, the type of beneficiaries you wish to include in your estate plan will be important in deciding what type of gift to make and how to incorporate that gift into your plan. For example, if your beneficiary is a political organization, a direct cash gift included in your Last Will and Testament might be sufficient. If, however, your beneficiary is a shelter for abused women, you might want to be more specific about how your gift is used. In that case, a trust might be a more appropriate vehicle for including your gift in your estate plan. A trust allows you to retain a strong degree of control over how the assets are used through the trust terms you create and the Trustee you appoint to oversee the administration of the trust.
Analyze Your Assets
A surprising number of people do not know the value and type of assets they own as well as they think they do. You may have a general idea of your net worth, but when it comes to estate planning you need to have a detailed understanding of all your assets and the current value of each asset. This is particularly important when you wish to include charitable gifts in your estate plan because your debts and obligations must be taken care of before you can start making charitable donations in your estate plan.
Gifting to Charities in Your Last Will and Testament
You can make charitable gifts in your Will; however, there are several reasons why making charitable gifts in your Will is not the best option. To begin with, using your Will to make charitable gifts means you will almost surely miss out on tax benefits that would otherwise be available when making charitable gifts. In addition, when you make a direct gift in your Will, you lose all control over how that gift is used once the transfer is complete. Finally, if you hope to involve your children, or other younger relatives, in your philanthropic endeavors, you will need to use a more complex method of continuing your charity work.
Other Ways to Include Charitable Gifts in Your Estate Plan
Fortunately, there are other tools and strategies that can be incorporated into your estate plan to facilitate charitable gifting, such as:
- Charitable Lead or Charitable Remainder Trust. Charitable lead and charitable remainder trusts are specialized trusts that allow you to give to both a charitable and a non-charitable beneficiary. With a charitable lead trust (CLT) a charitable beneficiary receives distributions from the trust for a specific period first. At the end of the designated period, the remaining assets are distributed to the non-charitable beneficiary. A charitable remainder trust (CRT) works in reverse with the non-charitable beneficiary receiving distributions first and the remainder going to the charitable beneficiary.
- Charitable Gift Annuity. In some ways, a charitable gift annuity is like a trust. You donate cash, or other assets needed by the charity, in return for which you, or another beneficiary (or more than one beneficiary), receives a fixed annuity payment for a designated period.
- Private Foundation. A private foundation is a non-profit organization that manages its own funds and can be used to make charitable gifts to numerous and varied causes. Because of the cost involved in setting up and operating a foundation, this option is only practical if you plan to donate a sizeable amount to charity in your estate plan. Creating a private foundation also gives you the opportunity to directly involve future generations in charitable gifting.
Contact Our Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about the options you have for making charitable gifts in your estate plan, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Salem and Nashua, New Hampshire office can be reached at (603) 894-4141.
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