If charitable gifting is an important part of your life, you may want to make it 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. To get you started, a Huntersville estate planning attorney at Potter Law Firm discusses how to make charitable gifts in your estate plan.
Who Are Your 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 large organization, a direct cash gift included in your Last Will and Testament might be sufficient. If, however, your beneficiary is a small local charity, 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.
Review 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 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.
Alternative 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 special trusts that allow you to gift 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.
- Donor-Advised Fund. Many investment companies offer donor-advised funds that will allow you to irrevocably make gifts to charity in one year but designate an individual to advise the company on how and when to make distributions to charities in subsequent years.
- Community Foundation. Community foundations pool the charitable gifts of many donors and direct the distribution of charitable gifts to individual charities over time. While the community foundation is responsible for authorizing distributions, you can indicate in your fund agreement which charities or types of charities you want to receive funding and the time period over which you want distributions made.
Contact a Huntersville Estate Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have questions or concerns about making charitable gifts in your estate plan, contact an experienced Huntersville estate planning attorney at the Potter Law Firm by calling 704-944-3245 (Charlotte or Huntersville, NC); or you can reach our Kentucky offices at 606-324-5516 (Ashland, KY) or 859-372-6655 (Florence, KY) to schedule your appointment.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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