Many people with financial resources want to give back to the community during their lifetime or as part of their estate plan. If this is you, you can start incorporating charitable giving into your planning now. There are many possible ways to give, so choose the ones that work for you.
Gift During Your Lifetime or in Your Will
Simple, straightforward ways to give to charities include making donations or naming the charities in your will. Many people like to make donations to 501(c)(3) nonprofit organizations because they can claim tax deductions on their annual returns. Also, you can name a nonprofit or charity as an heir in your will. Sometimes this will reduce estate tax liability, helping out your relatives who may inherit more as a result.
People often give the “residue” or “remainder” of their estate to charity – the money left over after the executor distributes specific gifts to relatives. If you take this route, make sure to find out the charity’s legal name (the name it uses to file taxes) and have a backup charity chosen, so there is no confusion if there are two charities with similar names or if a charity stops operating.
Naming a Charity as a Beneficiary
You can name a charity as the beneficiary of your life insurance plan, your 401(k), or your IRA. Again, make sure you find out the charity’s legal name and properly fill out the administrator’s beneficiary designation form. If the charity is a qualifying nonprofit, it will receive the account funds tax-free.
Set Up a Charitable Trust, Foundation, Scholarship, Donor-Advised Fund, or Pooled Income Fund
State and federal laws allow charitable givers to set up many kinds of entities that give money to charities or deserving people over a long period of time. Charitable trusts can either provide income to you during your life and then trust assets go to a charity on your death (a charitable remainder trust), or provide income to a charity for a set period of time and then the rest goes to other beneficiaries (a charitable lead trust).
Alternatively, you could set up a foundation, scholarship, donor-advised fund, or pooled income fund. Foundations and scholarships are good for benefiting a specific group of people that may not be served or who are underserved by charities and non-profits. Scholarships are great if you want to support a specific university or a group of higher-education-seeking students. For other options, talk to your estate planning attorney or watch for future blogs on these topics.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.