In life we passionately support the charities we love. However, we often believe we can no longer do so after we die. A common misunderstanding is that one must be wealthy to leave money to a charity in an estate plan. When I ask my clients about leaving money to their favorite charity in their estate plan, they often tell me they don’t have enough to “do that kind of planning.” They admit they would like to, but often believe it involves complex trust or gifting agreements they may be unable to fulfill due to the costs of future long term care. Some even believe that whatever small gift they may make would have little meaning to the charity.
None of these myths are true. Anyone can give money to a charity through their estate plan. Any amount, no matter how insignificant it may seem, is appreciated in charitable giving.
While one could create complex charitable giving schemes involving trusts, annuities and foundations, most people can simply give through a basic estate plan using one of four vehicles: a last will & testament (will), a Revocable Living Trust (trust), a life insurance policy, or an annuity.
To give a charitable gift in your estate plan, follow these six steps:
- Determine which charity to which you would like to give. This may seem simple at first. However, the charity you support might have a fundraising entity that accepts gifts on its behalf. For example, if you would like to leave a charitable gift in support of the Leon County, Florida public libraries, you would leave that gift to the Friends of the LeRoy Collins Leon County Public Library. Public schools, colleges, universities, and research organizations often have a charitable foundation that accepts charitable gifts. To determine the appropriate entity to which the gift must be given, call the charity and ask.
- Get the correct name and address of the charitable entity to which you are leaving the gift. Many small local charities have similar names as national charities or small local charities in other states. It is essential the correct name and address are used when naming a charitable organization as a beneficiary. The correct name and address will ensure the gift goes to the charity you choose in the event your executor/personal representative is unfamiliar with the organization.
- Determine how much money you would like to give the charity. If you are leaving money to a charity through a will or trust, you have two options. You can either leave a specific gift of an amount of money or type of property or you can leave a percentage of the estate. For example, you could leave the charity of your choice $5000.00, ten percent of an estate, or a particular type of property such as a collection of books. If you wanted to use life insurance or an annuity, you could maintain a life insurance policy and make the charity a beneficiary or make the charity a partial or contingent beneficiary to the life insurance policy or annuity.
- Determine if there is a specific goal you would like your gift to serve. Often, my clients want to give a gift for a particular purpose. If you would like to advance a specific goal with your gift, be sure it is a goal that can be accomplished and can be accomplished with your gift. For example, you might wish to give money to advance and support the technological advances at a local charity that tutors children by providing 100 tablets with math tutoring software, a gift of five hundred dollars is not going to achieve that goal. A gift of five thousand dollars is more realistic.
- If you are planning to give a specific type of property to a charity or to restrict your gift, contact the charity to see what additional requirements might be needed in your estate plan. While charities will take gifts regardless of the wording in an estate plan, many charities request certain language be included if the gift is a specific piece of property such as a painting or rare book. In some instances, if a gift has restrictions, the charity may be unable to accept it under that charity’s state law without certain language in an estate planning document.
- Finally, talk to your estate planning attorney and financial planner to ensure your estate and financial planning documents are updated. Updating your will or trust to include charitable gifts should be done with the assistance of your estate planning attorney. If you are leaving a gift to a charity using life insurance or an annuity, you should work with your financial planner to update the beneficiary designations on these vehicles to include the charity as a beneficiary.
If you want to support the charities you love in life after you are gone, it’s easy. Charitable giving in your estate planning can be simple. And, the impact of the gift you leave in your estate plan can have a lasting impact on your beloved charity.