Leaving money to a charity is often a way for people to give back, both in life and after death. There are many reasons you may choose to leave a small amount, a sizable amount, or even your whole estate to a charity or multiple charities. Perhaps you don’t have any family. Or you think that your family doesn’t need or deserve the money. Maybe a certain charity is meaningful to you or was personally helpful at one point and now you want to give back. No matter the reason, there are many ways you can choose to leave money to a charity, whether through a will or other alternatives.
In your Last Will & Testament, you direct how you want your estate to be distributed after your death. There are a variety of ways you can incorporate planned giving into your will:
· General Gift: You can designate a specific amount of money or a percentage of your estate to a charity
· Specific Gift: You can also gift specific items like real estate, vehicles, artwork, jewelry, etc.
· Residuary Gift: After all other distributions are fulfilled, you can designate that whatever remains be given to a charity.
· Contingent Gift: The gift can only be made if certain conditions are met. For example, you create a will that leaves your entire estate to your only child. But you state that if your only child were to die before you, then your entire estate would go to a charity of your choice.
No matter what type of gift giving you incorporate in your will, this sort of distribution to a charity usually comes with no strings attached, meaning it does not allow anyone to monitor the way the charity uses the money.
There are other estate planning tools available that provide you a way to control how a charity uses your gift, whether it is money or a particular item. Trusts are usually the best method to accomplish this, as a trustee manages the assets according to the trust’s provisions.
Outside of a Will
Some financial advisors may encourage you to plan for giving money to charity outside of your will in order to maximize the tax benefits for both the charity and your heirs.
Retirement accounts like IRAs and 401(k)s can incur high tax rates when distributed to your heirs. However, when distributed to qualified charities, like a non-profit, they pay no taxes. Consider making a charity the beneficiary of these sorts of accounts.
Before making any big decisions on leaving money to charity, consider speaking with both a tax expert and estate planning attorney to create a gift plan that meets your goals. Call today to schedule an initial consultation and learn more about how you can give back, both in life and death.