When you are putting together your estate plan, you may wish to leave money or property to more than your children and other heirs. If so, you are like many other people nowadays that are opting to leave a percentage of their wealth to various charities and other benevolent organizations.
If you have decided to do this, you are hardly alone. Many with wealth (e.g. Bill and Melinda Gates) and more modest backgrounds have made the same decision. The feeling like you have done something to make the world a better place is a very positive one. In order to ensure that your charitable wishes are carried out, it is important to make sure that your estate plan reflects your intentions.
Means of leaving money to charities
One of the simplest ways to give money to charities is to include a charitable contribution as a provision in your will. In other cases, it may make sense to donate your retirement account to the charitable institution. To do this, you simply designate the institution as the beneficiary on your account. After you die, it will automatically be distributed to the charity.
If you have considerable wealth that you would like to donate, it may be better to create a charitable remainder trust. Under this trust, you can ensure that the charity receives either a fixed payment or fixed percentage every year for a certain term (which can be for your life). Once the term has ended, the remainder of the assets within the trust goes to the charity. Although the trust is irrevocable, if you later find that you no longer wish to donate to your original charity, you can change the beneficiary at any time.
After you have decided to leave some of your assets to a charity, particularly if it is a large portion, it is important for you to let your family, especially your children, know of your decision. Doing so will allow any surprises to be avoided, help your loved ones understand your reasoning, and allow them the opportunity to become part of the charitable legacy you are leaving behind.
When you are deciding how you would like to distribute your assets to your chosen charity, it is vital for you to consider the tax consequences of each option, as they can have implications now and in the future. For example, making a simple gift in your will does not reduce your income taxes, but may end up reducing the size of your taxable estate, if you are subject to estate tax.
Since each means of distribution has its own advantages and disadvantages, it is a good idea to speak with an experienced estate planning attorney when making your decision. An attorney can review your options with you and recommend the best solution that will ensure that your donative wishes are carried out with a minimum of negative tax consequences.