8 Reasons To Put Charitable Giving In Your Estate Plan
There are only three places to leave your money when you are gone – heirs, charity or taxes. For many people, charity has not been part of the thinking, but this is changing. Warren Buffett and Bill & Melinda Gates have created a project called “The Giving Pledge,” aimed at enrolling billionaires to give at least 50% of their estates to charities of their choice, during their lifetimes or through their estate plans. Volunteer efforts like “The Giving Pledge” have been formed nationwide to encourage ordinary citizens to leave a gift to their chosen charities in their estates. It appears a new trend has started, because people who might never have thought to leave money to anyone but their relatives are beginning to think of their legacies in a new way.
What are the advantages to leaving money to charities rather than relatives or friends? Here are eight important reasons.
- HELPS YOU DO A BETTER ESTATE PLAN
It doesn’t take much thought to create an estate plan leaving all your money to relatives. Deciding how much is enough to leave your heirs requires some deep thought. Will a large inheritance help or hurt your children? Should charities be considered? How will this integrate into a unified plan? The end result of answering these questions is a more satisfying legacy.
- PASSES ON VALUES AS WELL AS MONEY
A mother’s gifts to specific charities were meaningful to her children. They said her donation to the local public radio and television stations passed on the value of lifelong learning. Her donation to her church expressed the importance of having a spiritual foundation in life. The money to the local food bank showed the importance of helping those less fortunate. These choices communicated her values to her children.
- TAKES CARE OF HEIRS WHILE BENEFITING CHARITY
The person who creates wealth has money management skills, but their heirs may not. Leaving an outright inheritance may not be wise in some cases – but leaving lifetime income may work very well. A useful technique is a Testamentary Charitable Remainder Trust, in which the heir receives income for life and the principal goes to charity on the heir’s death. If the estate is subject to estate taxes, the donation to the trust will also result in tax savings, an added bonus.
- HELPS ENCOURAGE CHILDREN TO BE SELF SUPPORTING
Murray Wertz felt he owed his children only a college education. Since the time they were teenagers, he told them he was leaving most of his money to charity. Because of Murray’s clarity and because he communicated his thoughts early on, his three children knew it was up to them to create the lifestyle they wanted. They had no expectations of an inheritance.
- ELIMINATES POTENTIAL FAMILY DISPUTES
We all know families that are torn apart over money or possessions. Hazel had two daughters who were barely on speaking terms, and she knew that after she was gone they would fight over her vacation home in Hawaii. When she became too frail to travel, she donated the home to her favorite charity.
- CREATES PHILANTHROPIC HEIRS
Andrew Arata and his brothers had a business that prospered, and they left the bulk of their estates to a trust benefiting charitable causes in their community. The third generation now runs the trust, learning to be philanthropists themselves in granting the yearly income. Good vehicles for this plan include Donor Advised Funds through community foundations and Family Foundations, both of which save estate taxes.
- ALLOWS YOU TO MAKE BIGGER CHARITABLE GIFTS
Most people worry about whether they will have enough money to last their lifetimes.
When you leave money to charities in your estate plan, it happens after you are gone.
You don’t need it anymore! It is fun to dream about the good you can do in the future without costing you a dime today.
- LEAVES YOUR MARK AFTER YOU ARE GONE
John Burkhardt’s father was a successful business man. When he died, he left a sizeable gift to a hospital that named its cancer center after him. Since it is a small community and John’s name is unusual, grateful patients have asked him many times if the center had something to do with his family. He is proud to tell them of his father’s gift that made it all possible.
Considering charities in your estate plan creates more options to benefit both your heirs and your community.
Authors: Elfrena Foord and Sheila Hard
Elfrena Foord became a CPA in 1969 and has been a practicing Certified Financial Planner since 1983. She received her Chartered Advisor in Philanthropy designation in 2009.
Sheila Hard, J.D., is a nationally recognized expert who provides gift planning services to charities and professional advisors.
Judee Daniels, CFRE, is a nationally recognized certified fundraising executive since 2008. She co-founded the statewide California Plan Your Giving Program with Elfrena Foord, from which the States of Iowa & Michigan modeled their statewide philanthropic awareness programs.
© Elfrena Foord and Sheila Hard, 2010
Here is Faith Episcopal’s Charitable IRS EIN number to use when consulting your tax and/or financial advisors #91-0200430