November 2014< Back to View All Publications
Tis the season to give thanks and count our blessings. Did you know one of the best – and simplest – ways to give back to your favorite charities is by including them in your estate plan?
Americans households gave over $316 billion to charities in 2012. Although the numbers aren’t finalized for 2013, some sources estimate that charitable giving increased by approximately 13%.
Many of my estate planning clients include their favorite charity – or charities – as part of their estate plan. Some clients plan to give their entire estate to charity upon their death. Other clients provide for gifts called “bequests” to charity with the balance of their estate going to family members and other loved ones.
If you are one of the millions of Americans who gives to charities each year, you may want to include your favorite charitable organizations in your estate plan. Here are a few ways you could leave a legacy:
One of the easiest ways you can incorporate charitable giving into your estate plan is by making a specific bequest to that charity. A bequest is a gift of a specific sum of money, a percentage of your estate, or a specific asset which is made upon your death. The funds can be used by the charity for their general operating needs or you could specify a specific program you wish to benefit.
If you already have a will or trust, you can provide for a charity by making a codicil to your will or an amendment to your trust. If you don’t already have an estate plan, now is a good time to get your plan in place, especially if you want to include gifts to charities.
Life Insurance & Retirement Plan Gifts
Making a gift of a life insurance policy or a retirement plan (such as an IRA or 401(k)) to charity may be appealing because it is a flexible, cost-effective, and in many cases tax-advantaged way to make a major gift that will benefit the organization. All you have to do is name the charity as a beneficiary for all or a portion of the life insurance policy or retirement plan.
Assets like life insurance and retirement plans are “non-probate” assets which may not be incorporated as part of your estate plan. Nonetheless, you can incorporate these types of assets into your goal of charitable giving by naming the charity to receive all or a portion of the asset as either the primary or contingent beneficiary.
Ask your life insurance company or retirement plan administrator for more information and a “Change of Beneficiary” form. You can then designate the charity as a beneficiary pursuant to your wishes.
Advanced Giving Strategies
There are many sophisticated techniques you can use to achieve your charitable giving goals. A few are explained below.
A charitable gift annuity is a transaction whereby an individual transfers cash or property to a charitable organization in exchange for the charity’s promise to make fixed annuity payments to one or two individuals, for their lifetime. A portion of the payments are considered to be a partial tax-free return of the donor’s gift, which are spread in equal payments over the life expectancy of the annuitant(s). The irrevocable gift becomes a part of the charity’s assets, and the payments are a general obligation of the charity.
A charitable lead trust is a trust that makes payments, either of a fixed amount (charitable lead annuity trust) or a percentage of trust principal (charitable lead unitrust), to charity during the trust’s term. Upon its termination, the trust’s remaining assets are returned to the grantor or transferred to others named by the grantor.
A charitable remainder trust is a trust that provides for a specified distribution, at least annually, to one or more beneficiaries, at least one of which is not a charity. The distribution must be paid at least annually for life or for a term of years, with an irrevocable remainder interest to be held for the benefit of, or paid over to, one or more qualified charities.
Want to know more about how to incorporate charitable giving into your estate plan? I invite you to give me a call (725 777 3000) or email (email@example.com).
Cordially, Kristin Tyler