Many people who have worked hard throughout their careers to build wealth choose to give back by undertaking charitable giving through their estate plan. Incorporating philanthropic goals this way can help you develop a charitable legacy for yourself and your family and obtain tax benefits that can prove helpful in financial planning.
Why Include Philanthropy in Your Estate Plan?
Many people choose to incorporate a philanthropic mission into their estate plan to use their wealth to leave behind a legacy that aligns with their personal beliefs and causes they feel passionate about. Conducting charitable giving in your estate plan allows you to provide long-term support to causes important to you, such as charities, religious organizations, and educational institutions. Philanthropy can help others remember you for your willingness to help people in need or support causes that make one’s community or the world a better place. Using your estate plan to engage in charitable giving may also inspire family members, friends, and future generations to continue your philanthropic endeavors. Finally, charitable giving also comes with tax benefits for you or your estate that can help you preserve more of your family’s wealth for future generations.
Ways to Leave a Charitable Legacy
You have various estate planning strategies that will allow you to leave a charitable legacy, including:
- Making bequests in your will: A person can leave a portion of their estate to specific charities or charitable causes through a bequest in their will.
- Charitable remainder trusts: A charitable remainder trust can provide income from its assets to designated beneficiaries for a specific period, after which the trust will distribute its assets to specified philanthropic organizations or causes.
- Charitable lead trusts: A charitable lead trust operates in reverse to a charitable remainder trust, with the trust providing distributions of income from its assets to designated charities for a specific period. After that period, the remaining trust assets pass to one or more designated beneficiaries.
- Donor-advised funds: Individuals and families can establish donor-advised funds, a special type of charitable trust that allows the person or family who created the trust to recommend specific philanthropic grants to the fund trustee(s).
- Beneficiary designations: People who have life insurance policies, retirement accounts, or bank or brokerage accounts can name a charitable organization as the beneficiary of the account or policy. Upon the donor’s death, the charity will receive the policy benefits or account assets.
- Private foundations: Families can donate substantial sums of money to a charitable trust managed by a board of directors or trustees who make charitable donations aligned with the family’s philanthropic goals, such as donating to medical research or providing scholarships to students.
Considerations for Choosing Charitable Endeavors
Individuals evaluating the idea of charitable giving through their estate plan should keep essential considerations in mind, including:
- Choosing charitable organizations that can provide tax benefits for donations, such as 501(c)(3) organizations
- Understanding how a charitable organization uses donations; look for organizations that provide a transparent breakdown of the portion of donations that fund the charitable mission versus funds used for administrative expenses and salaries
- Working with experienced financial advisors and estate planning attorneys who can help vet organizations and structure your estate plan to achieve your philanthropic goals
Communicating Your Legacy
Once you’ve decided to incorporate charitable giving into your estate plan, you should inform your family of your philanthropic wishes and goals to avoid confusion or surprise over giving a portion of your estate to charitable organizations instead of your loved ones. No matter which estate planning tools you use to undertake charitable giving, consider drafting a mission statement to incorporate into your estate plan that explains your philanthropic goals.
Contact an Estate Planning Attorney
An experienced estate planning lawyer can help you incorporate your philanthropic goals into your family’s estate plan to create a lasting legacy and obtain the legal benefits of charitable giving. Contact Monk Law Firm, PLLC today for an initial consultation with an estate planning attorney to discuss your legal options.