Some of the terms used for charitable giving can be a little daunting. They sound more like complicated financial transactions and less like making a generous donation for a meaningful cause. But it’s really pretty simple.
There are many different ways to make a donation to charities in your estate plan, but the most common way, according to The Jewish News in “Keeping it (charitable estate planning) simple,” is with a “bequest.” This is, quite simply, leaving assets, money or property, to an organization through your will that are distributed after you die. It requires the bequest to be added to your will. That’s just one way to accomplish this philanthropic goal.
We have all heard of making a “pledge” for a fundraiser. It’s a promise to be paid soon thereafter. You can also make a pledge that is payable-on-death. It’s simply a bill that comes due, when your estate is being settled. You have the ability to revoke the pledge when you’re alive. However, at your death, it must be paid by the executor of your estate.
Another way to leave money to a charity without changing your will, is to name a charity as a beneficiary of any financial asset, like an insurance policy, an IRA or a donor advised fund. All you need to do is complete a form that says what should happen when you die. You should retain a copy so that your executor will know where to direct the asset.
Charitable gifts paid directly from your IRA, can give you some terrific tax savings—both during your life and upon your death. Ask your IRA manager to arrange for a charitable beneficiary of your IRA to maximize the tax savings. You can also make charitable IRA distributions from your Required Minimum Distributions (RMDs) to your charities, to save the taxes now. However, make sure that the money goes directly from your account to the charity.
A charitable gift annuity is similar to a special bank account that pays you or a designated beneficiary annual guaranteed lifetime income. The rates are based on your age and are typically higher than you can earn with investments. This money is given to your designated charity as a gift, with the residual remaining with the charity when you die.
An estate planning attorney will be able to explain which of these methods make the most sense for you and your family and help make them part of your estate plan.
Reference: Jewish News (June 21, 2017) “Keeping it (charitable estate planning) simple”