Protecting your charitable ambitions in your estate plan

| Jun 21, 2020 | Firm News

Wanting to support a charitable cause you believe in can be a critical component of your estate plan.In most cases, charitable organizations welcome and appreciate gifts of any size or type. But to maximize and protect your donation, and to make it easier for the recipient party to avoid complicated legal processes to receive it, you can take the following steps.

1. Contact the organization ahead of time. Some charities have preferences for the types of gifts they receive and the method through which they receive them. Because of this, you should contact your intended recipients to discuss your donation. The organization could also have suggestions for how to tailor your gift to fit their needs and your wishes.

2. Set up a charitable trust. There are a couple of options for charitable trusts. A charitable lead trust (CLT) distributes a set amount of trust income to a charitable organization for term of years; after which remaining income goes to other parties, such as beneficiaries. A charitable remainder trust (CRT) works the opposite way. With a CRT, a set amount of trust income goes to beneficiaries first; a charitable organization receives remaining income. A charitable trust of either kind allows a donor to leave property or money to an existing charity or create their own foundation. These types of trusts can have considerable tax benefits in addition to benefiting the charity.

3. Name a charity as a beneficiary. Assets like retirement accounts need a beneficiary. Often, people name a friend or family member as a beneficiary, but it can be possible – and simple – to designate a charity as a beneficiary. Doing so can allow the charity to access assets just like any other individual.

4. Make gifts during your lifetime. You do not have to wait until you pass away to contribute to a charity. Lifetime charitable giving can be a critical component of your financial plan. Not only are there tax benefits to making charitable donations during your lifetime, but you can also structure your gifts to preserve your assets and protect your eligibility for Medicaid.

The option that works best for you depends on your unique wishes and resources. Considering the various options available and discussing your charitable ambitions with an attorney can be essential. There are laws that govern charitable gifts and rules for how to transfer property properly; complying with these can be crucial.

Whether your charitable goals are motivated by financial, philanthropic or social pursuits, you must take appropriate action to protect them.