You will find that there are many considerations to ponder when crafting the perfect charitable giving plan. Like all other aspects of your estate planning, there are competing interests involved, which requires careful consideration and forethought. A skilled estate planning attorney will ensure you make a high charitable impact while keeping tax liability as minimal as possible. Here are four good-to-know lessons donors should consider when going into charitable planning.
1.) Charitable giving is not an all-or-nothing proposition
Leaving a direct cash gift to a specific organization
Perhaps one of the most straightforward ways to leave a gift is to include charitable language in your estate plan. These gifts that are written in specific language often include liquid assets: direct cash, stocks, accounts, or a percentage of the overall estate. However, some donors will require a more robust and comprehensive estate plan once they factor in the needs of their family, businesses, and their other wishes.
Leaving a direct cash gift to a specific organization with limitations
There are also ways to give a direct gift to an organization, but with conditions or restrictions on it. If you are uncomfortable giving one sum of money or if you want the gift to be used in a specific way (or for a specific purpose), you can choose to be as methodical as you’d like. An experienced estate planning attorney is skilled in precisely drafting your plan to carry out your charitable giving wishes.
2.) You can approach planning as methodically as you’d like! Here are examples:
If you’re concerned about giving too much at once, consider a reoccurring distribution plan to avoid giving your money away all at one time. An example of this is a donor holding $100,000 in a trust and restricting the gift to 5% annually ($5,000/year). This way, the money is not quickly depleted, which may cause an organization to become more thoughtful in the way the money is spent.
An even more methodical way to gift funds to an organization is to require that only income earned from investment interest be paid to the organization. For example, if the principal is $100,000 and earns 5% interest, $5,000 will be paid out to the organization, but the principal will stay the same (an added benefit!).
Whether it is a collection of memorabilia, cars, or art, most organizations are open to non-monetary gifts as well. This can be accomplished by gifting the property directly to the organization (say, a museum that you would like to gift memorabilia to), or by gifting the property to the organization as an asset that can be liquidated and turned into cash.
3.) Consider alternative charitable giving options
Setting up a charitable foundation
If you have a large donation, you may opt to set up your own charity or private foundation. There’s a lot more paperwork that goes into starting or maintaining a foundation, but it is an option for those with long-term missions and large donations to fund them.
Another tax-friendly way to engage in charitable giving is through a community foundation. This is a gift that you give now (so you can write it off on your taxes during life) but is managed by the foundation and benefits the charitable interests you direct over time.
4.) Be sure not to gift to a faux organization
Before you choose an organization, it is important to remain cognizant of the fact that there will be scammers posing as a charitable organization in order to trick you into gifting to them. You can think of this as identity theft of an organization. You can avoid this conundrum by having a meeting with the organization you are gifting to so you are leaving to a legitimate organization with 100% certainty, and while you’re there, make sure their efforts are consistent with your wishes.
Learn more about leaving a lasting legacy
If you’re interested in learning more, attend one of Promise Law’s free estate planning workshops. These workshops provide a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation with one of our attorneys.