As an estate planning and probate attorney, I see death, and the heartache that accompanies it, every day.  I watch the dying and their loved ones struggle with fear, physical and emotional pain, grief, depression, and more. 

But in the midst of this darkness, I also see incredible light – I see love, strength, sacrifice, and hope. 

This light shines when a person leaves a legacy – something which says, “This is what my life meant, this is what I cared about, this is what I thought was important.”

There are many ways to communicate a legacy, but one way you may not have considered is planned giving.  

Consider Planned Giving

“Planned giving” is a term for gifting money to a cause you care about in a thoughtful, organized manner, or creating a plan to bequeath money to them in the future.

If you are like most of our clients, you resonate with certain causes and want to help others, but you also want to use the money you leave behind to provide for your loved ones. The beauty of planned giving is that it allows you to do both.

The best way for you to give will depend on your specific circumstances.  Some of our clients leave a percentage of their assets to a charity, others make a plan to care for a loved one and designate that leftover assets be given to a charity when that person passes, while still others use a trust to take advantage of tax breaks (more on specific planned giving avenues below).

However you choose to do it, planned giving can be both practical and deeply rewarding. Here are some of the benefits that make it worth considering:

The Benefits of Planned Giving

Give more: 

By giving taxable assets (like an IRA or 401k) to a charity, you can give a much larger gift than you could give anyone else.  This is because gifts to charities are tax-deductible.

For example, if you were to give a portion of your 401k or IRA to a family member, they would have to pay income and, potentially, estate taxes on it.  Depending on the specific circumstances, this can be as much as 77% of the total gift in Virginia, and more in other states.  In words, a gift of $100,000.00 could only really be worth $23,000.00 to the recipient. 

However, if you were to make that same gift to a charity, it would receive and be able to use the entire $100,000.00.  

Give to reduce taxes:

Planned giving also gives you many tax benefits.  You can reduce your current and future income taxes, estate taxes, and capital gains taxes by taking advantage of various methods of planned giving.  For example, you could create a charitable trust which provides you with an immediate income tax deduction but still allows you to use the funds.  I’ll go into more details on other specific methods below.    

Give without worry:

Planned giving allows you to give in a way that ensures you and your family are provided for. You can either wait to give until certain needs are met or retain the use of funds until they are no longer needed. 

This allows you to make a difference while at the same time protecting your loved ones.  

Give to make an impact:

Planned giving allows you to make an impact because you can give more and give it at one time. Sometimes a large endowment is just the blessing a charity or non-profit needs, and planning ahead allows you to give a bigger allotment.

Avenues to Planned Giving

So how do you do it? There are three main avenues to planned giving, but you are free to put your own creative twist on each:

Gifts at Death: 

The most common method of planned giving is to set up a way to give when you pass.  You can do this with either a Will, a Revocable (“Living”) Trust, or with beneficiary designations on retirement or investment accounts or life insurance.   

  • Gifts in Wills or Trusts:

To give to a charity in your Will or Trust, you simply include that charity as one of the beneficiaries. You can either leave them a specific monetary amount or a percentage of your entire estate.  You can use language like this: “I hereby give Blue Ridge Hospice $10,000.00.”  Or, “I hereby give Blue Ridge Hospice ten percent (10%) of the residue of my personal and real estate.” 

(Note: To make sure your Will or Trust actually does what you want it to do, you should consult with an estate planning attorney with experience in charitable gifts. For advice on choosing an estate planning attorney who is right for you and your family, click here.) 

  • Gifts through Beneficiary Designations: 

You can also give by naming a charity as a beneficiary on a life insurance policy or retirement or investment account.  To do this, request a change of beneficiary form from your life insurance carrier or investment brokerage.  Fill it in with the amount you have selected, the charity’s legal name, address, and TIN as indicated for a beneficiary.  Then return the form to the carrier or brokerage and confirm that they receive and process it.  

Charitable Trusts and Annuities: 

Another way to do planned giving is to set up a charitable trust or a charitable annuity.  This route gives you the advantage of receiving an immediate tax deduction for gifts that happen in the future.  

  • A charitable remainder trust allows you to keep (or give to relatives) the income from an asset(s) for a period of time. When that time is up, the assets are given to your designated charity. This allows you to create a stream of income for yourself or others until it is no longer needed. 
  • A charitable lead trust is a trust in which the income from certain assets goes to a charity for a period of time. When that time ends, the assets are given back to you or to your loved ones. 
  • A charitable annuity is a contract you enter into with a charity wherein you make a lump-sum gift to them, and they agree to make payments to you for a period of time (normally, your lifetime).  

(Note: With all trusts and annuities, I strongly recommend that you obtain advice and assistance from an estate planning attorney with experience in charitable gifting before you create one.) 

Gifts of Appreciated Investments: 

The final method of planned giving is to give appreciated assets.  These are assets that have increased in value since you bought them, and if you sold them, you would owe capital gains taxes.  By gifting these assets (instead of selling them and giving the cash), you are able to give more because the charity will not have to pay capital gains tax when they sell the appreciated assets. 

(Note: While you can certainly make these gifts without assistance, you may wish to speak with a tax professional to make sure you maximize your tax savings from such gifts.) 

Regardless of which method you choose, I suggest you let your charity know a gift from you is coming. Not only will it allow them to plan better, but it will also encourage them more than you know. 

 

Have questions about how you leave your legacy with planned giving? Contact us today.

 

Joshua E. Hummer, Esq. is a licensed attorney in both Virginia and West Virginia. He is a graduate of the University of Virginia and has been practicing law for over 15 years. Josh specializes in estate planning and estate administration, elder care, and business law. He is co-author of the recently published book, “Fearless: Facing the Future Confidently with Relational Estate Planning”, and is passionate about helping others form end-of-life plans that benefit their loved ones and leave their legacy behind. Outside of work, Josh loves spending time with his lovely wife and their four vibrant children, reading, and traveling.