Providing college scholarships. Saving the rainforest. Helping veterans get back on their feet. Few people would disagree that giving to charities is a worthy endeavor. In 2015, Americans gave almost $350 billion to registered 503(c)(3) charities.1 The US government even encourages charitable giving by providing tax incentives.
While the traditional means of giving are via cash, volunteering, and donating physical items, there are also ways to leave your money to charitable organizations after you pass away. These options can benefit your family and your favorite cause in the future.
Here is some helpful information about ways that you may not have considered to leave money to charities while shaping your legacy.
One of the simplest ways of giving money to charities is to leave a percentage of the funds you put aside in your retirement account to specified organizations. You can do this by naming them in your beneficiary designation for the account. This option doesn’t require extensive legal fees, and you may be able to exclude the donated assets from your taxable estate to reduce the estate tax burden after you’re gone. The charity will receive the full market value of your gift, and your estate may also receive an income tax deduction when you pass away.2
There are a variety of ways to use your life insurance as a charitable gift. You can name the charity, or charities, as a beneficiary of your life insurance policy. You can gift an existing life insurance policy and any cash value in that policy, to charity. Additionally, the charity may be able to use your donations to purchase a life insurance policy on you, so they will receive the benefit when you pass away. It’s important to consult with the charitable organization to ensure the details of the policies are in place.
Charitable Lead Trusts
If you have a considerable amount of money that you’d like to leave to charity, consider setting up a trust. A Charitable Lead Trust is a common arrangement where money or property is contributed to a trust when you pass away, but a stream of income is provided to your favorite charity for a period of years. The remainder of the trust assets - after the term of agreed upon years has expired - is distributed to your heirs. Depending upon the design of the trust, the amount of money that is given to the charity each year may be a fixed amount or rise and fall with the value of the trust assets. Trusts can be complicated, and establishing one will require an attorney familiar with charitable giving and estate planning.
If you want to find the best way to get your resources to your favorite causes it is best to consult with a financial professional. You may discover some options that can help you give more to the charity while doing more for your heirs, and that ensure that your good will is helping the world for years to come.
1The Giving Institute, “Giving USA 2015 Press Release,” GivingInsitute.org, June 16, 2015.
2,4Shelly Schwartz, “Donations: The gift that keeps on giving for donors,” Advisor Insight, CNBCNews, July 16, 2015.
3Guardian Life, “The Ripple Effect of Charitable Giving,”, Guardian Life.com, 2015