Leave a legacy: Use planned giving to control wealth now and give to charity after you’re gone

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For those with philanthropic interests, charitable giving can be beneficial to the charity and to you as the donor. In today’s tenuous world, everywhere we turn in our country, a fire, flood, landslide or other disaster is leaving families homeless. Youth are avoiding higher education because of the cost. Disease is breaking apart families. Houses of worship are facing financial straits. Needs seem endless.

Making contributions everywhere is impossible, but did you know that with a planned giving strategy you can donate beyond your lifetime to causes that matter most to you?

People who want to give to charity but fear running out of money have options. If you are resisting giving now because you worry about needing cash, planned giving is a way to act on your interests. Planned giving can fulfill your wishes after your death while potentially receiving benefits during your lifetime — and you can still leave money to family or friends.

What if you do not feel you have the cash to donate, even post-death? You are not alone — 93% of American wealth is held in noncash assets. These types of assets include retirement investments, real estate, life insurance and privately held stock.

With some well-informed planning, however, these assets can be donated to a charity, while possibly generating additional income, receiving an income tax deduction, avoiding capital-gains taxes and saving on estate taxes.

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First, understand your options

“Planned giving should be a thoughtful process that allows someone to ponder their philanthropic passions, while considering the needs of loved ones,” said David Chadwick, a member of the gift planning team at the University of Colorado.

A variety of planned giving strategies exist, such as designating a charity through a bequest in your will or as a beneficiary to a retirement account, a life insurance policy, a charitable trust or a gift annuity.

You will likely read and hear a lot about more complex structures such as charitable gift annuities (CGA), charitable remainder unitrusts and annuity trusts (CRUT and CRAT), charitable lead annuity trusts (CLAT), among others, but do not get lost in the acronyms. The specific planned giving vehicle can be determined once you have decided on your goals. The bottom line is knowing you can give in many diverse forms and ways.

Plus: I want to give over $600,000 to my adult children. How do I ensure they don’t lose that money in the event they divorce?

Second, be realistic about giving

Cash is not “king” when it comes to supporting worthy causes. Stocks, mutual funds, real estate and retirement assets are also commonly accepted donations. Other more complex assets like life insurance and closely held business interests can be donated as well, even post-life.

With a broad range of your assets available to donate to charity, review what your expected financial needs are today and until the anticipated end of life. What income do you need annually? Are you preparing to sell a privately held business and would benefit from a tax deduction and avoidance of capital gains? Do you have a highly appreciated stock? Are you willing to part with real estate but not its income?

Once you have answers to these questions along with the details of your financial life, the potential assets and vehicles for gifting will become clear. You always get to decide what and when to give with planned giving.

Third, work with qualified experts

Your lawyer and tax professional can offer solutions and options that best serve your tax situation and assets.

“Donors with philanthropic intent can benefit at both the income and the estate-tax level,” Chadwick said. “Some of the most effective giving is made with highly appreciated assets if those assets are not needed.”

One man told his lawyer he wanted his home to go to a housing charity. He showed his estate plan to his certified financial planner, who read it carefully. That charitable point was nowhere in the plan documents. When shown the discrepancy, the lawyer responded that “his executor could take care of that” and “it is easier this way.” The gentleman got a new lawyer.

A good lawyer follows your wishes and offers perspective, but you have to read the documents before you sign them. Verify what you are signing.

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Fourth, involve charities you choose

Being transparent with your plan will allow you to work with the charity’s staff to fully understand that your wishes and the charity’s needs can be met.

“Non-cash assets like a limited liability company or some other closely held business interest may feel like the right thing to give, but Chadwick said, “charities usually have guidelines and policies detailing what can be accepted based on the resources and expertise available to evaluate and manage the proposed gifts.”

Ruth Henry, the senior philanthropic adviser at Vermont Community Foundation, adds, “Plus, the donor wants to be sure the organization can fulfill their intentions.”

A charity may be restricted in how it distributes the money flowing through its doors. You want to be sure your charitable mission is possible. In addition, charities may have pre-existing strategies to improve upon your ideas.

Henry encourages working with a philanthropic adviser whose expertise can ease the way in planning for your bequest. This more holistic approach allows you to work with an expert and develop an estate plan that will benefit a range of the causes you wish to benefit.

The flexibility this approach offers includes the ease of changing charities over time and your adviser’s knowledge of the industry and charitable tools to meet your needs.

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Finally, tell your heirs about your plan

Your philanthropic interests and plans should not be a surprise to family after your death. They need to know why you decided to do this and what the overall process is. Otherwise, if they want to challenge the bequest they can, tying up your assets and reducing the charity’s financial benefit. Numerous donors’ families have been known to challenge bequests after death. Even if you think, “This will never happen to my family,” have this conversation before finalizing any bequest or other planned giving structure.

Donating post-death through one’s estate plan accomplishes three basic goals:

  • Keeps money in your control during your lifetime.

  • Allows your assets to benefit a charity of your choice at your death.

  • Creates a vehicle to save estate taxes for your heirs.

Planned giving is a beneficial way to leave a positive legacy. Giving wisely and strategically is not difficult but does require thought, time and professional assistance. With the right commitment, your donation will benefit others long after you have passed from this world. If you plan now.

C.D. Moriarty, CFP, is a Vermont-based financial speaker, writer and coach. She can be found at MoneyPeace.com. 

This article is reprinted by permission from NextAvenue.org, ©2023 Twin Cities Public Television, Inc. All rights reserved.

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