Many people want to do some good with the money that they have accrued over their lives. For some, the best way to accomplish this is to donate a portion or even all of their estate to charity. However, planning how to handle your estate is notoriously complex. There are many things to consider and, as the process concerns money, property, and taxes, you'll most likely want to consult with a legal firm specializing in estate law. In this manner, you can ensure that everything goes smoothly when the time comes and all funds go exactly where you want them to. Here are some basics that you need to know about donating part or all of your estate to charity.
Deciding What and to Whom to Donate
The first thing you'll need to decide is who to designate as your beneficiaries. Those without children or close family are most likely to want to donate their whole estates to charity; some people may also choose this option if their children are grown and financially well off. However, the most common practice is to divide the estate between children or other family and charity. Take a look at what you will have and decide who would most benefit from it. For instance, if you have a home, your children might want it, but money might be the most desirable option for your charity of choice.
You'll also want to consider any final costs when deciding on how much to allocate towards Doctors Without Borders or your local AWA. You can avoid passing a burden on to your children from the costs of final services and arrangements by planning ahead and putting funds aside. Charitable donations also have the added benefit of lessening the tax burden placed on your children's inheritance, allowing them to keep more of the money and property that they do get.
How to Donate
Once you have determined how much to leave to relatives in order to keep them comfortable, and how much and where you want to donate, you'll need to find the best way to go about this process. A great deal of this will depend largely on how much exactly you have and are bequeathing, and where the greatest tax benefit lies. Nonetheless, here is a quick rundown of some of the major ways to donate.
- Leave it in Your Will – The first and most obvious move is to leave the money to the organization of your choice in the will itself. This is the simplest to arrange, and ensures that the executor will honor your requests. If you don't at least do this, the money will be simply handed to whoever would legally inherit it. If you trust that person to carry out your wishes, this may not be a problem, but putting it in the will can secure the money for the purpose that you designate. You will also get a tax write-off for the donation.
- Name the Charity as the Beneficiary of Your Retirement Account – Rather than simply giving a certain amount to them, you can name a charity as the beneficiary of your retirement account. This means that the funds will not count towards your taxable estate, saving your heirs money. The organization won't be taxed for it either, so they will have more to work with once they receive the funds after probate.
- Create a Charitable Trust– A charitable trust offers a number of advantages. Like the aforementioned options, it decreases the tax burden associated with the remaining funds, but it has the distinct advantage of not being subject to probate. This means that the funds can be distributed to the charity immediately, without the six month to two year wait that they might otherwise go through. Also, as trusts are not part of public record, they can be kept private. Trusts don't have to just include money, either – they can contain stocks, property, bonds, etc. With a Charitable lead trust, you can put some money towards a charity, and the rest towards your beneficiaries; with a Charitable Remainder Trust, you can actually receive some income from the trust and then allocate the rest towards charity after a certain period.
These are just some of the most common methods of giving to charity through your estate. If you would like to explore your options more thoroughly and consult with an expert, contact us at Catanese & Wells. We have the knowledge and experience to determine which course of action would be most beneficial for you!