Doing Good After You’ve Gone: Charitable Trusts and Gifts by Will

A person’s response to the question, “What do you want done with your stuff after you’ve gone?” is likely to change throughout the years.

It’s natural—especially in early adulthood—for the only thought to be for the wellbeing of one’s young family. And that’s totally admirable and understandable. It’s important to make sure to provide for a spouse and minor children in case one dies unexpectedly at an early age.

Years later, the focus may shift a little. The children have grown, have established their own careers, and are now raising their own families. The future survival of your family is no longer in doubt, so it may no longer be necessary to make that the singular goal of your estate plans. Sure, you will still leave inheritance to those close to you, but you are now also free to consider donating to causes that have been dear to you for a very long time.

This is the time to think about charitable giving as part of your estate plan.

Who Deserves a Share of Your Good Fortune?

This is not to suggest that you scatter your assets impulsively to anyone who may knock on your door with hat in hand. You will get the most satisfaction from giving to a recognized organization identified with a cause close to your heart. Many of our clients have longstanding relationships with particular charities. These societies, agencies, and other groups have included…

  • Colleges, universities, and other educational institutions
  • Museums, libraries, performing arts groups, and other cultural organizations
  • Medical or scientific research facilities
  • Public health organizations
  • Social service agencies
  • Pet rescue, animal welfare, and service animal organizations
  • Missionary groups, churches, synagogues, temples, and other religious institutions
  • Disaster-relief and humanitarian organizations
  • World affairs agencies and non-governmental organizations
  • Political parties and advocacy groups
  • Journalism centers and small-press magazines or newspapers

In other cases, clients have come to us wishing to support a particular cause, but have no commitment to a specific organization. In those cases, we can help a client find an agency with goals that align to his or her preferences. The BBB Wise Giving Alliance, operated by the Better Business Bureau network, provides a scorecard for hundreds of charitable groups. The U.S. Internal Revenue Service also has an evaluation system for nonprofit and charitable organizations; choosing one of its approved groups may allow a client to capture significant tax savings.

Wills and Trusts as Vehicles for Charitable Giving

Both wills and trusts can be used to accomplish your charitable ends. They work in very different ways, however, and it’s likely that one will be more suitable for meeting your goals than the other. Each requires careful planning, however, so move forward with one or the other until you have consulted with an experienced estate planning attorney who can provide advice about your particular circumstances.

Making a Charitable Bequest Through Your Will

The provisions of a will only takes effect when you die. The probate process makes sure that an estate is divided according to the provisions of the will once all the deceased person’s debts have been paid; when this happens, the provisions of the will become a matter of public record.

A will can be an effective way to leave a modest gift to a charitable institution. Depending on the receiving institution, the A Closeup of Charity in the Dictionaryvalue of the assets passed on to the charity may be exempt from estate taxes.

Many people will choose to include a specific bequest to charity in their wills. A specific bequest would be a donation of a specific amount of money, or a specific percentage of the whole estate, or a specified item of property.

The alternative to a specific bequest is the residuary bequest. This type of charitable gift will award the charity the remainder of the estate after all other specific bequests have been honored. It’s possible to have multiple residuary legatees—which may be a mixture of organizations or persons—who will divide the remainder of your estate according to any formula you wish.

Using a Trust to Contribute to Charity

The chief virtue of a trust is that it can go into effect as soon as it is created, unlike a will. Also, unlike a will, a trust bypasses the probate system and may remain free from public scrutiny. A final significant difference is that a charitable trust is irrevocable: it cannot be changed once it is established.

The trust will hold the assets assigned to it, under the management of a person or institution (such as a bank) called a trustee. Often, the trust will hold onto the assets—at least for a time—and distribute any income from those assets to specific beneficiaries. Trusts can operate this way forever. However, many trusts are set up to dissolve and distribute their assets to new owners eventually; the triggering event for this could be the death of the trust’s creator, the death of all named beneficiaries, the passage of a certain amount of time, or almost any other provision desired.

Trusts are suitable vehicles for giving charitable donations of any size. Special attention should be given to the charitable remainder trust, the most common form of a charitable trust. This type of trust will hold the assets you provide and distribute the income to you or to another named individual. When the trust is dissolved, those assets pass on to the charitable organization you have selected.

An alternative is the charitable lead trust, which in many ways the mirror image of the remainder trust. In a charitable lead trust, the income from assets you set aside will go to the charity you choose for a fixed period—typically 10 or 20 years. After that time, the assets revert to your control or to your heirs.

Is it Time to Add a Charity Component to Your Estate Plan?

Your values can live on even after you pass away. It’s a straightforward matter to modify your estate plan to include a gift to a charity of your choosing. In fact, the law recognizes charitable giving as a positive development, and often provides tax incentives to encourage it.

If you’re serious about making this commitment to the future but new to estate planning, we recommend that you read our introductory pamphlet, The Ten Things You Must Know Before Creating (or Amending) Your Will or Trust. It can be ordered FREE from this website. You can then follow up with a call to our seasoned attorneys at (714) 459-5481 to learn how we can help you achieve your goals.

 

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm