According to a new report, charitable giving as an aspect of creating an estate plan has changed in recent years. Previously, wealthy citizens established a charitable foundation or trust as a means of reducing estate taxes and leaving behind a lasting legacy. Today, however, experts in philanthropy suggest that these “perpetual gifts” are no longer an effective way to give to society.
Long-Term Charitable Trusts May Be Unsustainable
Malcolm Burrows, head of philanthropic advisory services at the Bank of Nova Scotia’s Private Client Group, states that long-term charitable trusts and foundations are unsustainable. He feels that they create an unjustifiable burden on the trustees of the trusts and on the organizations. Similarly, some estate planning attorneys point out that trusts set up to go on in perpetuity generate relatively small payouts.
Donors Are Becoming Actively Involved
Today, Marvi Ricker, vice-president and managing director of philanthropic services at BMO Harris Private Banking, states that the manner in which people are giving is changing. He notes that donors are becoming more actively involved in the process—making decisions about how best to direct their funds so that they have maximum impact. He also points out that more people are choosing to donate while they are still alive, rather than waiting until after they have passed away. With the right estate plan in place, an individual can have the satisfaction of charitable giving as well as the various tax benefits.
Charitable Giving Is Not Just for the Rich
Charitable giving as part of an estate plan is not just for the wealthy. Middle-class families can create a plan that incorporates a bequest of a certain amount of their estate to the charity of their choice. If circumstances change and they need to use that money for other purposes, they can make a simple modification to their estate plan. This allows them to take advantage of certain tax benefits and satisfy their philanthropy goals, while still providing the required flexibility.
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