As you work to prepare your estate plan and determine where your money will go, you may be considering leaving a portion of your savings to a charity. There are numerous ways to include a gift in your will or trust, but the process can be confusing. Understanding each option may help you to navigate the process.
What Is a Bequest?
A bequest is a simple, direct way to make a charitable donation. This is a flexible option that allows you to change the recipient or adjust the size of your donation at any time. A bequest also allows you to specify what the charitable organization should do with your gift.
A bequest reduces the ultimate size of your estate, thus reducing the total amount subject to taxes. A disadvantage to making a bequest is that you will not be able to claim a tax deduction on your donation, because it will only be effective after your death.
Make the Charity the Beneficiary of Your Retirement Plan
There are additional ways to leave money to a charity at the end of your life, and some of them do not include your will at all. The first of these options is a retirement plan. Rather than listing a family member as the beneficiary on your retirement plan, you can list a charity. This type of gift is tax deductible, and the charitable organization will not be required to pay income tax on the money it receives. An additional benefit to this option is the lack of a probate period – the charity will not have to wait to receive your gift, and there are no excessive fees involved.
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This is an ideal option for people who may be concerned about having an income through the last weeks of life, but still want to leave a large sum to a charity. This requires setting up an irrevocable trust, transferring your assets to it, and having the trust pay your income. The money remaining at the conclusion of the trust’s term, or your death, will be given to the charity.
Consider a Charitable Lead Trust
You can arrange to pay an income to the charitable organization of your choice after your death. By setting up a charitable lead trust, you will specify the amount of the income and the length of the period during which the charity will receive this income. When that period concludes, your heir or heirs will receive the trust’s principal amount.
Estate planning can be complex and certainly feel overwhelming. Speak to a qualified elder law attorney who can help you navigate the process and protect your interests.
Find out more about more about estate planning by speaking with a knowledgeable lawyer from Bratton Law. Call our office today for a consultation.