Legacy Gifts: How to Leave a Gift to Charity

You do not have to be a millionaire or billionaire to give money to charity. A government survey indicated that the lower-income donate more per capita than those in higher salary ranges.

Many people choose to create a legacy gift to a charity such as Esperança. In fact, GivingUSA reported that in 2018, at least 9% of total donations to charity were gifts made at the time of someone's death. The survey also listed the importance of the cause and the impact the charity makes as two of the main reasons people made planned gifts.

So What Is a Legacy Gift?

A legacy gift is a future gift that gets made to pass assets from you to a nonprofit of your choice. Usually, these gifts transfer at the time of your passing, but there are options that can transfer funds during your lifetime.

Many people live their life hoping to leave behind a reputation as someone who lived in a positive way. Legacy gifts are a great way to continue to support the causes and values that have mattered to you throughout your life. This type of gift can also help ensure your personal legacy continues to live on.

Planned giving at the end of your life allows you to retain assets in case you need them. Legacy gifts such as endowments also help ensure the charities that matter to you and that you believe in can continue on doing good work.

There are several ways to create a legacy gift. You can include one or all of the following options in your future gift plans.

Create a Charitable Trust

A charitable trust is an irrevocable fund that gets created for a charitable purpose. Normally this is done by listing one or more charitable organizations as a beneficiary.

The creation of a charitable trust can result in a charitable tax deduction for the creator of the trust. To do so, the listed charity must be a qualified 501(c)3 organization, such as Esperança.

A charitable trust can distribute assets to the charity in two ways, as the lead beneficiary or the remainder beneficiary.

If you choose to name the charity as the lead beneficiary, the charity will receive the gift you have designated. If there is anything left over, the remainder will go to your beneficiaries in the manner you designate.

If you choose to name the charity as a remainder beneficiary, the lead beneficiaries will receive the assets you have gifted first. Since charitable trusts can get created while you are alive, you can list yourself as the lead beneficiary. You can then list other beneficiaries who can receive under the trust after you die. The remainder, if any, then gets distributed to the charitable organization you named in the trust.

List Charity as an IRA Beneficiary

Another way to leave a charitable gift is by listing an organization as a beneficiary on your individual retirement account (IRA). This can get done by providing the plan administrator or financial institute who manages your IRA with a beneficiary designation. Married people may need to have their spouse sign the designation as well.

Providing a copy of the designation to the person you have designated to handle your estate, such as the trustee of your trust, will ensure the process runs smoother when the time comes.

Remember to keep a copy of the beneficiary designation with the original and copies of your will and trust.

Name a Charity in Your Will

Similar to a charitable trust, you can also name a charity as a beneficiary in your will. Since a will is usually less expensive to have written and people can choose to write a will themself, this is a popular option.

In a will, a charity can get named to receive a stated sum of money or a percentage of the estate. The charity can also be listed to receive specific assets.

Charities can also be listed as a remainder beneficiary in a will. This means they will receive whatever remains after distributing assets to other beneficiaries, paying your debts, taxes, and other expenses to wrap up your estate.

Name Charity as Beneficiary on Life Insurance Policy

Naming a charity as a beneficiary on a life insurance policy is similar to naming them on an IRA. A charity can get listed on an existing policy or you can make the charity the owner and beneficiary of a new or existing policy.

Listing a charity on your existing life insurance policy may not help lower your taxes, but it can lower your estate's taxes after your death. If you opt to make the charity the owner of the life insurance policy, you may be able to lower your taxes during your lifetime.

Create a Charitable Gift Annuity

A charitable gift annuity can get created by entering into a contract with the charity. Normally, the donor gives the charity a sizeable amount of assets (money, stocks, and/or real property). The gift is then invested or held while it generates income or profits.

While you live, the income or profits get returned to you at designated times throughout the year. Once you pass, the charity retains ownership of the assets and any income or profits the assets generate.

Ready to take the next step in gift planning?

It is easy to have good intentions about making a legacy gift. But taking action to put those intentions in place is what provides the help a charity needs. Only having the gift in place will ensure they can meet the goals a charity lists in their mission statement.

Get your free estate planning guide here.

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