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Leaving a gift to charity allows individuals to pass on a legacy and support a cause they value. By doing so through a provision in a Last Will and Testament (will), individuals can fund a noble cause and reduce the taxable value of their estate. However, properly leaving a gift to charity in your will requires careful consideration and planning according to the applicable estate laws. For help answering your questions about leaving a gift to charity in your will, consider contacting an experienced estate planning attorney at Roulet Law Firm, P.A., by calling our Minnetonka, MN office at (763) 420-5087 or our Venice, FL office at (941) 909-4644.

What Are the Benefits of Leaving a Gift to Charity in Your Will?

There are many benefits to leaving a gift to charity in a will. It is an excellent opportunity to promote positive change in the world. Likewise, in some cases, giving a gift to charity reduces an estate’s overall tax burden, which means the person’s money goes further.

Reducing the Estate’s Overall Tax Burden

Under the current Internal Revenue Service regulations, testamentary gifts to qualified charities are generally not taxable. A testamentary gift is one that someone gives through a will (i.e., their Last Will and Testament). Qualified charities meet the requirements for a tax-exempt entity under Internal Revenue Code 501(c)(3).

Along with other types of transfers, testamentary gifts made to charity reduce the estate’s overall tax burden by decreasing the taxable value of the estate. In other words, the IRS deducts contributions made to charities from the estate’s total value, resulting in less taxable income.

Supporting a Charity by Leaving a Legacy Gift

In addition to the tax benefits, leaving a gift to charity in a will is a way to support a charity someone values and helps ensure their legacy lives on. For example, a cancer survivor may want to leave a charitable gift to a cancer foundation to help fund research to treat and cure cancer.

What Different Methods Can Someone Use to Leave a Gift to a Charity in a Will?

Individuals can use many different methods to pass on a gift to a charity of their choosing. For example, they might create a testamentary trust, fund a living trust, or pass on an outright donation.

Create a Testamentary Trust

One method for transferring a gift to a charity upon one’s death is to create a testamentary trust. This type of trust is designed by putting the instructions establishing the trust in someone’s will before they pass away. Those who elect to use this method can add language to their will that creates a trust when they pass away, names the charity as the beneficiary, and describes the assets that will be used to fund the trust.

By establishing a trust (as opposed to giving an outright gift), the individual can create a framework where the trustee invests the money and gradually pays out proceeds to the charity. A strategy such as this can help make the gift go further than if the executor of the will wrote a check and gave it to the charity.

Fund a Living Trust

A living or inter vivos trust owns assets, just like a person, and pays out proceeds per the instructions detailed by the settlor (the person who created the trust). Wealthy individuals may find it beneficial to use living trusts because it has the potential to decrease their tax burden.

Instead of creating a new trust in their will that begins to exist after they die, they can write a provision that transfers assets to a living or already-existing trust. If they choose this approach, they can name as a beneficiary their preferred charity and give instructions about when and how the charity receives income from the trust.

Make an Outright Donation

Finally, another method for giving a gift to charity in a will is to make an outright donation, such as cash or other assets. Under this paradigm, the charity receives the entire gift all at once rather than in installments. While it does not have the growth potential of the other options, a benefit of this gift is that it is simple and does not require ongoing maintenance.

An estate planning attorney can help you determine the best method for leaving a gift to charity in your will. Consider contacting the experienced attorneys at Roulet Law Firm, P.A.

How to Leave a Gift to Charity in a Will

Supporting charities by putting a gift in a will has the potential to help further significant humanitarian causes and foster change. It is essential to think and prepare carefully when creating a plan to leave a gift to a charity in a will. Considerations about doing so include:

  • Doing sufficient research,
  • Determining the type of gift,
  • Putting it in writing, and
  • Notifying the charity.

Research Charities

With over 1.54 million charities in the United States in 2019 (according to the National Philanthropic Trust), there are many charities to choose from, all with different goals, purposes, and internal structures. Before finalizing estate planning documents, research the various charities in the United States to find one that is a good fit.

When browsing charities, consider their status with the IRS (e.g., whether they regularly meet their requirements under IRC 501(c)(3)) and how they use donations. Some organizations publish the percentage of each contribution that directly supports the cause and how much is used for administrative purposes (like salaries).

Determine the Type of Gift to Leave

Next, determine the type of gift to leave to the charity. This includes the legal framework of the contribution (a trust or outright donation) and the asset itself. For example, some people may donate money, while others wish to donate investments or tangible property, such as a house or furniture. Another option available to most is to pass on a blended gift that includes a combination of different types of assets.

Put the Gift in Writing

Putting the gift in writing is also essential to properly document the individual’s plans. If the will or valid testamentary document does not include the charitable contribution, the charity may not receive the donation as the person intended.

Inform the Charity About the Gift

Make sure to notify the charity that they are a beneficiary in a will. Doing so helps put them on notice and can inform their future planning. The individual making the gift can also take this time to talk to the charity about how they will use the donation, which can benefit all involved.

An Experienced Estate Planning Attorney Can Help With Your Charitable Giving

Charities do impressive work for people, such as fueling the fight against cancer, helping to feed hungry children, and housing the homeless. Understanding the steps for how to leave a gift to charity can help ensure that your donation goes to the organization of your choice according to your instructions when you pass away. For legal help with leaving a gift to a charity in your will, consider scheduling a consultation with Roulet Law Firm, P.A. by calling our Minnetonka, Minnesota office at (763) 420-5087 or our Venice, Florida office at (941) 909-4644.

And if you would like to learn how to make it as easy and inexpensive as possible for your family to manage your affairs in the event anything ever happened to you, while ensuring your assets go to whom you want, and how you want, Click Here to Register for my FREE online masterclass.

Chuck Roulet
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Nationally Recognized Estate Planning Attorney, Author, and Speaker
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