Planting a garden or investing in a home requires us to look to the future and consider possibilities. In the world of philanthropy, we often remind donors to consider ongoing support for the causes they care about. Planned or legacy giving simply means planning now to leave a gift after your lifetime and it is often easier than you think.
Consider giving through your will. A bequest is the simplest way for many donors to make gifts to their favorite charity and reduce the federal estate tax due at the donor’s passing. If you find it difficult to determine what size donation makes sense, consider directing a percentage or even the remainder or residual of your estate to your designated charity in your will. Bequests offer both flexibility (you can change your mind at any time) and versatility (gifts can be a specific item, a specific dollar amount or a percentage of your estate and can even be contingent upon a certain event).
Or use your life insurance policy or all or part of your IRA/retirement plan to make a charitable gift. Name your favorite charity as a beneficiary or as a partial beneficiary of your insurance policy, 401(k) or IRA. You don’t part with a single penny today – and you protect your estate from taxes later. A simple change of beneficiary form will allow you to direct these charitable gifts and, in most cases, you can download the form easily from your plan administrator’s website.
Consider receiving income now to help a charity in the future. With a charitable gift annuity, you can make a gift of cash or appreciated assets to purchase an annuity, which, in turn, provides you with fixed payments for life and an immediate tax deduction. After your lifetime, the remaining amount of your annuity goes directly to your designated charity. With a charitable remainder trust, you use cash or appreciated assets to fund a charitable trust and decide on the size of the payments (within IRS limits) to yourself and/or others you choose. The trust assets remaining at the end of the beneficiary’s lifetime go to his or her designated charity. You can provide cash flow now and receive numerous tax advantages.
Perhaps you’d like to help a favorite charity now and leave money to your heirs. A charitable lead trust can support the causes you care about while also taking care of specific individuals. You can use cash or appreciated assets to establish the trust, which will make periodic payments to your designated charity. At the end of the trust’s specified time period, the remaining assets will be distributed to the individual(s) of your choice. A charitable lead trust allows you to transfer assets to your heirs at a reduced gift and estate tax cost because the assets in the trust are removed from your taxable estate.
The reality is, just as a vibrant spring garden or quality home improvement project requires planning, long-term, impactful philanthropy relies upon some form of planned giving.
Kristen Beall Barnes, Ed.D., is the president and CEO at Kern Community Foundation. Contact her at Kristen@kernfoundation.org or 616-2601. The views expressed in this column are her own.