How to Leave Money to a Charity After You Pass Away
15 Jul How to Leave Money to a Charity After You Pass Away
Posted at 08:52h
in Giving Back
Do you want to leave a lasting legacy and continue to make a difference after you’re gone? If you’re passionate about a cause and want to support it even after you pass away, there are several ways to leave money to a charity. You can set up a charitable trust, designate a charity as one of your beneficiaries, or make a bequest in your will. We explain how each of these processes works, and how you can make sure your wishes will be fulfilled.
The Three Best Ways to Leave Money to Charity
1: Charitable Trusts
Setting up a charitable trust is usually the best way to leave money to a charity. Like any type of trust, a charitable trust will avoid probate. This can be a long, expensive process, so if you want to make sure that your cause gets the biggest donation possible, it’s important to create an estate plan that stays out of court.
A charitable trust is a legal entity that allows you to set aside assets for charitable purposes during your lifetime. How the assets are distributed depends on the type of charitable trust.
- A Charitable Remainder Trust (CRT) provides income to you or your beneficiaries for a specified period of time, with the remainder going to the charity afterward. It can provide tax benefits and a seedy income stream.
- A Charitable Lead Trust (CLT) provides income to the charity for a specified period, with the remaining assets passing to your beneficiaries after the period is over. This type of trust can reduce gift and estate taxes.
2: Beneficiary Designations
Certain assets, such as retirement accounts, life insurance policies, and payable-on-death accounts, allow you to name a beneficiary who will immediately receive the funds after your death. The beneficiary doesn’t have to be a person—you can name a charitable organization as your beneficiary, or you can name a charitable trust. This process is very simple, as it typically only involves filling out a beneficiary designation form for the account.
3: Bequests in Your Will
Another way to leave money to charity is through a bequest in your will. You’ll need to clearly identify the charity you wish to support by using its full name. If possible, you should also include a registered charity number (similar to a tax ID) to avoid any confusion. You’ll also need to state whether you wish to leave them a specific sum, or a percentage of your estate.
Tips for Planning Your Charitable Giving
Consult an Estate Planning Professional
Working with an experienced estate planning attorney will ensure that your charitable plans are legally sound and tax-efficient. DIY estate planning can easily result in errors that make your documents invalid, and might even prevent your wishes from being carried out as you intended.
Communicate Your Wishes
Let your family know about your final wishes ahead of time. This will help prevent misunderstandings and family disputes. You might also want to notify the charity you plan to benefit. They can give you specific information that will help the executor of your estate process your donation.
Review and Update Your Plan
It’s important to regularly review and update your estate plan every few years or after a major life event. If estate planning laws change or your desired charity shuts down, your estate plan will need to change as well.
Estate Planning Attorney in Mesa, Arizona
Leaving money to a charity in your estate plan is a meaningful way to support the causes you care about. By understanding your options and planning carefully, you can ensure that your legacy makes a lasting impact.
If you would like to create an estate plan that includes charitable giving, we can help! The lawyers at Phelps LaClair have been helping Arizona residents create impactful and successful estate plans for over 40 years. Give us a call at 480-892-2488 today to schedule a free consultation at our Mesa office or another convenient location near you.
Photo by Katt Yukawa on Unsplash used with permission under the Creative Commons License for Commercial Use 7/15/24.
