A Comprehensive Guide for Donors Considering Leaving a General Bequest to Charity
Are you considering creating a lasting legacy by leaving a bequest to your favorite charity? This comprehensive guide will help you navigate this significant philanthropic journey with confidence and clarity.
Bequests—gifts that you designate in your will—are a powerful way to ensure your legacy lives on. They’re an integral part of planned giving and can be a lasting statement of your generosity and foresight. This guide is designed to provide you with vital information if you’re considering leaving a general bequest to charity.
Overview of Charitable Bequests
A bequest is a gift that you leave to a charity in your will or trust. These gifts are typically made as part of an estate plan and can take various forms, including a specific monetary amount, a percentage of an estate, or specific assets such as stocks or real estate. Bequests are a significant source of income for many charities and play a vital role in funding their work.
Importance and Impact of Bequests
The importance of bequests cannot be overstated. They provide critical support to charities and allow them to continue their important work. Your bequest, large or small, can make a substantial impact, helping a charity to thrive for years to come, fund specific programs, or support their mission in a general way.
Types of Charitable Bequests
1. Specific Bequest: This is when you leave a specific asset, like a piece of real estate, or a set amount of money.
2. Residual Bequest: This involves leaving the remainder of your estate, or a percentage of it, after other bequests and debts have been paid.
3. Contingent Bequest: This takes effect only if a certain event occurs (or doesn’t occur). For example, you might leave a gift to a charity if certain beneficiaries predecease you.
Classification of Legacy Gifts in Estate Planning
In the realm of estate planning, various assets (i.e. stocks, trust funds, life insurance policies) can be apportioned in different manners as per the individual’s preferences and objectives. Each type of asset that one would like to leave as a legacy gift can be bequeathed in a variety of ways (i.e. specific bequest, residual bequest, or contingent bequest) depending on how you structure your estate plan. They don’t necessarily fall into a single category of bequests as the structure of each one largely depends on your personal preferences and estate planning goals.
For instance, these assets could be part of a specific bequest if you specifically name an individual or organization to receive them in your will. If you decide to leave a certain number of shares from a particular company or the proceeds from a specific life insurance policy to a named individual, it would be considered a specific bequest.
Alternatively, these assets could also form part of a residual bequest. After fulfilling all your debts, taxes, and other specific bequests, whatever is left of your estate (which could include stocks, remaining value in trust funds, or proceeds from life insurance policies) could be given as a residual bequest.
Lastly, they could be part of a contingent bequest. For example, you might specify that a particular person will receive your stocks or life insurance proceeds only if they outlive you or meet a certain condition.
Moreover, assets like life insurance policies and trust funds can have designated beneficiaries. In such cases, these assets would not pass through your will but would instead be distributed directly to the beneficiaries you have named in the policy or trust agreement.
In all scenarios, it’s important to remember that giving such assets must be done in accordance with relevant laws and regulations, and with the advice of professionals such as estate attorneys or financial planners to avoid potential legal complications or unintended tax implications.
Leave a Lasting Imprint on Hearts & Souls
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Leave a Lasting Imprint on Hearts & Souls
Let’s Discuss Your Options
The Benefits of Bequests
1. You maintain control of your assets during your lifetime.
The concept of maintaining control of your assets during your lifetime is an essential aspect of financial and estate planning. This ensures you have the financial stability and resources you need to sustain your lifestyle, meet your obligations, and pursue your passions or hobbies. When you maintain control over your assets, you have the flexibility and freedom to decide where your resources are allocated. This extends to significant decisions such as purchasing a new property, investing in business ventures, or supporting causes you believe in. It also grants you the ability to respond to unforeseen circumstances or emergencies that may require substantial financial resources. Thus, controlling your assets is not merely about the ability to use your wealth but also about safeguarding your future and ensuring a comfortable lifestyle.
2. Bequests may provide estate tax benefits.
Estate planning also has the potential to provide significant estate tax benefits through bequests. Bequests are gifts that you leave to others in your will upon your death. By bequeathing portions of your estate to beneficiaries, you can significantly reduce the taxable value of your estate, thereby minimizing the estate tax burden. For instance, charitable bequests are often entirely tax-deductible, allowing you to reduce the value of your estate for tax purposes while still supporting causes or organizations you believe in. This reduction can result in substantial tax savings, ensuring more of your assets are used as per your intentions rather than going towards tax payments.
3. You have the satisfaction of knowing your legacy will support a cause you care about.
Lastly, there’s an emotional satisfaction and peace of mind that comes from knowing your legacy will support a cause you care about. By directing parts of your estate towards these causes, you extend your influence and values beyond your lifetime, making a lasting impact on the world. Whether you choose to support a charity, fund scholarships, or donate to research institutions, your legacy turns into a tangible reflection of your beliefs and passions. This sense of fulfillment transcends material possessions and wealth; it’s about making a difference and leaving the world a little better than you found it. Knowing that your life’s work will continue to bear fruit and positively influence lives can provide a profound sense of satisfaction and contentment. It gives meaning to your accumulated wealth, transforming it from mere numbers on a bank statement into a tool for positive change.
Best Practices for Planning a Bequest
1 Consult Professionals
Engage with a trusted estate planning attorney and tax advisor to help craft your bequest in a way that maximizes tax benefits and ensures your wishes are accurately reflected. These professionals can also provide advice on the best assets to give and how to structure your charitable bequest to best serve both you and the charity of your choice.
2 Speak With Your Charity
Reach out to your charity of choice to discuss your planned bequest. This can ensure your gift aligns with the organization’s needs and future plans. Furthermore, the charity may have specific language to use in your will to ensure the gift is used as intended.
3 Review Regularly
Estate plans should be reviewed periodically, especially following significant life events like marriage, birth of a child, divorce, death of a beneficiary, or substantial change in financial status. This ensures that your estate plan and bequest remain current and continue to reflect your wishes.
Frequently Asked Questions about Charitable Bequests
Can I change my mind if I decide to make a bequest?
Yes, since a bequest is typically made as part of your will, you can change your mind at any time until death by revising your will or trust.
What if I can’t afford to make a donation now?
A bequest is an excellent option if you can’t afford to make a donation during your lifetime. It allows you to support the charity of your choice after your death, using the assets you leave behind.
Do I need to inform the charity if I've included them in my will?
While you’re not legally required to inform a charity about a bequest, doing so can be beneficial. It allows the charity to plan for the future and gives them the chance to thank you for your generosity.
Leaving a bequest to a charity is a meaningful way to create a lasting legacy. By understanding the process, types, and benefits of bequests, you can make an informed decision that aligns with your philanthropic goals and estate planning needs.