Who's leaving what Charity givers: 8 percent of Americans designate a charitable gift in their will or estate plan. Bequests are tops: Nearly...
A small but growing number of Americans are finding both personal and financial advantages to charitable giving as part of retirement and estate plans.
Here’s a look at three.
Who’s leaving what
Charity givers: 8 percent of Americans designate a charitable gift in their will or estate plan.
Bequests are tops: Nearly 75 percent of those who give to charity after death make bequests, a number growing in recent years.
Not a lot of will: 42 percent of American adults report having a will and/or estate plan.
Sources: National Council on Planned Giving; Giving USA; survey by lawyers.com, online attorney directory
Why you need a will
“If you don’t have a will when you die, the state of Washington gets to decide” what happens with your estate, says lawyers.com’s legal editor Alan Kopit. “It’s an absolute myth that age or amount of assets should be the central impetus for making an estate plan. Even a single, young person with modest possessions may want to control where his or her assets end up.”
Giving it away
Adding a charity to a retirement or estate plan typically involves choosing from among about 10 popular ways of designating gifts; here are four of the most common. Potential donors should consult financial experts about details and varying tax implications.
What it is: Direct gift of cash or assets (such as real estate, cars, stock) from an estate upon death, through a will or revocable living trust. Most common form of estate giving.
Advantages: Anyone can leave bequests, including those of modest means. For the wealthy there can be estate-tax benefits. Changeable by revising a will.
Caution: No tax benefits during life.
Typically suites: All ages and income brackets; those who feel a need to hang onto assets during their lifetime.
GIFT OF APPRECIATED PROPERTY*
What it is: Direct donation, during one’s lifetime, of asset that has gone up in value after having been owned for longer than a year. Real estate and many securities and mutual funds qualify; art work, collectible cars or other tangible investments may also.
Advantages: Tax deduction for full value of the donation and no tax owed on the increase in value. Often very easy to arrange.
Caution: Must donate asset — not proceeds from its sale.
Typically suites: Those who have assets they can afford to give away.
IRA/QUALIFIED RETIREMENT PLAN
What it is: Funds from Individual Retirement Accounts or 401(k) and 403(b) plans directed to charity upon death.
Advantages: Similar to bequest, but change requires only switching designation on a financial form (not a will); charities pay no tax on income that builds in such plans.
Caution: Not appealing to give during life because donors are taxed on the money (though Congress may yet act to change); at best, charitable deduction might offset extra income.
Typically suites: All ages and income brackets.
What it is: Gift (such as cash, stock or other property) to a charity in return for regular payments lasting for donor’s or donor’s and spouse’s lifetime.
Advantages: Substantial income-tax deduction. Fixed payments for life are favorably taxed; typically installments equal about 6 percent to 11 percent of donation. While commercial annuities pay more, allowable tax deduction can lessen the difference.
Caution: Most charities require minimum contribution of $5,000 to $10,000. Only a limited number of charities issue gift annuities.
Typically suites: Donors at least in 60s, but especially 70s-plus because payments are higher the older the donor is at start of gift.
Source: Bill Zook, executive vice president for Seattle’s Planned Giving Services, consultants to nonprofit organizations, donors and their advisers.
*The financial phrase for this is “long-term appreciated capital asset.”
AARP: Comprehensive estate-planning information. www.aarp.org/estate_planning
American Council on Gift Annuities: Nonprofit organization providing information about gift annuities and other planned gifts, as well as other services to American charities. www.acga-web.org or 317-269-6271
Better Business Bureau: Organization includes reports on charities. www.bbb.com
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Estate Planning Council of Seattle: Estate-tax planning strategies, wills, trusts and more, from a council that includes local attorneys, CPAs, trust officers, insurance professionals, financial planners and planned-giving experts. www.epcseattle.org or 206-285-4066
GuideStar: Online database allows users to search more than 620,000 nonprofit organizations by name, subject and more. www.guidestar.org/
Lawyers.com: Basic online information about preparing a will, trust and estate planning, with a link to estate-planning attorneys in the area. www.lawyers.com
Leave a Legacy of Western Washington: Local and national resources for starting or improving a personal planned-giving program. www.leavelegacy.org, 206-285-6237 or 800-682-0090
Planned Giving Design Center: National network hosted by profit and nonprofit groups, providing current information on charitable taxation and planned giving. www.pgdc.com or 704-849-0731
NewTithing Group: “How to Assess Nonprofit Accessibility,” and other resources from this nonprofit group and private foundation help donors calculate how much they can afford to contribute to charity. www.newtithing.org or 415-274-2765
Washington State Bar Association: referrals and general information. www.wsba.org or 800-945-WSBA (9722)
Women’s Philanthropy Institute: Charitable-giving resource for women and those who counsel women as donors. www.women-philanthropy.org or 317-274-4200