At least that is what my kids tell me when they ask for money.  I guess I have been a little slack in teaching them the importance of giving to charitable causes.  In looking back on my various topics for Counselor’s Corner, I found also that I have not mentioned charity enough.  In these times of economic uncertainty charities are in more need than ever.  How can you help?  Give now! If you can’t do that at least include a provision for charity as part of your estate plan and here’s how:

1.  The easiest way to provide for charity in your estate plan is to include a bequest in your Will or Living Trust.  You can name one or more charities to receive a specific dollar amount or percentage of your estate.  It is as simple as that.  You can also provide that a specific asset will be distributed to charity at your death, but you should check with the charity first to make sure they can accept that particular asset, especially if it involves real estate.

2.  An even better option is to name charity as a beneficiary on a portion of your retirement assets.  You can list a charity as a beneficiary to receive a certain amount or certain percentage of your IRA or 401k.  Since the charity is a tax exempt entity it will not incur income tax when it receives its share of the retirement asset.  This is a great way to leverage the value in your retirement assets, even if it is at the expense of Uncle Sam.

3.  For clients who desire to provide a substantial gift for charity, they may benefit from the use of a charitable remainder trust (CRT).   A CRT allows you to give an asset to charity while retaining an income stream for life.  The special tax treatment of a CRT allows the donor to make a gift of low cost basis assets, which can be sold without incurrence of an immediate capital gain tax; the tax liability is recognized only as the funds are distributed to the life beneficiaries (similar to qualified retirement assets).  This provides the donor a tax efficient option to diversify a large asset  holding.  The donor also benefits from an income tax deduction for a portion of the value of the assets transferred to the CRT.  There are many variations for the CRT which are beyond this short description, but it is something to consider if you intend to include charity as a major beneficiary of your estate.

Important:  If you are naming a charity make sure that the charity qualifies as a §501(c)(3) organization.  That designation will ensure that your charitable gift will not be subject to estate tax or income tax.  Many nonprofits such as service organizations (Kiwanis, Lions Club etc.) are not qualified as a §501(c)(3) but they may have a related foundation that is which can receive your gift.


Goodness is the only investment that never fails

     — Thoreau