Some Americans want to leave a legacy that will outlive them and is wider than just their immediate family members. Charitable giving through estate planning is one of the best ways to do this. But how can you give to charitable entities through your will or other estate documents? And which methods would be best for both you and them? Here's what you need to know about some of the most popular methods.
1. Direct Cash Bequest
Certainly, the simplest means to give to charity in a will is simply to stipulate a dollar amount or liquid cash account that should be distributed to them. It's easy and straightforward. Plus, cash is simple for the charity to receive, manage, and use.
2. Donation of Property
Contributions to a charity don't have to be made in cash. You can leave them assets such as a vehicle, real estate, royalties, or stock. The downside for the charity is that these are often harder to convert to usable funds for their work. However, the advantage is that it could actually result in a higher donation through things like appreciation and tax basis.
3. A Community Foundation
If you want to leave a larger bequest with a more wide-reaching legacy, consider starting a foundation. Foundations fund charitable activities through financial gifts rather than doing the charitable work themselves. You can set up a foundation that lets you start making donations during your lifetime and/or pass control of it on to your heirs for long-term continuation.
4. Life Insurance Policy
Even if you don't have a large estate, you can make a difference for a charitable cause by making them a beneficiary of your life insurance policy. They can be the sole beneficiary or one of multiple. As a bonus, life insurance funds pass on to beneficiaries directly and don't have to go through the lengthy probate process.
5. Charitable Remainder Trust
Trusts are great estate planning tools both for tax reduction and to pass on assets smoothly and privately. A charitable remainder trust allows you to receive income or another benefit from certain assets during your lifetime while leaving the actual assets to the charity when you pass. It's a win-win for those who want to keep their asset but ensure it quickly goes to charity when they no longer need it.
Where to Start
Which of these charitable giving methods is right for you? To learn more, contact an estate planning lawyer.