3 Tips for Leaving a Charitable Legacy

​You’ve worked your whole life to build a career, raise a family and make your mark in your community. You’ve accumulated assets along the way, and now it’s time to think about what will happen to those assets after you pass. While you likely want to leave assets to your children and other loved ones, you may also want to leave a gift that helps a favorite charity or makes a positive impact for others.
 
However, it may not be clear how best to leave that gift. Do you write a check to the charity? Do you put the charity in your will? And how do you ensure that your charitable bequest won’t cause conflict among your loved ones?

Every person’s goals and needs are unique, so there aren’t universal answers to these questions. Charitable giving strategies are just like any other type of financial planning; they have to be customized to meet your objectives and concerns.

However, there are a few good tips that can serve to guide your thinking. Below are a few things to consider as you start the planning process for your legacy:
 
Consider a trust.
If you really want to control when the money is released to the charity and how it is used, consider using one of several types of trusts. You could place certain assets in a trust today and then have them gradually distributed to the charity during your lifetime and upon your death. That way, you could see how the charity puts the gifts to use.
 
You could also place highly appreciated assets in a charitable trust. By gifting those assets, you may be able to reduce your capital gains tax liability. You could also put assets in a trust to be distributed upon your death, but still use them to generate income for yourself while you’re alive.
 
A trust offers a great deal of flexibility and control in managing your charitable plans. An estate planning attorney or financial professional can help you decide what kind of trust is right for you.
 
Think how you want to structure the gift.
There are a couple of different ways to structure a charitable gift. One is by stating a flat gift amount. For example, you may state in your will that you want to leave $100,000 to your favorite charity. That makes the gift certain, so the charity can start thinking about how it will put it to use.
 
However, stating a flat amount could also have some ramifications. Years may pass between the time you set up your planning documents and the time you pass away. Asset values can change quickly. What if the value of your estate declines, but you are still committed to giving a flat amount to charity? That would reduce the amount that is left for your family.
 
An alternate method is to use a residual or percentage approach. Instead of stating a flat amount, you state the percentage of your estate that should be distributed to the charity. For example, if your estate is worth $2 million today and you specify a 10 percent gift, the charity gets $200,000.
 
However, assume that your estate value is cut in half by the time you die. In this case, the estate is worth $1 million, so the charity gets $100,000. Conversely, if the estate has grown to $3 million, the charity would receive $300,000. A residual approach is more fluid, and it protects your family’s share of your legacy.

Communicate your plans.
Finally, make sure you share your plans with your loved ones and with the charity leadership. Your family will be emotionally fragile after your passing. If they find out after the fact that their inheritance has been reduced because of a charitable gift, they may respond negatively. They may even try to dispute the planning documents.
 
Instead, explain your plans and wishes early. That will allow them to think clearly about your plans, and it will give them time to adjust their thinking. They may even want to play a role in communicating with the charity and ensuring that your legacy is put to good use.

Need help planning your charitable gift? Contact us at Sprouse Financial Group. We welcome an opportunity to meet with you and your family and develop a plan for maximizing the impact of your legacy.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
 
 15837 – 2016/6/23