You’ve worked your whole life to build your legacy. You may have a beautiful family, an accomplished career, perhaps a successful business and a substantial amount of assets. Now you’ve reached a point where you need to plan how that legacy will be distributed after you pass away.
You probably want to distribute some of your assets and possibly even your business to your children and other loved ones. However, you may also want to leave assets to benefit a favorite charity or to advance a specific cause. If you’ve created assets for yourself and your family, you might wish to use some of those assets to make the world a better place.
You may think that leaving money to charity is as simple as writing the charity into your will. However, that may not necessarily be the case. If you leave the money in your will, it could get tied up in probate, delaying its distribution to the charity. Your family could challenge your wishes. There could be taxes and other financial ramifications that dilute the value of the gift.
If you want to leave money to charity, you may need to spend some time planning how you want that distribution to occur. Below are a few questions to ask the charity, your adviser and yourself. By planning ahead, you can ensure that the assets are used in a way that reflects your goals and wishes.
How will the charity use your gift?
Don’t assume that the charity will use your gift as you intended. What if you want your assets to be used to impact the charity’s beneficiaries, but instead it’s used to pay for administrative expenses? How would that use of funds make your family feel?
Before you commit to a gift, speak with the charity about your goals and how it would use your assets. Make sure you’re comfortable with the charity, its objectives and its leadership. You may even want to interview a few different charities to make sure you select the right one.
Also, you could put your assets into a trust and then designate a person to act as trustee. The trustee could then distribute funds only if they’re confident that the charity is using the funds according to your wishes or according to any agreements that you and the charity may have made. If the funds aren’t being used properly, the trustee can find other uses for the money.
Is there a better way to give the funds while you’re alive?
Who says you have to wait until you’re dead to make a gift to charity? There may be ways to gift the money today but also take advantage of a few financial benefits. For example, you could put the asset into a trust and then use income generated by the asset to fund your lifestyle. At your passing, the asset could then pass on to the charity.
Another option is if your asset has appreciated in value. You could gift the money to charity today to reduce your capital gains tax liability. Of course, another benefit of gifting while alive is that you’d get to see firsthand how the gift is put to use.
Is your family on board?
Perhaps the most important question is whether your family is on board with your plan. If your charitable gift comes as a surprise at the reading of the will, your heirs could be left angry, resentful or confused. In the worst case, they could challenge your planning documents and take the issue to court.
You can avoid this kind of conflict by sitting down with your children and other loved ones ahead of time to explain your objectives. Share how the plan will impact them and their inheritance. Also, listen to their feedback and think about whether your plans should be adjusted. Your gift should be a positive reminder of your legacy. Don’t make it a nasty surprise that brings conflict to your family.
Need help planning your charitable gift? Contact us at Gregory Financial Group in Kingwood, Texas. We welcome the opportunity to sit down and discuss your goals and concerns, and develop a strategy that’s right for you. Let’s start the conversation today.
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