Leave Your Legacy with Planned Giving
Written for Blue Ridge Hospice by Joshua E. Hummer, ESQ., PLC
As an estate planning and probate attorney, I see death, and the heartache that accompanies it, every day. I watch as the dying and their loved ones struggle with fear, physical and emotional pain, grief, depression, and more.
But, in the midst of this darkness, I also see incredible lights – love, strength, sacrifice, and many others.
One of these lights is when someone leaves a legacy – something which says, “This is what my life meant, this is what I cared about, or this is what I thought was important.”
A legacy like this does not remove the pain or grief, but it changes it. Pain is tempered with pride, grief with honor and cherished memory.
There are many ways to communicate a legacy. You can provide financially for a loved one, write an ethical will to give advice or encouragement, or send letters to family members.
But one way you may not considered is planned giving.
Consider Planned Giving
“Planned giving” is just a term for giving to an organization or cause you support in a thoughtful, organized manner or creating a plan to give in the future.
With planned giving, you can maximize your impact, minimize taxes, and give to others after you are sure you and your family have been provided for.
If you are like most of our clients, you care deeply about certain causes and want to help other people. But you also recognize that your primary responsibility is to provide for your loved ones and make sure you are not a burden to them.
The beauty of planned giving is that it allows you to both make sure you and your loved ones are provided for and make a difference in the causes most meaningful to you.
The best way for you to give will depend on your specific circumstances. For many of our clients, planned giving simply means leaving a percentage of their estate (their assets that remain after they have passed) to a charity.
For others, it means setting up an annuity or stream of income for a loved one while they are alive, and then, when they pass, giving the assets to a charity.
For someone else, it may mean setting up a charitable trust to take advantage of a tax deduction now for a gift that will be made later.
However you choose to do it, planned giving has both practical and deeply rewarding benefits that make it worth considering.
The Benefits of Planned Giving
By giving taxable assets (like an IRA or 401k) to a charity, you can give a much larger gift than you could give anyone else. This is because gifts to charities are tax deductible.
For example, if you were to give a portion of your 401k or IRA to a family member, they would have to pay income and, potentially, estate taxes on it. Depending on the specific circumstances, this can be as much as 77% of the total gift in Virginia, and more in other states. In words, a gift of $100,000.00 could only really be worth $23,000.00 to the recipient.
However, if you were to make that same gift to a charity like Blue Ridge Hospice, it would receive and be able to use the entire $100,000.00.
Give to reduce taxes:
Planned giving also has many tax benefits for you. You can reduce your current and future income taxes, estate taxes, and capital gains taxes by taking advantage of various methods of planned giving. For example, you could create a charitable trust which provides you with an immediate income tax deduction, but still allows you to use the funds. I go into more details on other specific methods below.
Give without worry:
Planned giving allows you to give in a way that ensures you and your family are provided for. You can either wait to give until certain needs are met, or give, retain the use of funds until they are no longer needed.
This allows you to make a difference while at the same time protecting your loved ones.
Give to make an impact:
Planned giving allows you to make an impact because you can give more and give it at one time. To give a personal example, I am a huge advocate of Blue Ridge Hospice.
If you have experienced the gift of hospice care for yourself or a loved one, you know it is impossible to fully describe how wonderful it is. Hospice workers bring life, peace, and hope to one of the darkest and most uncertain seasons of human experience. They treat people and their families with dignity and act as guides through the troubled and grief-stricken waters of the dying process. Unfortunately, many more people need hospice than actually receive it.
So when you support Blue Ridge Hospice, you make a huge impact in the lives and families of those in need of their care and services.
Methods of Planned Giving
So how do you do it? There are three main avenues to planned giving, and you can put your own creative twist on how you do each one:
Gifts at Death:
The most common method of planned giving is setting up a way to give when you pass. You can do this with either a Will, a Revocable (“Living”) Trust, or with beneficiary designations on retirement or investments accounts or life insurance.
- Gifts in Wills or Living Trusts: To give to a charity in your Will or Living Trust, you simply include that charity as one of the beneficiaries. You can either leave them a specific monetary amount or a percentage of your entire estate. You can use language like this: “I hereby give Blue Ridge Hospice, 333 West Cork Street, Winchester, VA 22601 (TIN: 54-1126227), $10,000.00.” Or, “I hereby give Blue Ridge Hospice, 333 West Cork Street, Winchester, VA 22601 (TIN: 54-1126227), ten percent (10%) of the residue of my personal and real estate.” To make sure your Will or Living Trust actually does what you want it to do, you should consult with an estate planning attorney with experience in charitable gifts.
- Life Insurance and Retirement Accounts Beneficiary Designations: You can also give by naming a charity as a beneficiary on a life insurance policy or retirement or investment account. To do this, request a change of beneficiary form from your life insurance carrier or investment brokerage. Fill it in with the amount you have selected, and make sure to include the charity’s legal name, address and TIN where indicated for a beneficiary. Then, return the form to the carrier or brokerage and confirm they have received it and processed it.
Charitable Trusts and Annuities:
Another way to do planned giving is to set up a charitable trust or a charitable annuity. The advantage of these structures is that they allow you to receive an immediate tax deduction for gifts that happen in the future.
- A charitable remainder trust allows you to keep (or give to relatives) the income from a certain assets or asset for a period of time. When that time period is up, the assets are given to your designated charity. This allows you to create a stream of income for yourself or others until it is no longer needed.
- A charitable lead trust is a trust in which the income from certain assets goes to a charity for a period of time. When the time period ends, the assets are given back to you or to your loved ones. This trust allows you to give a charity the income from an asset for a while, and then have the asset returned to you or your loved ones.
- A charitable annuity is a contract you enter into with a charity wherein you make a lump sum gift to them, and they agree to make payments to you for a period of time (normally, your lifetime).
With all trusts and annuities, I strongly recommend that you obtain advice and assistance from an estate planning attorney with experience in charitable gifting before you create one.
Gifts of Appreciated Investments:
The final method of planned giving is to give appreciated assets or investments. These are assets which have increased in value since you bought them, and if you sold them, you would owe capital gains taxes. By gifting these assets (instead of selling them and giving the cash), you are able to give more because the charity will not have to pay capital gains tax when they sell the appreciated assets.
While you can certainly make these gifts without assistance, you may wish to speak with a tax professional to make sure you maximize your tax savings from such gifts.
Regardless of which method you choose, I encourage you to let the charity you are giving to know about the gift. You will encourage them more than you realize and allow them to plan better.
Of course, which method(s) of planned giving is best for you will depend on your specific circumstances. But I hope that you now have some ideas about how you can use planned giving to leave a legacy by supporting an organization such as Blue Ridge Hospice.
If you have questions about planned giving, please contact the organization you wish to support or an estate planning professional.
About the Author: Josh is an estate planning attorney with offices in Northern Virginia and the Shenandoah Valley. He is passionate about helping people plan their relationships and finances so they can face the future with peace of mind and confidence. He’s the co-author of the upcoming book, “Fearless: How to Face the Future Confidently with Relational Estate Planning”. To learn more about Josh, check out his website at www.jehlaw.net .