Estate Planning and Charitable Gifting:

Knowing Where to Start

One of the most common challenges people face regarding estate planning and charitable gifting is not knowing where to start. Without a clear plan or understanding of estate law, making informed decisions about how to structure an estate plan that reflects your wishes can be difficult.

What Documents Are Needed

Additionally, many people don't know what documents are needed for estate planning or how to make charitable bequests in a way that ensures they're used effectively. Fortunately, with the right knowledge and resources,estate planning and charitable gifting doesn't have to be overwhelming – and this guide will provide you with all the information you need.

Provide a Safe and Loving Home

As a supporter of NCHS’s mission to provide a safe and loving care for every child, you understand the importance of sharing an umbrella to support each other through life’s struggles and storms. We hope as you build your estate plan, you will remember the vital work of NCHS and consider making a gift of any size to continue to keep open the umbrella of support.

Catalog Your Assets

Create a catalog of all of your physical, financial, and digital assets, and start thinking about who you’d like to receive them after you pass.

Physical assets mostly include items that have a title, like cars, boats, RVs, homes, and property. They can also be sentimental items like jewelry, your heirloom tomato plants, or your favorite fishing pole. Think about the things that matter most to you and who you want to care for them after you are gone.

Financial assets are money in checking or savings accounts, businesses, mutual or retirement funds, stocks and bonds, Health Savings Accounts (HSA), or life insurance policies.

Digital assets are a little less straightforward and are often overlooked. This is truly a digital age, and determining who will have access to the family videos saved on your phone or computer are important assets to consider, especially for your grieving loved ones. Other digital formats to consider are PDFs, videos, presentations, audio files, images, spreadsheets, graphics, and design files.

Consider adding co-owners to your assets. By adding your favorite nephew to the title of the truck you taught him to drive in, you can help to ensure it passes to the correct person. Make sure to list them as a “joint tenant” with the “right to survivorship” on the title. However, this concept has a couple of downsides to keep in mind. The first is that if you ever want to sell the item or connect it with a loan, the co-owner needs to agree. And second is that if the asset’s value is over a certain amount, they could potentially receive a federal gift tax when it transfers to them.

A smaller number of material things in possession makes estate planning easier. Some people will start to gift or hand over possessions to others as they are creating their estate plans.

Determine What You Need

It’s time to look at your life from a high level and determine what you need. Do you need a lawyer to help you legally clear up confusion over some assets? Are you comfortable using an online package, or do you need an attorney to help you? 

An online will works fine for 95% of the population. However, if your estate is worth over $1 million, you may want to consider a living trust instead of a will. Living trusts transfer your money and assets to a trust while you are still alive that you control as the trustee. This can be a great way to avoid probate court and minimize estate taxes. 

Create a Will

When building your estate plan, many people believe that their will IS their plan, but it’s actually just a piece of it, though it is an essential part. The first step is determining what type of will is best for you. For most people, a simple will is sufficient. Then you’ll need to actually complete your will. 

We’ve created this worksheet to help you compile all the information you will need in one place. Then you can find a legitimate online form written by a lawyer or take it with you when you meet with your lawyer. Once your will is complete, you will need to print it out, sign and date it in front of two witnesses. It’s not legally required to have your will notarized in most states. However, it is recommended that you do so as an added protection after you are gone. 

List Who You Want to Include In Your Estate Plan

There are certain roles to consider for the people that you want to be part of your legacy: beneficiaries, executors, guardians for dependent children or pets, trusted advisors, and medical and financial power of attorneys.

Beneficiaries - The people or causes you want to receive your assets when you die. It’s important to choose beneficiaries now; otherwise, a probate court will decide what to do with your estate, and they may not distribute it as you wish.

Tip: Create a backup plan and pick contingent beneficiaries in case something happens to the individuals you chose as primary beneficiaries.

Executors - This is the person or people who you appoint to ensure that your wishes in this plan are carried out. A good idea is to think of the person in your life who has the knowledge and time to distribute every part of your estate according to your will. Once you have someone in mind, ask them if they would be okay to be your executor before adding them to your will.

Guardians - If you have dependents, this is easily one of the most important decisions you will make during this process. A guardian is someone who would have legal custody of your child or children and their property when you are no longer able to care for them. If you don’t name a guardian in your will, the courts will decide for you.

Guardians for Pets - Your furry companion has brought so much joy to your life. Make sure that they are properly cared for by designating someone to look after them when you die. Otherwise, they may end up in a shelter.

Trusted Advisor - Depending on the complexity of your estate, your executor may need assistance sorting out the details of your will. This can be an accountant, a family member, or a friend who manages the day-to-day financial responsibilities or someone to counsel with when there are difficulties in the execution. This role is completely optional.

Medical Power of Attorney - This person is responsible for making medical decisions on your behalf, usually in life-or-death situations. They should be familiar with your wishes in regard to what to do if you are ever in a coma or where you would like to pass.

Financial Power of Attorney - This person should be someone you trust deeply and who is able to make financial decisions (like paying your bills) when you are no longer able to perform these actions yourself. Again, discussing your wishes with this person ahead of time will make it easier for them to step into the role when it’s needed.

Designate Distribution to Beneficiaries

You’ve already started thinking about this step when you cataloged your assets. Now it’s time to make it official. For retirement accounts and life insurance policies, you likely already chose who should receive the benefits if you were to pass. However, it’s good to check on your policies and make sure that the beneficiary listed is still correct and that your contingent beneficiaries are noted as well. Now it’s time to designate beneficiaries for all of your other assets.

Compose a Letter of Intent

A Letter of Intent (or Instruction) allows you to provide personal instructions that aren’t in your will for anything that you want your loved ones to know. Some things to consider are burial information like what clothes to bury you in, your obituary, password, and PINs for your accounts, etc. Include whatever information you can give them that will help make things easier when you are no longer with them.

Discuss Your Plans

Talking about your final wishes with your family and friends is an important part of your legacy and will help to ensure that they know what your wishes are. Additionally, discussing the various roles you’ve chosen for the different people you’ve included in your will allows you to gauge if they are up for it.

Duplicate and Distribute Documentation

Now that you’ve made all of these plans, it’s time to make copies and distribute them. We created this checklist of the documents that you’ll want to include. You’ll want to provide a copy for your executor, your spouse (if applicable), and one for yourself.

Save Your Documents

The last step is to save your documents in a place that your family can easily access them when you are gone. An option to consider is a legacy drawer. This is a drawer that contains all of the important information and documents that your family will need all in one place.

Trusts

Creating a trust is an effective way to support nonprofits since it allows for larger sums of money to be distributed at once. This can be done during your life and after your death. With living trusts, you can appoint trustees who will manage the trust assets and distribute them according to your wishes while you’re still alive. Testamentary trusts are set up through wills and become active after the designated person passes away.

Charitable Remainder Trust

A charitable remainder trust (CRT) is an irrevocable trust set up by a donor that pays income, typically in the form of annuity payments or unitrust payments, to one or more individuals until the beneficiary's death. The assets of the CRT must then be transferred to one or more nonprofit organizations upon the death of all beneficiaries. The donor receives an immediate tax deduction for setting up the CRT based on the value of their gift and other factors.

In addition to providing tax advantages, CRTs can provide significant estate planning opportunities. For example, if a donor wants to leave money to charity but also wants some portion of it to go toward funding education expenses for their children or grandchildren, they can use a CRT to at least partially fund such expenses without having to worry about any estate or inheritance taxes being imposed on those funds after their death.

Benefits of Setting Up A Charitable Remainder Trust

One of the greatest benefits of setting up a CRT is that it allows donors to make larger gifts than they normally would have been able to do without incurring huge tax obligations down the line. Donors may be able to utilize existing assets like stocks and real estate in order for them to qualify for a substantial deduction when setting up their CRT.

Since these trusts are irrevocable once established, donors will not have to worry about any changes made by future governments affecting their investments or donations going forward. Lastly, because beneficiaries can choose how much they want to be paid out annually (or semi-annually), they are in complete control over how much money they receive each year from their trust—eliminating any potential surprises down the line come tax time.

CRT At-A Glance

• You are in control and can choose how it is set up and managed.
• You can select the charity that will benefit from the donations generated by your trust.
• You can specify exactly how much money will go to them each year (this amount is called an annuity).
• You can designate someone else (such as family members) to receive income from your trust in the event that something happens to you before it is fully disbursed.
• You retain complete control over your donation plan.
• Deduct a part or all of your contribution from your taxable income for the current year.
• If the trust contains appreciated assets such as stocks or real estate, you pay no capital gains tax when donating these assets.
• In addition to receiving an immediate deduction, you will also save money by avoiding capital gains tax on those donated assets.

Charitable Lead Trust

A charitable lead trust is an irrevocable donation vehicle used to fund charities with income for a specified term. The donor specifies how much money will be donated each year and which charity or charities will receive the funds. The donor also names beneficiaries who will receive the remaining assets in the trust after the donor passes away. This type of trust offers several advantages over other forms of giving.

Advantages of Setting up a Charitable Lead Trust

One of the major benefits of establishing a charitable lead trust is the potential tax savings it can offer donors. These trusts provide significant tax deductions to donors, allowing them to reduce their taxes by donating assets through this type of trust instead of other methods like cash donations or direct contributions to charity. Since these trusts are irrevocable, they provide donors with some assurance that their donations will be used in accordance with their wishes after they are gone. Another benefit of setting up a charitable lead trust is that it allows donors to preserve wealth for future generations while still making an impact on society today.

CLT At-A-Glance

• Tax Benefits – Donors receive substantial tax deductions from making gifts to charity through their trust. This means that donors can save money on taxes while increasing their charitable giving at the same time.
• Security – A charitable lead trust provides peace of mind by protecting assets from outside influence and guaranteeing that the trust will remain in effect until all funds are distributed according to the donor’s wishes.
• Flexibility – This type of trust allows donors to specify exactly how much money they want to be donated annually and what types of charities should benefit from their generosity. That way, donors can rest assured knowing their legacy will be carried out just as they intended it to be.

By setting up a charitable lead trust now, donors can ensure that their legacy has an enduring effect long after they’re gone by ensuring that money goes towards causes they believe in and also providing for future generations through naming beneficiaries to receive assets from the trusts after they pass away.

Planned Giving

Planned giving is defined as the practice of making donations to charities or nonprofits through estate planning. In essence, it is a type of donation that allows donors to make larger gifts than they may have originally thought possible. It allows people with limited resources to make charitable contributions in the form of cash, stocks, real estate, or other assets over time rather than all at once. By setting up a plan with their chosen charity or nonprofit, donors can spread out their donations over several years – allowing them to give more than they initially thought they had available.

Advantages of Planned Giving

Planned giving offers many benefits for both the donor and the recipient organization. For one thing, it enables donors to make larger gifts than they anticipated being able to make. Additionally, because donors are able to spread out their payments over several years (or even decades), they can ensure that the donated funds go directly towards helping the cause close at hand rather than having them lost in administrative costs.

Although there are certain costs associated with setting up such an arrangement – such as legal fees and administrative expenses – these costs pale when compared to the potential benefits offered by participating in this type of philanthropic endeavor. Plus, there are many tax incentives available for those who decide to donate through this method which can help reduce taxable income significantly over time.

Endowment Funds

An endowment fund is a type of donation that helps non-profit organizations continue their operations in perpetuity. The money donated will be invested, with the proceeds from the investment used to sustain the organization's activities. Typically, these donations are made through charitable bequests, meaning the donor specifies how the money should be used in their last will and testament.

Endowment funds can be set up for specific causes or projects within a nonprofit organization. Oftentimes it's best to donate the funds without restriction so nonprofits can use them in the area of greatest need. Regardless of the specific cause, donors can rest assured that their money is going toward something important and beneficial.

The Benefits of Endowments Funds

Setting up an endowment fund has many benefits for donors and nonprofits. For donors, it allows them to have a lasting impact on causes they care about even after they’re gone. It also provides tax benefits since donations made through charitable bequests are not subject to estate or capital gains taxes. This also helps donors feel more connected to the causes they care about because they can see firsthand how their donation makes a difference over time. Additionally, donors can designate specific areas where they would like their funds to go—such as college scholarships or research initiatives—which ensures that their gifts are being used for the causes that matter most to them.

Nonprofits like NCHS benefit from these funds by having access to steady sources of income even after the initial donation has been spent; this helps ensure that our mission can continue long into the future without interruption or worry about funding shortages.

Endowments also help create stability within organizations by providing a steady stream of income; this allows them to plan ahead for future projects or initiatives without worrying about running out of money midway through the implementation or execution stages. Additionally, because many nonprofit programs rely heavily on paid staff members, having access to reliable funding means that those services can continue uninterrupted as well.

Will-Based Gifts

Using a will is another great way to make sure that any gifts given go directly towards charitable causes without being subject to estate taxes or probate proceedings; this ensures that all funds are used as intended. Will-based gifts - or direct gifts - allow you to designate specific amounts of money or a portion of your estate to charities that are important to you.

Your will-based or direct gift can be:

• A specific amount of money to a designated charity's endowment fund
• A monthly stipend
• Cash or other assets
• Stocks or mutual funds
• Non-cash items like artwork, antiques or valuables

Depending on the size of the gift, these types of donations can also qualify for tax deductions if they meet certain criteria.

Donor-Advised Funds (DAFs)

A donor-advised fund (DAF) is a charitable giving vehicle that provides donors with an easy way to manage their donations and have input into which charities they support. This type of fund allows donors to donate assets such as cash or stocks, receive tax benefits, and then allocate where those funds will go. The beauty of a DAF is that donors can remain involved in donating even after they’re gone by designating another person or persons to manage the DAF on their behalf.

From there, the DAF makes distributions from its accounts rather than from the donor’s accounts, which often simplifies record keeping for tax purposes. The DAF also simplifies the process by consolidating multiple donations into one account and providing immediate tax benefits for each donation. Additionally, some DAFs offer other features, such as anonymous giving options for those who wish to remain anonymous when making donations.

Advantages of Donor Advised Funds

A DAF is another great option for those looking for more control over their donations because it gives donors direct access to when and where their funds go throughout their lifetime, as well as after they pass away. It also allows donors to spread out their gifts over multiple years while maintaining tax benefits associated with large contributions in one year due to its unique structure. Donors also have flexibility in terms of how they want the funds distributed, meaning they can choose which organizations receive their money each year and make sure it’s going towards the causes they believe in most deeply.

Donors gain the ability to stay connected with their favorite charities even after they’ve passed away by designating someone else to distribute funds on their behalf. Additionally, donors have control over where their money goes while still enjoying maximum tax benefits associated with charitable giving since all contributions made through the DAF are tax deductible at the time of donation. Finally, many DAFs provide additional services, such as helping donors set up endowments or make gifts in memory of loved ones that have passed away.

DAF At-A Glance

• Donors have more control over where their money goes since they can set conditions on when, where, and how much money is distributed from their fund.
• Tax deductions are available immediately upon setting up the fund.
• The money remains invested in the fund during its lifetime, so it can accrue interest which increases the amount available for distribution.
• The donor’s name will remain associated with the fund for years after they pass away
• It allows donors to easily track contributions and distributions from all sources into one place.
• Donors can also use DAFs to establish scholarships or awards that will carry out their vision beyond their lifetime.
• DAFs provide an ideal platform for families or businesses who would like to create an ongoing philanthropic legacy together.