Charitable gifts and donations can be a great way to extend your legacy. While drafting or revising your estate plans, consider whether you would also like to leave a donation or bequest in your Will or Trust. There are multiple ways to make this happen.
Donations and Beneficiaries
Some grantors will leave a small sum in their will or trust to a named charity or group of charities. They may state a firm dollar amount or a percentage of the estate. For small amounts, a dollar amount may be fine; however, the general advice is to use a percentage instead of a fixed dollar amount, as you never know how much will be left in the estate once all taxes and fees have been paid at the end of your life, and you may want to make sure your loved ones receive what you expect them to.
Often, grantors choose to name a charity as one of their beneficiaries, either in the second or third tier. If in the second tier, this means that after the spouse is named in the first tier, the charity will receive a donation once the spouse has passed. If in the third tier, then the spouse and any second-tier beneficiaries must have passed or disclaimed their allocation in order for the charity to receive a donation.
If you wish to ensure a charitable donation and not list the charity as a second- or third-tier beneficiary, then the charity can be named separately as receiving a donation of your specified amount or percentage before the estate is split among beneficiaries.
“Bequest” means personal property given in a will, but colloquially this term usually means a high-dollar donation or a specific arrangement with an institution. In some cases, the bequest is a named bequest, meaning your name is attached to the gift, such as when a scholarship is named for the person who donated the money.
For these kinds of large donations, you or your representative should discuss the details with the organization you wish to donate to and make sure you have any additional information you might need as well as additional paperwork completed.
Regardless of how you decide to donate to a charity or nonprofit, you should discuss any additional specifics with the organization before naming them in your estate plans. For example, if you want to leave a bequest in honor of a loved one, the organization will likely need to know that information from you beforehand so they know what name(s) to include on the donation.
If you have any questions, ask your estate planning professional for advice. They will be more than happy to help!