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Some people choose, upon death, to give their inheritance to a specific organization or charity. The good news is that you don’t need a famous last name to give like a philanthropist.
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If you want to leave some or all of your money to charity, here’s what you need to know about charitable giving as part of your estate plan.
Confirm that the organization accepts donations
Before making any other moves, you should first find out if the organization can accept donations and confirm with the charity of your choice. Bruce Tannahill, director of business and estate planning for MassMutual, said that unless you have a formal agreement with the charity stating that you will accept the inheritance, confirmation is not a binding commitment.
Therefore, you should check with the organization if there is any formal language that they may require you to include in your will or trust as part of a specific bequest. If the charity is currently unable to accept this type of donation, Tannahill recommends exploring what they will accept or whether other charities with a similar mission will accept it.
Determine how much you want the charity to receive
Will you give every penny of your estate a certain dollar amount, or will you choose a specific percentage to give to charity? Decide how much you want the charity to receive and also consider a possible estate tax exemption.
“Some people want to leave the estate tax exemption, the maximum amount that can go untaxed, to individuals and the rest to charity,” Tannahill said. “Because the estate tax exemption is subject to change and the value of your assets will change, the amount the charity will receive will likely change when planning is done.”
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Plan ahead in case the charity does not exist after your death
Some companies, including charities, dissolve. If something happens and the charity you planned to donate to doesn’t exist at the time of your death, what will you do next?
Estate planning attorney Andrew Ayers recommends taking the time to meet with your estate planning attorney and find out what happens to the legacy if the organization you’re donating to no longer exists. He can plan ahead to pass the inheritance on to another organization and make sure he receives the funds. Or, he can have the estate revert to general distributions in his will.
Communicate how you want your gift to be used
If you want the charity to use the inheritance in any way, you can check with the charity and get more information. Find out if the charity accepts this type of restriction, how long it can last and what happens if the charity no longer uses it for this purpose.
Will it receive recognition or naming rights?
Some people may also be interested in receiving recognition for their heritage. This may include an acknowledgment or announcement about the donation or possible naming rights.
If you want to receive recognition for your donation, specifically for naming rights, Tannahill recommends asking the following questions:
- What will the name be if it can receive naming rights?
- How long will the name stick?
- What if your heirs don’t like something the charity is doing or not doing?
- What if the charity doesn’t like something you or your family did or are doing?
Work with an estate planning attorney
When drafting charitable planning provisions, be sure to do so in conjunction with an estate planning attorney who is familiar with your needs.
Tannahill said the provisions of your will should be specific about your wishes and give your personal representative, executor or trustee enough flexibility to adjust based on conditions at the time of your death.
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