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You Are A Superhero: Charitable Giving Through Estate Planning. (Everything* You Need to Know About Estate Planning: Day 7)

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You are a superhero. Seriously, you have the ability to change the world or, at the very least, your little corner of it. In fact, changing the world can be as simple as asking yourself one question: what causes would I like to benefit in my will?

BEQUESTS TO CHARITIES IN YOUR WILL

You can include the nonprofits you care about most in your will, leaving a legacy after you have passed on. You can include charities like your church, alma mater, a local cause, or an international organization in your estate plan. If you ask the charity you care about most, I bet they’ll tell you that your charitable bequest, no matter how big or small, can make a huge impact. 

WHAT ABOUT MY KIDS?

When folks come to me for estate planning help, a major reason they do so—perhaps even the single reason they do so—is to benefit their children. Parents often think, “I love Charity X, but of course, I love my kids even more, and I’ve got to take care of my family.” Of course you do, and you should! However, I implore you to ask yourself another question: 

How much is enough for my kids?

If you have an abundance of assets, and/or your children are independent adults, could you provide adequate support for your children and include a bequest to one or more charities?

LET’S TALK

Invite the whole family to the kitchen table sometime (even if your kitchen table is a virtual one, via email or Zoom) and talk about the distributions you want to make at death. Ask if including gifts to charity from your estate plan would be appropriate and acceptable for your children. Perhaps it’s a charity the whole family supports. Perhaps this will be the beginning of a multigenerational cycle of giving.

Why not talk about it? This can be an especially productive conversation if you can explain that taxes are going to eat up a chunk of one or more of the assets, which can be avoided by giving said asset(s) to charity (since charities are tax-exempt).

LIFE INSURANCE

Sometimes when parents give a major asset(s) to charity, and their kid’s inheritance takes a real hit, they’ll buy a new life insurance policy to make up the shortfall to the kids. They may even buy a new life insurance policy and name the charity directly as a beneficiary. There’s also a very helpful kind of trust called an ILIT, that significantly increases the impact of life insurance. 

Without getting too complicated, let me explain the basics. An ILIT is an irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust to one or more beneficiaries.

WHAT IS THE ROLE OF AN ESTATE PLANNER?

When it comes to estate planning, you’re thinking about so many different variables and scenarios – so what if you forget to factor in charity? Lucky for you, I’m here to help you maximize your charitable giving. That means determining how your generosity can not only help an organization make a difference, but how you can maximize the financial and estate-related benefits of giving.

STUDIES SHOWED

A 2013 study showed how lawyers, like me, can help charitable giving in estate planning. The scientifically-conducted research from the UK-based Behavioral Insights Team showed that when lawyers asked clients specific questions regarding charitable giving, the results were significant. Here are the findings:

CONTROL GROUP/BASELINE

Lawyers who provided no reminder or inquiry to their clients about possibly benefiting a charity in their estate plan (bequests) resulted in 4.9 percent of those clients including a charity in their plans.

TEST GROUP ONE

Lawyers who asked their clients, “Would you like to leave any money to a charity in your will?” resulted in 10.8 percent of their clients including a charity.

TEST GROUP TWO

Lawyers who said, “Many of our clients like to leave money to a charity in their will. Are there causes you are passionate about?” resulted in 15.4 percent of their clients including a charity. 

What a dramatic increase!

Here are the approximate dollar values associated with each group:

CONTROL GROUP/BASELINE

Average bequest – $5,000

TEST GROUP ONE

Average bequest – $4,800

TEST GROUP TWO

Average bequest – $10,200

Again, test group two gives a powerful example of the difference charity-minded estate planners can make.

In the study, there were a 1,000 people in each group. That means that “Test Group Two” raised over $1 million more than the control group.

Certainly, your lawyer plays an important role in reminding, guiding, and assisting you in your charitable giving so that you can use your superpower – charitable giving through your will – to the fullest extent.

In 2017, $35.70 billion was contributed to US charities through bequests. Imagine if everyone worked with a lawyer with a strong focus on charitable giving! The impact nonprofits make in our communities could be incredibly transformative.

LET’S GET STARTED

Harness your superpowers and start your legacy today! The best place to start is by filling out my Estate Plan Questionnaire. It’s easy, free, and there’s no obligation. It’s simply a document to get you thinking and planning. 

Already have an estate plan and want to update it to include the causes that are near and dear to your heart? Don’t hesitate to contact me.

*OK, not everything. But many things, let’s say, an excellent start.

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25 Days of Giving: Substantiation Requirements of Charitable Gifts made by Payroll Deduction

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Santa with Heart

Thanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues to inspire others to also make meaningful year end gifts this season…and plan ahead for 2020 charitable goals.

Under the current tax code, you may have changed the ways in which you give or the tax-beneficial strategies you employ with your charitable giving as compared to previous tax laws. What hasn’t changed, is that you may choose to deduct from your federal income tax any charitable contributions of money or property made to qualified organizations if you itemize your deductions. But, there are record keeping requirements you’ll want to stay on top of, so you’re not scrambling during tax time!

Payroll deduction substantiation

Making a charitable deduction directly from your paycheck is a great and steadfast way to be sure to meet your charitable giving goals. For charitable contributions made via payroll deductions, the donor needs two documents to substantiate the gift:

  1. a pay stub, W-2, or other document furnished by the employer that sets forth the amount withheld from the taxpayer during a taxable year by the employer for the purpose of contributing to a charity;
  2. a pledge card or other document prepared by or at the direction of the charity that shows the name of the charity.

Donors who give to a local United Way or other organizations that funnel contributions to other charities need to only obtain the pledge card or other document from the United Way and not from the affiliated charities which ultimately receive the money.

25 Days of Giving: 9 Quotes to Inspire Charitable Gifts

Payroll deductions of $250 or more

Tax law requires that for any contribution of $250 or more, the taxpayer must substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the charity. For payroll deductions, the contribution amount withheld from each payment of wages to a taxpayer is treated as a separate contribution for purposes of the $250 threshold.

So, for example, a taxpayer who gave $300 over the course of a year through payroll deductions, $30 per paycheck over ten paychecks, would not trigger the $250 substantiation requirement. The substantiation requirement would only kick in if $250 or more is withheld from each paycheck.

If any of this is confusing, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together!

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25 Days of Giving: Charitable Gifts Defined

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pinecones with candle

If you’ve been reading along with the 25 Days of Giving Series throughout December, thank you. If you’ve happened upon the GoFisch blog just now, welcome! I hope to see you back here often.

Giving for the sake of giving is great, however it’s financially wise to make certain your charitable donation is also beneficial in terms of your taxes.

Charitable gifts are defined by the IRS, at least for the purpose of qualifying for a charitable deduction from federal income tax. A review of statutes and caselaw show that the IRS attributes several major characteristics to charitable gifts:

Charitable intent

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There must be a clear and unmistakable intention on the part of the donor to absolutely and irrevocably to divest herself of both title and control of the property.

Irrevocable transfer

The irrevocable transfer of the present legal title and dominion and control of the entire gift to the charity so that the donor can exercise no further act of dominion and control over it.

Delivery

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The donor must deliver the gift to the charity. (Delivery can be made through a number of ways. This could be hand-delivered, like dropping off a check. It could also mean a secure electronic payment made on the charity’s website. In the case of charitable gifts of grain this could mean physically delivering the grain to a specific silo.)

Acceptance

The charity must accept the gift. For instance, you may want to donate part of your modern art collection to your favorite nonprofit, but if the nonprofit doesn’t have the resources to accept or doesn’t want the collection for some reason, it’s not a charitable gift.

Qualified organization

The donee must be an organization recognized as charitable by the IRS. You can use this IRS online search tool for organizations to see if the charity you’re considering donating to is recognized as tax-exempt.

Want to be sure your charitable gift is indeed a tax deductible charitable gift in the eyes of the IRS? What about charitable gifts or life insurance or a retained life estate? It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

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