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Implementing Local Legacy Simply

Anne Ruffer is Chair of the Community Foundation’s Professional Advisor Council.  She wrote this article for the winter edition of Smart Money, a publication of the Central New York Community Foundation, to give some guidance on incorporating charitable giving into estate plans.

In 2010, the Central New York Community Foundation commissioned a study on wealth transfer. It found that over the next decade, local individuals in our five-county region will determine the distribution of an unprecedented $22 billion after they pass away. The Community Foundation’s Professional Advisor Council has discussed ways to raise awareness and motivate our charitable community to retain part of this wealth transfer. We all agree that keeping wealth in the local community is vital to our future, and that each person should consider giving at least 5% to local charities at the time of their passing. Here are three ideas for accomplishing this that we wanted to share, and we invite you to join us as we work toward this common goal:

  • Talk to Your Clients: The most important action to take is to talk with your clients about their plans. Charitable giving in estate plans is quite personal and commonly depends on an individual’s family and personal situation. One example is that individuals who have no children or have only distant or uninvolved relatives may leave a large portion, if not all, of their estates to charity.
  • Keep It Simple: No one knows what the exact value of their estate will be when creating their plan, so charitable bequests in wills or trusts frequently pass through an individual’s residuary estate using percentages.
    • The percentage method works well when a large portion or all of an estate is left to charitable beneficiaries. However, when an individual desires to leave only a small percentage of their estate to a charity, leaving a specific dollar amount (known as a general bequest) in the individual’s will or trust, rather than a percentage, should be considered. This is primarily due to the added requirements when a charity is left a percentage bequest under a will or trust, including notification of and review by the New York State Attorney Generals’ office before distributions can be made. This involvement is valuable as a protection for charities, especially for larger portions of estates, but adds to the time and cost of the estate administration.
    • A recent example is my client whose 85-year-old mother had passed away. She had a modest estate and intended to leave 10% to a local charity that she has supported throughout her life, with the remainder going to my client. The added cost associated with the notification and accounting review requirements reduced her estate and added approximately six months to the estate distribution compared to if it had been a general bequest.
  • Don’t Forget About the Easiest Solution: Another option is to use beneficiary designations for IRA, 401(k) or similar accounts, and is a very simple and tax effective way to leave to charities. Distributions to charities under these types of accounts or with life insurance designations usually occur much more quickly than when giving under wills and trusts.

 

TAGS: Estates, Trusts & Personal Planning, Wealth Management, Charitible Giving, Wealth Transfer