charitable-bequest

4 minute read

What is a Charitable Bequest & Why Should You Care?

How do charitable bequests relate to your estate plan? We’ll explain everything you need to know in this guide.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

Kirk Douglas reportedly donated the bulk of his $61 million Estate to charities through the Douglas Foundation after his death in February 2020. On an episode of Dax Shephard's podcast, "Armchair Expert," Ashton Kutcher said that he and Mila Kunis plan to give their money to charity after they're gone.

In 2010, Bill and Melinda Gates, along with billionaire investor Warren Buffett, founded the Giving Pledge. This campaign encourages the world's wealthiest people to donate most of their wealth to charity, either during their lifetimes or after their deaths. More than 200 of the world's wealthiest individuals, couples, and families have signed onto the pledge, including Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan.

But Charitable Bequests aren't just for celebrities and the mega-rich. In 2017, the largest source of charitable giving came from individuals just like you. Charitable Bequests, or donations to a charity or non-profit explicitly stated in someone's Will or Trust, accounted for eight percent of total giving that year, totaling over $30 billion.

If you're someone who thinks it's important to give back to your community, you may wish to include a Charitable Bequest in your Will or Trust. In this article, we will discuss the basics of Charitable Bequests, the benefits of making one a part of your Estate Plan (for you and your loved ones), and how to make it legal.

What is a Charitable Bequest?

A Charitable Bequest is a donation to a charity, non-profit organization, trust, or foundation explicitly stated in someone's Will or Trust. Anyone can make a Charitable Bequest, and it can be of any value.

There are many reasons why someone may make Charitable Bequests in their Estate Plan. If you've given to charity regularly, you may want to leave a lump sum donation to your favorite organization in your Will. If you love volunteering at your local animal shelter, you may wish to give them a percentage of whatever remains of your Estate so that they can continue doing the meaningful work they do. People who find success in a particular field may make a charitable contribution to the schools and organizations that educated and trained them.

However you contributed to the betterment of your community, prominent institutions, and the world around you, you can make sure you're doing the same in your plans for the future.

Types of Charitable Bequests

Charitable Bequests can fall into one of any of the four different types of Bequests:

  • General Bequests: A monetary gift paid out of the general assets of an Estate

  • Specific Bequests: A gift of a particular cash amount or item listed in an Estate, such as a prized possession or family heirloom—think pieces of jewelry, art, stamp collection, etc.

  • Demonstrative Bequests: A monetary sum paid from a specific source, such as a personal bank account or investment fund

  • Residuary Bequests: A gift of what remains in an Estate after the payment of administrative expenses, creditor claims, and all other listed Bequests—General, Specific, and Demonstrative.

Benefits of a Charitable Bequest

As part of your Will or Trust, you will decide what will happen to your property, possessions, and money after you're gone. Making philanthropy part of your Estate Plan doesn't just make you a good human; it also makes you a clever financial planner.

Tax Benefits: Charitable giving comes with its own set of tax benefits. There are also ways for individuals to maximize those benefits.

Charitable Bequests are deducted against the value of an Estate. Under current tax law, there is no limit to the number of Charitable Bequests that can be made against an Estate, making it a rather powerful tool for bringing Estate taxes down.

An Estate can deduct bequests of cash and property alike. Property is not treated equally under the law if inherited by an heir as opposed to a charity. Where an heir may face taxes and fees for their inheritance, Charitable Bequests save you money. Charitable Bequests can be General, Specific, Demonstrative, or Residuary, and can include money and property, including real estate, IRA retirement accounts, vehicles, and other assets.

Recognition: Charitable Bequests allow you to leave a legacy behind, either for yourself or a loved one. There are many ways that non-profit organizations and foundations recognize those who give generously to their cause or program. These can include placards, benches, memorial trees, or areas in nature. Named scholarships, either for an alum or in honor of someone's remarkable achievements, can be created by universities through Charitable Bequest gifts.

Flexibility: Lawyers and Estate Planning professionals advise looking over your documents at least once every few years. When you create a Trust-Based Estate Plan with Trust & Will, your Revocable Living Trust will list the gift you intend to bequeath and to which charity or organization, both during life and after death. A Charitable Bequest is flexible and easy to update as part of your Trust as your giving portfolio grows or changes.

How to Make a Charitable Bequest

While you may know who will inherit your home or your grandmother's good china, making a Charitable Bequest may require some additional planning.

A Charitable Bequest can have a significant impact on the organizations you care most about. Trust & Will makes it simple to create a Will online or update your existing Estate Plan.

As part of your Will or Trust, you will name the one or more charities or non-profit organizations in which you would like to leave a monetary gift or asset. If your gift is for an organization's general use, no additional information is required. However, if your charitable gift is for a specific purpose, you may consider contacting the charity or organization directly. This will allow you to confirm that they can accept your gift for the specific purpose you have in mind.

Trust & Will makes naming a Charitable Bequest easy, allowing the causes you care most about to continue being supported even after you're gone, creating a purposeful legacy for you and your family.