Estate planning is all about leaving a legacy, your mark on this world. When you envision it, what does this legacy look like to you? If you’re an altruist at heart, philanthropy is likely a part of that vision. Whether you have a grand or humble estate, you can make an impact by giving a gift to an organization that you care about. Keep reading to learn how to leave a charitable bequest through your estate plan and create an honorable legacy for yourself.
What is a Charitable Bequest?
A charitable bequest is a gift or donation you can make to an organization through your estate plan. For example, you can leave instructions in your Trust or Will stating that a gift should be made to your favorite charity upon your passing. Your trustee or executor will be responsible for making sure that the gift is properly transferred to the organization. Although you can leave a monetary gift, you could also decide to bequeath valuable or collectible items that might be relevant to the organization’s cause.
The rest of this guide dives into how to leave a charitable bequest properly. If you’d like to spend more time understanding charitable bequests, click here.
Why Leave a Charitable Bequest to a Nonprofit?
If you’re already planning to leave a charitable bequest out of the goodness of your heart, perhaps you don’t need any more convincing. However, if you’re somewhat on the fence, you might be delighted to know that there are some serious benefits associated with leaving a gift to a nonprofit.
Tax benefits: Tax benefits are arguably the most tangible advantage of leaving a charitable bequest. Currently, any estate valued at over $11.7 million will owe federal taxes. You may also face state taxes at much lower thresholds. Giving gifts is a legitimate strategy for reducing your overall taxable estate.
Flexibility: There may be some hesitation if you’re thinking about leaving a sizable gift. The nice thing about charitable bequests is that they can be modified. Unless you have an irrevocable trust, you can update your estate plan at any time. You can even revoke it if your circumstances drastically change.
Create a legacy: Leaving a charitable bequest in a will also means that you’re making a positive impact on the world. You’re creating something wonderful for you to be remembered by, and you can have a smile on your face knowing that your gift will be used toward a good cause. Who knows, maybe you’ll even end up with your name on the side of a building!
How to Leave Charitable Bequests for Nonprofits
Feeling ready to bequeath some gifts to charity? Great! Now that you have good intentions, you might be wondering how to get started. You might be happy to find out that leaving charitable bequests to nonprofits is quite easy. Below we expand on these four simple steps:
Research nonprofits of interest
Decide what type of charitable bequest you’d like to make
Create or update your will to include your charitable bequest
Tell friends and family about your decision
1. Research nonprofits of interest
Picking a nonprofit is easy if you already have one in mind. However, if you don’t, it could be a tough job. According to Independent Sector, there are 1.6 million nonprofit organizations in the United States alone. From soup kitchens to churches, the nonprofit industry is quite large, making it difficult to choose just one.
Spend time researching different organizations. You may be able to narrow down the list by finding nonprofits and charities that align with your core values. Charities are always a great choice, and there are also several types of organizations that would benefit from a donation. Here are some examples:
Educational institutions, such as schools and universities
2. Decide what type of charitable bequest you’d like to make
Once you’ve selected an organization that you’d like to make your gift to, it’s time to decide what type of bequest you’d like to make. There are three main options you can choose from: a percentage, specific, or residual bequest.
When you make a percentage bequest, you are instructing to gift a certain percentage of your total estate. In contrast, you can make a specific dollar amount or name a specific asset to gift. You may have already guessed that this is a specific bequest. Last but not least, you can make a residual bequest, which is made from the balance or remainder of your estate.
You should be made aware of the risks associated with making a specific bequest. These are generally taken out of the estate before other types of bequests. If you are making a large gift, but then your estate ends up being smaller than expected at the time of your death, this plan could go awry. Your other beneficiaries might experience a loss of what they would have inherited. This may be a non-issue if your charity gift is small, or you’re confident it would not create any conflict with the remainder of your estate plan.
If you prefer to play it on the safe side, a percentage bequest is a great choice. This way, all of your beneficiaries will receive their designated portion, regardless of the size of the estate. You could also go with a residual bequest, which flips the order of the specific bequest. Your donation to charity would be made with the remainder of your estate, after your other debts, expenses, and bequests have been paid.
3. Create or update your will to include your charitable bequest
Once you’ve made decisions about what kind of charitable bequest you’re going to make, and to which organization, it’s time to put your plan to action.
If you don’t already have an estate plan, this makes for a great reason to create one. If you do already have an estate plan, you can simply update your Will with your bequest. Make sure to include who you want to give your gift to, what type of bequest you’ll make, and what you want to give. Once you update your Will, make sure to have your newest version signed and notarized into effect.
4. Tell friends and family about your decision
Last but not least, we highly recommend that you sit down with your friends and family to let them know about your decision. Inform them of the details of the bequest and let them know where they can access your will. That way, there will be no surprises, which lessens the odds of someone contesting your will.
You might also consider informing the organization that will benefit from your charitable bequest. By sharing your intentions, the charity or non-profit can make any necessary arrangements ahead of time. You may even be fortunate enough to find out how your bequest will go to use before you pass away.
Specify Your Charitable Bequest Today
If you’ve been wondering how to leave a charitable bequest, we hope that you found this guide helpful. At the end of the way, leaving a charitable bequest in a will is quite easy. All you have to do is update your estate planning documents with details on the nature of the request.
As a reminder, these are the key components: the name of the nonprofit organization, the type of bequest, and what you wish to give. Once you’ve updated your will, make sure to validate it with the necessary signatures, and ensure that your family is aware of your plan and has access to the most recent version. That way, you can have peace of mind knowing that your wishes will be carried out upon your passing.
If you don’t already have a Will, or wish you had a way to update your current Will more easily, Trust & Will offers easy and convenient Will creation services! You can include your charitable bequest information in your estate plan within a matter of minutes. Click here to get started today.
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