Guide to Planning a Charitable Bequest

A charitable bequest is a beneficiary designation or a provision in a will or trust that allows estate assets to pass to a charitable organization. Thoughtful planning will help you provide for the right beneficiaries, in the right manner—and possibly help minimize taxes.

Presented By Tom Kennedy, CFP®:

6 Step Charitable Bequest Checklist

When planning a charitable bequest, you may find it helpful to take the following steps: 

1. Determine the bequest amount. Do you want to give a set dollar amount or a percentage of your assets? Some people prefer to cap the contribution at a specific amount, while others are more comfortable giving a percentage of their assets. With either approach, consider the possible consequences if your estate is much larger or smaller than expected. 

2. Think about contingency provisions. Do you wish to make your bequest contingent upon other circumstances? For example, you may want to leave assets to charity only if other beneficiaries are no longer alive. Or, you might decide to give the charity your residuary estate (the assets remaining after taxes and administration expenses are paid and other noncharitable bequests are distributed). 

3. Specify future use of funds. Do you have a preference for how your donation will be used, or can the charity put the contribution in its general fund? If the charity has multiple purposes, you may be interested in supporting a specific charitable function. If you’re donating to a children’s organization, for example, do you wish to support academic programs, the purchase of supplies or equipment, or other activities? Any restriction on the use of your donation should be worded carefully, allowing the charity some flexibility to manage the funds accordingly in the event of unforeseen opportunities or challenges. 

4. Discuss your plans. Run your ideas by the charitable organization’s staff members. They will be able to confirm that the charity can fulfill your future gift intentions or, alternatively, identify plans that cannot be accepted for legal or practical reasons. They can also discuss anonymous giving with you, if that’s a concern, and suggest creative ways to leave a legacy. Finally, sharing your plan with the charity’s staff will let them say “thank you.” 

5. Engage professional advisors. Work with your financial advisor and attorney to craft a bequest that meets your goals. Investing in good planning now may save your estate and family considerable legal, financial, and emotional grief in the future. Your advisors will work with you to determine whether to make a testamentary bequest through your will, or if advantages provided by trusts—such as probate avoidance, flexibility, and privacy—may better meet your needs. 

6. Designate a successor. Because the charity’s circumstances may change after your death, consider identifying a successor organization. Naming a successor will ensure that your charitable gift is put to good use in case of unforeseen events, such as a charity’s closure. Or, authorize your administrator or trustee to identify, if necessary, a new charity that supports your specific charitable goals.

Types of Bequests

Enlisting an attorney to craft your bequest can help you satisfy your charitable goals, as well as ease the administrative burden of passing funds to the charity. Below are a few sample provisions to help you envision how a bequest can be worded and get the process started with your attorney. He or she will be able to refine these samples to fit your specific situation.

• General bequest (under a trust). The trustee shall distribute, outright and free of trust, to [charity’s name], a 501(c)(3) organization located at [charity’s address information], [a percentage of trust assets, a specific dollar amount, or remainder of the trust assets] to be used for its general support and charitable purposes without restriction.
• Specific bequest (under a will). I give, devise, and bequeath [a specific sum of money, percentage, or specific asset] to [charity’s name], a nonprofit 501(c)(3) charitable organization located at [charity’s address information], to be used for [a specific purpose].
• Residuary bequest (under a will). I give, devise, and bequeath all [or a percentage] of the rest, residue, and remainder of my estate, both real and personal, to [charity’s name], a nonprofit 501(c) (3) charitable organization located at [charity’s address information], to be used for [its general purposes or a specific purpose].
• Contingent bequest. In the event that [name of primary beneficiary] does not survive me, I give, devise, and bequeath all of the rest, residue, and remainder of my estate [or a specific sum of money, asset, or the percentage of the residual estate that would have been given to the primary beneficiary] to [charity’s name], a nonprofit 501(c)(3) charitable organization located at [charity’s address information], to be used for [its general purposes or a specific purpose]. 

Savings clause

When working with your attorney, be sure to add a savings clause to any specific bequest. Such a clause helps ensure that your gift will continue to be used according to your wishes in the most efficient way.

• Sample savings clause. If at any time it becomes impossible or impractical for my gift to be used for the above purpose, [charity’s name] shall use my gift for a purpose and in a manner that most closely meets the above purpose. 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Learn about private foundations.

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Tom Kennedy is a financial advisor located at Global Wealth Advisors 520 Post Oak., Suite 450, Houston, TX 77027. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial network®, Member FINRA  / SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (832) 649-8111 or at info@gwadvisors.net.

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