At the end of your life, you may hope to make one final impact on the community where you lived and worked. For high-net-worth individuals, leaving a financial legacy involves planned giving for nonprofits in their will or trust.
What should you know about the process of naming a charity as a beneficiary when you pass? To make the best use of the resources at your disposal, consider these three tips before you make a final decision.
Tip #1: Research the Charity
Just because something sounds good on paper does not necessarily mean that it deserves the hard-earned money you have worked to build for decades. After you find causes that truly matter to you, your next step is to research those nonprofits that are already doing the work.
Why does this matter so much?
Not every charity that claims to make a difference is doing work that supports that claim. In order to find a qualified local charity, you should assess their reputation in the industry, their accountability for spending habits, and verify that they are indeed a qualified nonprofit.
Some of the things you may want to explore include board oversight, size, and compensation. You may want to ensure that they have regular board meetings to discuss strategy and fundraising. It can be beneficial to review the mission statement and assess how well it meets objectives.
Of course, it goes without saying that you should also take a deep dive into their finances. Make sure funds are allocated toward program expenses and that the cost of fundraising efforts does not disproportionately consume budgetary resources.
Tip #2: Leverage a Charitable Vehicle
Donating cash directly from your estate may not have the long-term financial benefits of other forms of giving. Instead, cash donations only allow you to get a tax benefit if you itemize on your returns. For many people, this rules out any of the benefits they could have potentially seen.
Instead, donor-advised funds (DAFs) and charitable remainder trusts (CRTs) offer more tax benefits, along with access to advanced strategies. For example, both of these vehicles allow you to donate appreciated assets, such as stocks or real estate. This can represent a financial boon by allowing you to avoid capital gains taxes on the sale of those assets.
Not to mention, there are other benefits to using a trust for high-value assets, including your real estate. Using a CRT allows your loved ones to avoid probate, protects those assets, and shelters the property from several forms of taxes. All of this serves to maximize your gift to charity and relieve the potential tax burden for your beneficiaries, as it removes the asset from your gross taxable estate.
Plus, charitable remainder trusts provide a consistent source of income for your beneficiaries in addition to the charitable giving you have planned.
Tip #3: Work with Legal and Financial Experts
Once you determine that planned giving for nonprofits is part of the legacy you want to leave, it is best not to leave it to chance. It pays to work with professionals to ensure that everything about your estate is structured the way you want it before the unthinkable happens. You should work with both an attorney and a financial expert.
An attorney is often the first step in the process. They are responsible for ensuring that your trust, will, or charitable vehicle is structured and written in accordance with your wishes. They can help give your CRT or DAF the careful wording needed to benefit both beneficiaries and charities.
A financial professional will also be an essential part of your team. They ensure that your decisions are the wisest for you at this moment and for your beneficiaries down the line. Tax experts are going to look at tax implications and help you find the best way to structure your gift for your benefit and for the charity you choose.
Magellan Provides Services Under One Roof
Are you ready to start thinking about how you want to make a philanthropic decision? Part of the complex process of setting up a charitable remainder trust is coordinating the legal and financial services you need to ensure your gift is structured properly. Magellan can do it all under one roof, serving as your one-stop shop for estate planning.
Magellan offers comprehensive estate, financial, tax, and legal planning to ensure that you will maximize the gift that you want to make. We can assist you in forming and managing that trust over the long term, so you can rest assured that you will have a lasting legacy to leave behind.
Reach out to us today to learn more about how we can help you get started planning your giving!
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This material provided by Kevin Meaders was written by Axle Eight, a non-affiliate of Magellan Planning Group and Cetera Advisor Networks LLC.