Prepare to Leave a Legacy

At a time when non-profit organizations need resources the most, charitable giving is down. Americans either are focusing more on saving or diverting their assets elsewhere as a result of the recession.

Corporate and individual gifts make up most of a non profit’s budget, but bequeathing to a charity in a will also makes a difference. Charitable bequests made by individuals totaled $22.66 billion in 2008, according to Giving USA, a report compiled by the American Association of Fundraising Counsel. This is a decrease of 2.8 percent (6.3 percent when adjusted for inflation) from the previous year. Charitable bequests are estimated to be 7 percent of total giving.

If you’re interested in philanthropy, bequeathing money to a charity in your will is one of the best ways to give through your lifetime and beyond. If every adult in the U.S. drafted a will that included a bequest of just $100, billions of dollars would flow to charitable causes every year.

The following are some of the more common kinds of bequests.

• General bequests: Legacies left to certain causes that come from the general value of the estate. They’re made by designating a specific dollar amount, a particular asset or a fixed percentage of your estate.
• Specific bequests: When a particular item or property is bequeathed for a designated purpose, such as leaving instruments to a local school for its music education program.
• Residuary bequests: Leaving the residue portion of your assets after other terms of the will have been satisfied.
• Contingency bequests: Leaving a portion of your estate to a particular charity if your named beneficiary does not survive you.

There are many ways to leave a bequest to the charities you choose. For example, you can donate all or part of your retirement plan, IRA, 401(k), life insurance plan, stock portfolio or savings bonds or set up a trust.

If your portfolio is substantive enough to justify the legal costs incurred when establishing a charity trust, there are two types to consider:

• A charitable lead trust allows you to give the charity accrued interest for a set period of time. When the time has elapsed, funds revert to a beneficiary of your choice. You avoid being taxed on the funds while retaining control of the investment. A charitable lead trust is most effective if it is cash based.
• A charitable remainder annuity trust allows you to receive an annual interest payout from the non-profit in the form of an annuity. When your money is transferred to the charity, the board of directors will invest in diverse areas. Your annual payout will be a percentage of the existing value of the fund or a lump sum agreed upon when the cash was transferred.

While there is plenty of flexibility in a charitable trust, keep in mind that it cannot be dissolved and the annuity amount cannot be changed.

Whichever method you decide to use to bequeath to a charity, start by making a list of the organizations or causes you would like to support. Then make a detailed list of your assets and meet with a trust advisor or attorney who will guide you through the process.

You can reach Jim Baugh at 865-766-3017 or by e-mail at jim.baugh@pnfp.com.