Estate plan gifts, often planned or legacy gifts, are charitable donations made as part of an individual's estate planning. They offer a unique opportunity for donors to make a lasting impact, even beyond their lifetimes. Not only do these gifts benefit charitable organizations and causes, but they can also provide substantial tax benefits for the estate or its heirs. Here's a closer look at some of the most common types of estate plan gifts and their advantages:
Bequests
The most straightforward form of an estate gift, a bequest, is simply a provision in a person's will or living trust to leave a portion of their estate to a charitable organization.
Specific Bequest: Donors give a specific amount or a particular asset.
Residuary Bequest: Donors give all or a percentage of the remainder of their estate after other obligations are met.
Contingent Bequest: The charity receives only a part of the estate if certain conditions are met (e.g., a primary beneficiary does not survive the donor).
Charitable Gift Annuities
This is a contract between a donor and a charity. The donor makes a gift to the charity in exchange for a fixed, lifelong income stream. Upon the donor's passing, the remainder of the gift goes to the charity.
Charitable Remainder Trusts (CRT)
In a CRT, assets are placed in a trust, providing a fixed or variable income to the donor or other beneficiaries for life or a specified term. After the term ends, the remaining assets go to the charity.
Charitable Lead Trusts (CLT)
The opposite of a CRT, a CLT provides a fixed or variable income to a charity for a specific number of years. Once the term concludes, the remaining assets are transferred back to the donor or named beneficiaries.
Retirement Plan and Life Insurance Beneficiaries
Donors can name a charity as the beneficiary of their retirement accounts (like IRAs) or life insurance policies. This is an efficient way to give, as these assets can be heavily taxed if left to individual heirs but pass tax-free to non-profit organizations.
Retained Life Estates
A donor can gift their residence or property to a charity but retain the right to live in or use it for their lifetime. The donor receives an immediate tax deduction, and the property goes to the charity upon their passing.
Benefits of Estate Plan Gifts
Tax Advantages: Many planned gifts provide tax benefits, either immediately (as in the case of certain trusts) or for the estate/heirs later (as with bequests).
Income Generation: Some estate gifts, like charitable gift annuities or CRTs, can provide a stable income for the donor.
Flexibility: Planned gifts can be revised (unless irrevocable) to account for changes in financial situations, family needs, or charitable preferences.
Legacy: Perhaps the most compelling advantage is the ability to leave a lasting legacy, ensuring that the causes and organizations one cares about are supported well into the future.
Conclusion
Estate plan gifts are a profound expression of one's values and priorities. When contemplating such a gift, working with estate planning professionals and financial advisors is wise to ensure that your charitable intentions are clearly articulated and align with your overall financial and estate goals.
