Charitable Conversations in Estate Planning

When planning financial affairs, most people are primarily interested in how they can improve their quality of life. They want to be able to live comfortably, to take care of their family, and to “make a difference.” When planning for their estate, transferring wealth means for many not only transferring financial capital but also passing on family values and traditions. Professional advisors often focus too much on their clients’ financial assets and too little on their personal or social values.  Meaningful discussions between individuals and their advisors around charitable giving can help connect these goals.
Clients, for example, wishing to pass family values to the next generation or to perpetuate the family’s name may consider establishing a charitable fund during their lifetime or from their estate. One type of fund, a multigenerational Donor-Advised Fund, allows children and grandchildren to carry on the family tradition of charitable giving by letting them decide which organizations to contribute to. Other types of funds let donors support their favorite charitable organizations or causes in perpetuity. A charitable fund can be named after an individual or a family thus serving as a permanent reminder of a past generation’s care for the future generation’s wellbeing.

Many believe that charitable planning is only for the wealthy, for older people, too difficult to implement or only for the charitably inclined. However, it can be financially attractive for everyone and easy to carry out. Contributing to a charitable fund qualifies for a charitable tax deduction. Individuals concerned about income for their loved ones may consider Charitable Gift Annuities which create charitable tax deductions for donors and partially tax free income for beneficiaries. If charitable contributions or annuities are funded with appreciated assets, the donor may avoid capital gains tax. This planning technique is especially attractive when the asset contributed to charity was not previously producing any income for the donor.

These are just a few examples of how charitable conversations in estate planning can help clients transfer their entire wealth, both financial and human.