By Gina M. Barry
Bacon Wilson P.C.
Do you donate money to charity each year? Perhaps you donate to an organization dedicated to finding a cure for a disease that has affected your life or the life of a loved one. Maybe you choose to benefit organizations that support positive growth in our youth, such as the YMCA. If you are an animal lover, you might support the local animal shelter or abuse prevention organization. Most everyone has a cause that is near and dear to his or her heart.
Continuing your good works
If you are charitably inclined but concerned that your generosity might impact your ability to comfortably support yourself for the rest of your life, consider making charitable gifts that take effect only when you have passed away. Voltaire, a French Enlightenment writer and philosopher, once said, “The man who leaves money to charity in his Will is only giving away what no longer belongs to him.” By providing for charity in your will, you can ensure that your assets will be available for your needs, and support your favorite cause if assets remain after your passing.
When you make a gift to charity, especially a significant sum, you can designate how and for what purpose the money is spent, ensuring your money will be used for the purposes you designate. Or, you may choose to contribute to a charity generally and leave the determination of how to use the money to the charity’s governing board. Another option is to establish a fund in your own name, leaving a legacy that lives on beyond your lifetime.
Charity and your heirs
In addition to a favorite charity, most people include family members or friends in their will. Leaving a specific dollar amount to a charity in your will may unintentionally divert your remaining funds away from the family or friends you also want to benefit. Unless you are leaving your entire estate to charity, consider leaving a percentage of it to your favorite charity, with the remaining percentage being divided between family members and/or friends. By leaving a percentage, you can be certain that regardless of how large or small your estate may be, your family, friends and the charity will receive proportionate shares reflecting your wishes.
The potential tax benefit
Leaving money to charity may also help to preserve your estate and allow for a greater amount of assets to be passed to your family or friends. Presently, the Massachusetts estate tax threshold is $1 million, and the federal estate tax threshold is $5.43 million. If your estate exceeds the applicable thresholds, estate tax must be paid and the amount remaining for your heirs reduced. Any amounts left to charity will reduce the value of your estate, reducing or eliminating estate tax. Further, should your estate contain highly appreciated assets, consider donating these assets to charity. A charity can generally avoid paying income tax when redeeming these assets. Your estate would incur income tax for the same redemption.
Instead of leaving money to a charity in your will, you may name a charity as a beneficiary of any asset with a designated beneficiary. Most commonly, a favorite charity is named as the beneficiary of life insurance or retirement plans. It is also possible to benefit a charity using various types of trusts. As every estate plan is different, it is important to choose the most beneficial option when determining what asset to leave to charity, what amount to leave to charity and what planning technique to use to do so.
Charitable giving can be extremely rewarding. Your donation could fund research that cures an incurable disease, builds a neighborhood playground that bears your name or provides medical care for an abused animal in desperate need of rehabilitation.
However, your donation can only meet these needs if you actually make the donation. You can’t take it with you . . . consider charity.
Gina M. Barry is a partner in the regional law firm of Bacon Wilson, P.C., Attorneys at Law. She is a member of the National Association of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association. She concentrates her practice in the areas of estate and asset protection planning, probate administration and litigation, guardianships, conservatorships and residential real estate. She may be reached at 413-781-0560 or gbarry@baconwilson.com.
