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Resolved: Make Philanthropy Part of Your Estate Planning

Debbie ZateenyBy Debbie Zateeny, Partner, Zateeny Loftus, LLP

Women are well known for their generosity during their lifetimes: They are more likely to give—and to give more—than men in similar situations, according to research by the Women’s Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy.

Yet many women don’t initially include philanthropy in their estate plans or their retirement income plans. Perhaps our natural instinct as caretakers is to think of our loved ones first. Even so, clients should be asked whether they wish to consider planned giving options (such as charitable remainder trusts and charitable gift annuities), IRA rollovers to charity or specific charitable bequests at death.

How much stronger would your region be if all women resolved this year to make philanthropy part of their estate planning? Doing so may be simpler than you think. Here’s my step-by-step guide.

#1. Work with a trusted partner. Your wealth manager or legal advisor can help you draw up the necessary papers. The Philadelphia Foundation, which serves the Greater Philadelphia and Southern New Jersey region, can point you to effective organizations and help you develop customized strategies that carry out your wishes. (Pennsylvania is served by many community foundations, so that’s an option wherever you live in the Commonwealth.) If an organization you decide to support ceases to exist in the future, the community foundation will make sure your money supports a nonprofit doing similar work.

#2. Identify which causes or organizations you want to support through your estate planning. Are there specific causes you want to support through a legacy gift? Animal welfare? Arts and education? Humanitarian aid? Women’s causes? What does your experience tell you about who is doing effective work?

#3. Set up a charitable fund now that will continue over time. You and your advisor can work together to create your enduring philanthropic legacy, whether you want to support a set of causes, a scholarship or a particular organization. An endowed donor advised fund (DAF), for example, allows you to decide what to support while you’re alive, and then your children and grandchildren could make grants through the DAF to nonprofits that matter to them.

An endowed charitable fund is invested so that it grows over time, allowing you to distribute far more than the initial gift. It’s also less complicated and less costly than setting up a private foundation. Your heirs could add to the fund every year on a selected date such as your birthday over time—a meaningful way for them to remember you and what you value.

#4. Determine ways that you want to provide support in your estate. The possible options:

  • Leave a bequest in your will. It could be either a stipulated dollar amount or a percent of your estate. You also could designate an organization as the beneficiary of your IRA, 401K or your life insurance.
  • Donate tangible assets. You could donate real estate such as a shore home or valuables such as jewelry or works of art. They would generally be sold upon your death, with the proceeds going to the organization of your choice.
  • Establish a charitable gift annuity. This popular tool allows you to transfer funds to the cause of your choice and still earn income on the donation—some of which will be tax-free. What remains after your death supports the charity.
  • Set up a charitable trust. Through what is called a charitable remainder trust, you transfer assets to a trust and receive income for life; the remainder goes to your preferred cause or organization Alternatively, through a charitable lead trust, you can support an organization for a number of years or until your death, with what’s leftover going to your named beneficiaries. The income you receive from either type of trust can be either fixed or variable.

#5. Consider potential tax advantages. Laws can change, but each of the options outlined above currently has some tax benefits, either for you or for your heirs.

#6. Finally, talk with your loved ones about what you’re doing and why. Not only does this allow you to discuss your values, but you could also inspire them to make their own charitable estate plans.

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