Charitable Giving as a Tool in Estate Planning
by Stephan J. Lipskis, Esq.
The rate of charitable giving in the United States is consistently among the top among the world. Over two-thirds of the United States population donates to charity. Yet, when many individuals confront their estate planning, they become so overwhelmed with the required decisions that they forget about causes they have supported throughout their life. Including a beloved charity (or charities) in your estate plan can help simplify administration of the estate, lower estate tax burden (in the case of high net-worth estates), provide donations of needed tangible items to a charity, and further the relationship an individual (and their family) has with their chosen charity. It is important to realize that including charities in an estate plan is not solely a tool for the extremely rich, but also can benefit less affluent individuals.
Charitable bequests are most often thought of as a means for very wealthy individuals to leave a legacy to an institution and perhaps reduce estate tax burden. Use of charitable trusts, bequests, and other donation techniques can provide benefits for either estate tax planning or income tax planning and should be considered as a means to reduce those taxes. The main benefit of doing so is that donating to charity allows the individual to direct who spends those funds, rather than the United States Government. This ability to help their favored causes in their community appeals to many individuals.
A common refrain heard when individuals are asked whether they would like to include a charitable bequest (gift) as part of their estate plan is “I don’t have enough money to do that!” While that response is understandable for many of us, it also does not contemplate ways in which a charitable beneficiary would help even in a small estate. For instance, if none of the named takers under a will survive the client, then the balance of the estate will pass according to Virginia law. Under Virginia law, this means a search will begin for relatives by degree of relationship, until a beneficiary is found. Often this search can be difficult and costly, which adds to the cost of the estate’s administration. Usually, this type of search results in estate funds passing to distant family members who had little to no relationship with the deceased. Distant takers are often referred to as “laughing heirs” because they are not grieved by the loss of the deceased individual they did not know. Substituting a charity as a residuary taker prevents “laughing heirs” from taking, eases the administrative cost, and allows the direction of funds to a cause the individual cares about. Importantly, this type of inclusion of a charity does not diminish the funds that the individual wishes to leave to beneficiaries who survive them; it merely provides an option in the case that none of the stated beneficiaries are alive.
Charities often provide an option for assets that are undesired by clients or family members. For instance, some charities are willing to accept real estate and take on the administrative burden of either using it or selling it. This can greatly reduce the time required to administer an estate because the real property is quickly handled and funds for the estate are not tied up in marketing and selling the property. It is important, however, to work with an experienced estate planning attorney because some charities may be unwilling or unable to accept gifts of real property. Their inability to accept the real property directly does not mean they cannot be benefited, rather a discussion with charity is required to find a mechanism for performing the gift.
Regardless of net worth, charitable institutions are logical recipients for gifts of collectibles, art, vehicles, and other items that will be used or displayed by the charity. These items can provide a great income tax deduction, or merely provide a useful purpose for property for which the family of an individual has none. Planning ahead and discussing where your collectibles and tangible property should go establishes that your property will be valued for years to come.
Including charitable planning as part of overall estate planning should further communication with an individual’s family and their preferred charity. Charities frequently receive unexpected bequests, but most charities will tell you they would prefer to have an opportunity to thank the supporter for such generosity. Furthermore, including family members in the process allows for later generations to understand the relationship with the charitable cause and why giving is important to the individual client.
Inexperienced planners will often create problems that will go unseen until the death of the donor. For instance, an inexperienced planner may not sufficiently state the purpose of a gift or accurately state the name of the charity. The former causes the money to be spent for an undesired purpose and the latter could cause the gift to fail or even create litigation between charities (for instance a national branch of a charity may claim a right to a gift where the donor meant, but did not clearly state, that the local branch should receive the gift). Other examples of errors include overly restrictive charitable bequests that create an excessive administration burden on the charity. Such administrative burdens reduce the benefit the charity can provide with the donation. An experienced attorney will work with a planned giving officer to: make a donation work for both the individual donor and the charity; keep the purpose of the gift limited within the intent of the donor but flexible enough for the charity to administer the donation; and (most importantly) make sure that the charity is properly named. Importantly, none of the correct planning steps mentioned above necessitate that client confidences (or even the client’s identity) be revealed.
When you consider creating or updating your estate plan, consider not only those individuals that have contributed to your life, but the causes and institutions that have as well. If you are inclined to donate to a charity under your estate plan, a large number of tools become available, that otherwise would go unused.
Ask Kit Kat – An Unusual Pet
Hook Law Center: Kit Kat, do skunks make good pets?
Kit Kat: Well, if you like an unusual pet, they can be very nice pets indeed. It is important to get a skunk at a young age, and train him/her in routines. They are able to co-exist with dogs and cats. Some will even spend time on your lap. They can be litter trained, but unlike cats, they do have a tendency to chew on things. It is best, therefore, to provided them with small, chew toys. Skunks have a life span of 8-12 years. They can vary in size from approximately 15-37 inches. A good adult weight is 8-12 pounds.
First, check the laws of your state regarding exotic animals. In Kentucky, for example,the law requires that you only can get one from a breeder within the state, and you must have a wildlife permit, which cost about $75 for a duration of 3 years.
Next, know that skunks are resourceful eaters. Leave the food out that you want them to eat, but don’t let them demand feed by leaving out 2-3 days’ supply. If you leave leftovers on the table after a meal, you may just find them cleaning up the plate! They should be fed a diet of vegetables and meat-dairy in the ratio of 40% to 60%, respectively. They also like variety, so if you’re thinking they are an easy pet to keep, think again. Their favorite vegetables are broccoli, cauliflower, squash, zucchini, green peppers, and turnips, to name a few. NEVER feed them cat food. It contains too much protein and fat.
Skunks also require yearly veterinary care. They should be neutered/spayed between 4-6 months old ,and have their scent glands removed, so they can no longer spray when frightened. They should not be de-clawed, since the front claws are partly used for eating. Vaccinations do not include rabies, but they can receive the distemper/parvovirus shot commonly given to dogs and cats.
So, if you would like an unusual pet, a skunk might be right for you. Just be aware, they might be a little more time-intensive than your normal canine or feline companion. (http://www.petresearch.net/content/owning-pet-skunk submitted by Portia M on 7/25/2011)
- September 9, 2015 – Andrew H. Hook will be speaking at a Virginia Continuing Legal Education seminar. Click Here To See Complete List
Distribution of This Newsletter
Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at email@example.com or fax us at 757-397-1267.