It’s easy to think of philanthropic legacy giving — donating some percentage of your wealth to charity when you pass on — as something reserved for the 1%. Warren Buffett can “afford” to give 99% of his money to charity because, based on his current net worth, he’ll still be leaving his family approximately $1 billion.
While few of us are in that position, there’s no reason to exclude charitable giving from our estate planning. And yet, many of us are doing just that. Although 60% of U.S. households donate to charity every year, 86% of charitable donations made at death come from the wealthiest 1.4%. Put another way: we give during our lifetime, but we don’t think to give as part of our legacy.
There are reasons for this disconnect. To begin with, we don’t like to think about death, so a surprising number of us avoid estate planning completely. Caring.com’s 2020 Estate Planning and Wills Study found that the number of adult Americans who have a will or estate plan has dropped 25% since 2017, and procrastination and avoidance are likely contributors to that trend.
Here are some insights on how to make sure you include your philanthropic inclinations in your estate planning.
1. You are passing on your values, not just your money
Consider this definition of legacy: “something that someone has achieved that continues to exist after they stop working or die.”
That perspective changes the entire conversation around legacy giving. It shifts estate planning from a somber realization of the end of life to a positive way to leave lasting memories behind.
What charities do you support now? What organizations and causes do you think will be most important and impactful for the people you care about — your children, their children, your loved ones?
Asking and answering those questions can give you real insight into who you are and what you value, regardless of how much money you have.
2. Your support will encourage others to give
Charitable legacy planning can provide the organizations you care about with additional support, similar to challenge grants during fundraising drives. Nonprofits have created legacy societies to recognize, celebrate, and publicize the names of individuals who included their organizations in their estate planning. Your support becomes a public declaration of your belief in an organization’s mission and vision, and can inspire others to take action.
Legacy societies also connect you to like-minded people and allow you to appreciate the impact of your philanthropy. For example, the Kennedy Center Legacy Society, whose mission is “to promote dignity, empowerment, and opportunity for all individuals with disabilities and special needs,” lists its members on its website and publications and invites supporters to an annual endowment event. Legacy planning can enrich your life now.
Studies also show that people who are intentional about charitable legacy planning give, on average, three times the amount they’ve contributed throughout their lifetime, making it one of the most impactful decisions you can make.
3. Charitable legacy planning brings families together
Include your family early on in your charitable legacy planning discussions. That will avoid any future surprises and, more importantly, reinforce your belief in the importance of private giving.
These discussions can also bring us closer together. As family units become increasingly diverse and nontraditional, we can't assume that our current priorities and future intentions are understood by all.
Sharing your thoughts and motivations about your legacy plans can open rich avenues of dialogue. Use sources like Charity Navigator to ensure that the organizations you are considering have a track record of maximizing gifts.
4. Legacy planning can be simple
You don’t need fancy legal or financial instruments to include charitable giving in your estate planning. Unless you have complicated and extended assets, your contribution can be made through traditional means, including:
- Retirement funds
- Life insurance policies
- Physical assets
There are tax implications that can maximize the gifts you leave for all of your beneficiaries. For example, assets from an IRA or 401(k) plan are subject to income tax when bequeathed to an individual, but are tax-exempt when left to a 501(c)(3) charity. Engaging legal and financial professionals who have the credentials and experience in estate planning is often the best way to understand which options are best for you, your family, and the causes you care about.
Why not maximize the impact you can have, now and in the future?
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