Estate planning allows you to decide how your assets should be handled after your death. While many people focus on leaving property and financial assets to family members and loved ones, charitable giving can also be an important part of an estate plan.
If there is a charitable organization or cause that is meaningful to you, including it in your estate plan can help ensure that part of your legacy continues to support that organization in the future. There are several ways to leave money or other assets to a charity, and the right approach can depend on your goals, the type of assets you own, and how you want your estate to be distributed.
What Is Charitable Giving in an Estate Plan?
Charitable estate planning involves including a nonprofit organization or charitable cause as part of your plan for distributing assets after your death.
You may choose to leave a specific amount of money, a percentage of your estate, or a particular asset to a charity. Some people include charitable giving alongside gifts to family members, while others make charitable organizations a more significant part of their estate plan.
Your estate plan can provide instructions regarding which organization should receive the gift and how the gift should be distributed.
You Can Leave a Gift Through Your Will
One of the most common ways to leave money to a charity is through a will.
You can include instructions stating that a specific amount of money, a particular asset, or a percentage of your estate should go to a charitable organization after your death.
For example, your will could provide that:
- A specific dollar amount goes to a charity
- A percentage of your remaining estate is distributed to a nonprofit organization
- A particular investment or other asset is given to a charitable organization
This type of gift is often referred to as a charitable bequest.
It is important to clearly identify the intended organization in your estate planning documents to help reduce the possibility of confusion or disputes later.
Can You Include a Charity in Your Trust?
A trust can also be used to make charitable gifts.
Depending on how your estate plan is structured, a trust may provide instructions for distributing assets to family members, charitable organizations, or both.
For example, you may establish a trust that provides for certain beneficiaries while also directing a portion of the remaining assets to charity.
Trust planning can offer flexibility, particularly for individuals with more complex estates or specific goals regarding how and when assets should be distributed.
An estate planning attorney can help determine whether incorporating charitable giving into a trust may be appropriate for your situation.
Naming a Charity as a Beneficiary
In some cases, you may be able to name a charitable organization as a beneficiary of certain accounts or assets.
Depending on the type of account, beneficiary designations may be available for assets such as:
- Retirement accounts
- Life insurance policies
- Certain financial accounts
Beneficiary designations can be an important part of your overall estate plan because they may determine who receives an asset independently of the instructions in your will.
For this reason, it is important to review beneficiary designations regularly and make sure they are consistent with your current estate planning goals.
Leaving Specific Property to a Charity
Charitable gifts do not always have to involve cash.
Depending on your circumstances, you may want to leave other types of property to a charitable organization. This could include investments, real estate, personal property, or other assets.
Before leaving a specific asset to a charity, it is important to consider whether the organization is able and willing to accept that type of property.
For example, leaving real estate or another complex asset may involve additional considerations regarding valuation, ownership, maintenance, or eventual sale of the property.
Planning ahead can help avoid creating unnecessary complications for both your estate and the charitable organization.
How Charitable Giving Can Fit Into Your Family Estate Plan
Some people worry that including charitable gifts in their estate plan means they cannot also provide for their family.
However, charitable giving can often be incorporated alongside gifts to children, spouses, other relatives, and other beneficiaries.
You may decide to leave a specific amount to charity while dividing the remainder of your estate among family members. Another option may involve leaving a percentage of the remaining estate to a charitable organization after other gifts have been distributed.
The right structure depends on your priorities and the goals you have for your assets.
Make Sure the Charity Is Properly Identified
When including a charitable organization in your estate plan, it is important to use accurate information.
Many organizations have similar names, and some charities may operate through larger parent organizations or separate legal entities.
Providing clear identifying information can help ensure that your intended gift goes to the correct organization.
It is also a good idea to review your estate plan periodically. Charitable organizations can change names, merge with other organizations, or cease operating over time.
If circumstances change, updating your estate plan can help ensure that your charitable goals are still properly reflected.
Consider What Happens If the Charity No Longer Exists
One issue to consider is what should happen if the charitable organization you named no longer exists when your estate is distributed.
Without clear instructions, this situation could create uncertainty regarding where the gift should go.
You may choose to include alternative instructions in your estate plan. For example, you could identify another organization or provide guidance regarding a similar charitable purpose that should receive the gift.
Discussing these possibilities with an estate planning attorney can help create a more flexible plan.
Review Your Estate Plan as Your Priorities Change
Your charitable giving goals may change over time.
You may become involved with a new organization, decide to support a different cause, or experience changes in your financial circumstances. Major life events can also affect how you want your estate to be distributed.
Reviewing your will, trust, beneficiary designations, and other estate planning documents periodically can help ensure that they continue to reflect your wishes.
An outdated estate plan may no longer accurately represent the people and organizations you want to support.
Work With an Estate Planning Attorney in Illinois
Including charitable giving in your estate plan involves more than simply naming an organization.
Your charitable goals should work together with the rest of your estate plan, including your wishes for your family, property, financial assets, and other beneficiaries.
An experienced Illinois estate planning attorney can help you understand your options and create a plan that reflects both your personal and charitable goals.
Conclusion
Leaving money or property to a charitable organization can be a meaningful way to create a lasting legacy. Whether you want to make a specific gift, leave a percentage of your estate, name a charity as a beneficiary, or incorporate charitable giving into a trust, planning ahead can help ensure that your wishes are clearly documented.
By reviewing your assets and working charitable giving into your overall estate plan, you can support the causes that matter to you while continuing to provide for the people you care about.