Donating to charities is one of the easiest ways to support a cause you believe in after your demise. People often donate to charities to help and honor a loved one or make a positive change in the world. Besides, donating money can also reduce income taxes during your lifetime and estate taxes after you pass on. Therefore, if you want to include charitable donations in your Will, you must plan accordingly. Planning will help you make the most out of the tax-saving benefits and donate to the most deserving charitable organizations and causes. However, before we discuss the method to include charities in your Will, let’s discuss the reasons why donating to charities is a good idea.
Why donate to charities in your Will?
Leaving a bequest for charities is a noble task, and many factors can motivate you to take this step. Some reasons include:
It costs nothing. Any money you have today won’t matter once you leave the world. Once you have secured the future of your loved ones, consider donating something to a meaningful cause. You will be able to make one final impact after you depart.
You create a legacy. Life is temporary, and so are our memories. However, how you choose to change and impact someone else’s life may be remembered for a long time.
You get to invest in a cause you are passionate about. Whether providing free healthcare to marginalized communities or standing up against animal cruelty- every cause is worth being passionate about. Therefore, leaving charitable giving to ASPCA and other non-profit organizations in your Will allows you to help the cause you believe in and make a difference in the world.
These are few reasons why you should consider donating to charities in your Will. Now to the important question- how can you contribute to the cause you are passionate about? We’ve listed down four steps.
1. Decide what you want to leave for charity
Before you name the organization as a beneficiary in your Will, you must first decide what you want to donate. For this, you have a couple of options, such as:
- Leaving a certain percentage of your assets, a particular amount of money, or specific gifts
- Donating appreciated stocks to the organization, which will provide long-term capital gain
- Donating leftover assets to the charity once primary beneficiaries have got their share
What you decide to donate from these options will determine how you include the organization as a beneficiary in your Will. Therefore, the next step is to name the charity as a beneficiary.
2. Decide what kind of beneficiary the organization will be
There are three kinds of beneficiaries in a Will. The primary beneficiary receives whatever gifts or assets you assign for them in your Will. A secondary beneficiary inherits the estate in case the primary beneficiary also passes away. The third is a residuary beneficiary. A residuary beneficiary receives whatever gifts and assets are left after distribution to the primary beneficiaries. Most people prefer to name charitable organizations as residuary or secondary beneficiaries in their Will.
3. Name the charity as a beneficiary in your Will
Now that you have decided what gift, stocks, or a percentage of your assets you want to donate, you must add them as a beneficiary and make it official. Doing so ensures that gifts and assets you decide to leave behind are distributed as per your Will. Hence, if the executor liquidates has to liquidate the assets, the organization will get its share.
To add the organization as a beneficiary in your will, you must include details such as:
- Full name of the organization
- Complete address
- The organization’s employer identification number (EIN)
The IRA issues a unique number to each business entity, which is known as EIN or IRS EIN Tax ID. Mentioning the EIN is essential since there can be many different charities that operate under the same name. But the employer identification number helps in distinguishing which one you are referring to.
4. Let the charity know about your gift
Non-profit organizations and charities typically run on donations and funding. Therefore, if they know about your intentions to donate in advance, they can plan their future activities accordingly. It also helps create an atmosphere of transparency in case someone tries to mishandle your estate and swindle the beneficiary after your demise. For this reason, most non-profit organizations have a separate form by the name of “legacy giving” or “plan to give” on their websites. The document helps to notify them of your intentions.
Conclusion
Living a charitable life is honorable, but leaving a legacy after your demise can have a different impact altogether. For starters, you don’t have to worry about affecting your day-to-day finances, which gives you the room to make hefty donations as a grand farewell when you pass on. This article outlines a few steps to leaving a charitable bequest. If you intend to do so, follow them with proper legal help.
