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How to Make Charitable Giving Part of Your Estate Plan: Part 1

How to Include a Charity in Your Estate

There are actually a number of different ways in this can be achieved however, the most basic option for a will or a trust is to simply designate a portion of your estate to a particular charity. This can be done in the form of a fixed cash amount or as a percentage of your estate. It’s quite easy to do but don’t miss the basics – make sure you have the correct full name of the charity and the address of that charity and specify how or where that gift is applied: whether it is for general charitable purposes, a scholarship program, holiday food drives, or whatever else it might be. No detail is too small.

Important Considerations

A lot of people think in terms of cash amounts as it is fairly straightforward. It is recommended, however, to instead consider instead thinking in terms of percentages – none of us know what we might have at the end of the day and when we are no longer here. The benefit of structuring your estate in this manner is that if you designate 10% of your estate to go to a specific charity, regardless of what your estate ends up being, you can rest assured that 10% of it will go to that charity.

Another important factor to consider is that some of the larger charities will have a process or person in place to work with you on achieving your charitable goals, especially in the cases of a charitable trust or annuity. In some cases, these charities may be able to assist you by setting up the necessary paperwork in ways that a smaller charity might not.

Make a Backup Plan

When planning for your estate to include a charitable gift, it is also important (especially with smaller charities or non-profits) to consider the possibility that the organization might not exist in the future. Well-established charities that have been around for a long time are generally safe, but it is a valid concern to consider if, for any reason, a smaller or newer organization might not exist in the future. There is a legal doctrine called cy pres (derived from an old form of French and translated as “so close”) that has to do with when a charitable bequest fails because the organization doesn’t exist, so it seeks to determine the closest thing that can be done. The other time this doctrine comes into play is if, for example, you make a very specific reasoning for the bequest or a very targeted place where that money is supposed to go. These are important considerations and identifying a backup (or even giving your trustee or executor the ability to choose the next best thing) will be helpful in ensuring your wishes are executed as intended.