When movie producer David Gundlach died suddenly from a heart attack in October 2011, few people knew he intended to leave his massive personal fortune to a local charity in his hometown of Elkhart, Ind. Gundlach gave away all of his $125 million to the Elkhart County Community Foundation.
One doesn’t have to be a famous movie producer or sports star to donate assets to charity in wills. Individuals sometimes make the choice to leave a portion of their estate to a favorite charity to create a legacy that helps the unfortunate. Such a decision may surprise family members, so it may be wise to discuss plans when drafting wills and ensuring that the correct method of bequeathing estates to charities is followed.
When a will is written, it is typically in a person’s best interest to consult with an estate-planning attorney prior to making any decisions. When working in conjunction with a financial planner, an attorney can help you grow your estate and ensure your assets will be distributed according to your wishes.
When writing a will that includes charitable donations, be very precise in the verbiage and specify your wishes and intents so they are carried out correctly. Just like feisty family members, charities can be quite aggressive in their pursuits of funding, particularly if they have reason to believe that money will be coming their way as part of a person’s will. In order to prevent unnecessary battling among attorneys, it is best to have all of your wishes clearly explained and spelled out so the people and organizations who matter the most to you receive the money – and that you’re not simply funding legal bills.
Leaving money to a charity can have financial advantages for the other benefactors of your will. A bequest to a charity reduces the size of your estate, meaning less money is subject to estate taxes. While you cannot benefit from an income-tax deduction while you are alive, you will cut down on taxes afterward, which would normally take away money that was left to family and friends.
Despite the advantage to bequeathing money to a charity, it is not something that is very common. According to Russell N. James III, a professor at Texas Tech University who conducted a study that analyzed 20,000 Americans over the age of 50 from 1995 to 2006, only around 9.5 percent of those who donated more than $500 a year to charity planned on making a charitable bequest after their deaths.
Those who want to save money in a tax-efficient way upon making a charitable donation can choose to donate an IRA account to charity. This will save your heirs money in income taxes that they otherwise would have to pay when the IRA is distributed. There are some gray areas in doing this properly, so it is best to consult with a tax adviser.