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Personalize Your Plan

The concept of planning your legacy may seem a daunting task, but it can be a meaningful, enjoyable and deeply fulfilling process. Part of that process includes the personalization of your Legacy Plan based on your specific situation and goals.

While all Legacy Plans are unique, every Legacy should include the following three essential elements:

Beneficiaries: The beneficiaries are the nonprofit organization who will receive the funds. While you may decide one specific organization only, Legacy Plans often include two or more beneficiary organizations. Note that some nonprofit Legacy programs allow you to support specific projects or initiatives within the  organization, in which case you may choose to designate the funds towards a specific project.

Funding Structure:  Three common ways to fund your Legacy include lump sum at death, a gift over For a term of years (two, fiver or event twenty), or a permanent fund which distributes annual income to your beneficiary in perpetuity. The funding structure you choose will depend on what works best for you or your beneficiary.

You can also designate a specific program or programs withing an organization, or permit the funds to flow unrestricted so that the organization’s leadership can decide their best use.

Funding Amount:  The amount you decide the fund up to you – no amount is too much or too little. You may fund a specific dollar amount or specify a percentage of your estate. For many people, percentages work better because you may not know today the exact assets that will be available in your estate later. If you’re funding multiple organizations, you can specify the percentage that each beneficiary organization will receive. 

Once your gift is funded, your promise becomes a reality and your funds can flow to all the organization you choose and individuals they support.

Legacy Tax Strategies

The way charity fund transfers are taxed is specific to each country.

If you live in the United States, the estate tax only impacts those who are leaving behind more than $5.6 million per person, or $11.2 million per couple. Because of this, most people are no longer going to be affected by the U.S. estate tax (although those who are may end up paying the 40% rate).

Bequest, which are funded through either through the donor’s will or living trust and take effect at the time of death, are still the most common funding vehicle. For most people, bequests remain the ideal choice for Legacy gifts. However, as with all funding options, the way bequests are taxed may not be best choice depending on the specific situations.

In specific situations, for example, it could make sense to incorporate individual retirement accounts (IRA) beneficiary designation together with a charitable remainder trust. Generally speaking, your withdrawals from traditional IRA accounts are subject to standard income-tax rates. In certain instances, since most other assets will transfer to heirs at the time of death are won’t be subject to income tax, there may be a substantial tax benefit received by funding your philanthropic gift through your IRA in place of a bequest.

It’s always recommended that that you always consult the advice of your attorney or advisor when determining the best approach to Legacy Planning.

Gift Funding Options

Gift Types: There are a lot of options when it comes to choosing the right funding strategy for your Legacy. While most gifts are made as a bequest, it’s helpful to know your options. As always, make sure to consult with your advisor when determining which Legacy Gift structure makes the most sense for you.

Bequests and Estate Plan Gifts: By far the most common gift type, bequests can be made by including a statement in your will or living trust that names your beneficiary organization. Bequests can be made as a specific dollar amount or as a percentage of your assets. You can also name your beneficiary of a retirement plan or life insurance policy. The amount left to the university (or any charity) can be expressed as a dollar amount or as a percentage of the assets to be given.

Life Income Gifts: Life income gift enable you to make a Legacy gift while, at the same time, providing income to either yourself or another for a set time period before your beneficiary can use the funds. Life income gifts can be made with securities, cash, or real estate. Your beneficiary will or trustee will manage the investment and distribute income to you and/or your designated beneficiaries for the rest of your life or a term up to 20 years.

Charitable Gift Annuities: A Charitable Gift Annuity enable you (or someone else) to receive a fixed amount annually for life.

Donor Advised Funds: Donor advised funds enable you to make tax-deductible gifts to your nonprofit beneficiaries by establishing a fund now, then advising your nonprofit beneficiary on the use of the gift at a later date. You may support multiple nonprofits through a single Donor Advised Fund.

Charitable Remainder Unitrusts and Lead Trusts: You are able to establish a trust from which you (or others) will receive variable payments annually for life or set number of years. Then, at the end of the term, the remainder in the trust assets will go to your nonprofit beneficiary. With a a charitable lead trust, you’ll makes annual payments to your nonprofit beneficiary for a set period of years, with the remaining assets going to your children (or others).