Question: Can your heirs get by with just 95% of your estate?

February 18, 2021

 

February starts what I hope is only a six-week crabby season.  Is it a coincidence that the groundhog declaring six more weeks of winter also launches tax preparation season?

 

We’re in that time of year when we focus on our finances.  Paying off credit cards from Christmas shopping.  Getting W-2s and other tax documents together.  Staring at the W-2 because we can’t believe we paid that much in taxes.  You can offset taxes paid via charitable giving and deductions, but that was my December column.

 

Instead, I’m hoping this season of finances also causes many of us to think about our estate finances.  You don’t have to be a millionaire to have an estate.  But you do have to talk with a professional about what you plan to leave to your kids, simply because some assets are taxable to your children and some are not.  For those taxable gifts, please consider leaving them to charity instead.

 

When thinking about gifts via your estate, please consider “the 4 Cs – children, college, church, and community.”  If you plan to leave part of your estate to college, church, or community, we can help.

 

Most of us will leave money to charity with no instructions or restrictions.  Some may think, “For as little as I plan to give them, is it really worth it to be picky about how they use it?”  Maybe not, but we have many donors who have set up their estate and donor-designed funds to support little things that they don’t want to go away.  Baums and Petersons set up a fund solely to support the choir/music program at the First Presbyterian Church in Morris.  We have a number of endowments specifically for Immaculate Conception School.  An anonymous donor set up an endowment to support Boy Scout Troops 469 & 471.  Another anonymous donor set up an endowment to forever fund the Hands-On 8th Grade Career Fair.  Here in rural Grundy County, the little things make a difference.

 

Question: Can your heirs get by with just 95% of your estate?  If so, the charities of Grundy County ask you to dedicate just 5% of your estate to the charity(ies) of your choice.  You can gift to them directly or you can use one of our donor-designed funds:

 

Donor Advised Funds (DAF) are the most flexible – donors fund it now, take the charitable deduction now, and grant from it at their leisure.  We allow donors to name up to two generations of grant advisors, which makes it function like a family foundation.  Children and grandchildren can grant from your DAF after your lifetime, which is a great way to leave a family legacy.

 

Designated Funds automatically grant to the one charity that you designate in an amount and date of your choosing.  If you have more than one charity in mind, you can set up one Designated Fund for each.

 

Field of Interest Funds are pooled funds for donors with similar interests.  These are for when you want to pool your donations to help a particular issue or geographic area.

 

Scholarship Funds can be set up to assist students of all ages, background, geography, or field of study.  You can help a student go to trade school, finish a degree, return to school in middle age, or pursue a certificate.  The options are as varied as the educational opportunities now available.

 

If you are leaving money in your estate to a charity, please make sure you list their legal name and EIN number.  So many nonprofit names are similar, or they have a parent organization name, so please be sure to check.  It’s the same with churches – please be specific or it might end up going to the larger organization.

 

Also, you don’t have to tell a charity that you are naming them in your estate, but we do like to know.  And a wise charity will have a plan for when unexpected (and sometimes large) gifts arrive.

 

When leaving money to a charity, you can either name a specific dollar amount or you can assign a percentage to each charity.  To see a sample will and the language used, please visit https://cfgrundycounty.com/philanthropists/ to view excerpts from Jim & Carol Baum’s will as it relates to charity.  As you can see, they are leaving all of their charitable gifts to us to administer, but you don’t have to – you can list your favorite charities to receive gifts directly, assign a percentage, and be done.  You can also leave instructions for how you would like the charity to use your gift.

 

Why 5%?  In 1999, Paul Schervish at Boston College prepared the first Transfer of Wealth study.  In it, he outlined the vast wealth across the entire nation that will be transferred to the next generation over the next 50 years through estates.  He also discussed how that vast wealth will transfer to heirs who no longer work and live where they grew up.  Then he wrapped it up with the idea that if charities can capture just 5% of that vast wealth in endowments, hometown communities will have millions at local charities to continue their work.  Just 5%.

 

So.  Can your heirs get by with just 5% of your estate?  If so, please gift it to local charities in endowments so that the county where you lived, worked, worshiped, and raised your children will continue to serve our residents long after your lifetime.

 

To learn more about the vast wealth in Grundy County (yes, here), please view our 4-minute video at https://cfgrundycounty.com/

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