You are most likely charitably minded. Studies show that more than 80 percent of Michigan residents give annually to nonprofit charitable organizations. However, have you ever thought about what happens to those nonprofits after you are no longer around to make those annual gifts. The charity which is close to your heart can no longer rely upon your support.
Although more than 80% of Michiganders are charitably minded during their lifetimes, less than 10% include charities in in their wills or other estate plans. There are a variety of tools and techniques that you can use to plan your charitable gifts after you are gone. You could name your favorite charities as beneficiaries of your will, trust, life insurance policy, IRA or other retirement plan.
Because charitable contributions get favorable tax treatment, with these planned charitable gifts, your estate or trust may get a deduction. One organization, Leave A Legacy® is a national group of professional advisors and nonprofit groups, including social service and arts organizations, churches, hospitals and educational institutions who encourage charitable giving.
Locally, this group works through Leave A Legacy Southeast Michigan. Leave A Legacy does not solicit gifts for any particular organization. The partners help promote the message that people from all walks of life can “make a difference in the lives that follow” through charitable giving.
Instead of waiting until after you are gone, you can start building your legacy today. By contributing to an endowment fund, you can start now to replacing your annual charitable giving. With the favorable tax treatment, you generally get a current income tax deduction for these charitable gifts.
With the endowment fund, the charity would only use the income earned, which is about 4%-5%, and never spend the principal. If you want your gift to replace your lifetime annual gift, your contribution to the endowment fund would be about 20-25 times your annual pledge. Replacing your $15 weekly or $780 annual pledge to your church would need a gift of $15,600 -$19,500 to the church’s endowment fund. If the gift earns 4%-5%, then the church gets $780 every year, forever.
But what if your church or other favorite charity does not have an endowment fund? You could start your own private foundation, but administrative cost could eat up the income of the fund, especially with smaller funds. A better option would be to look to your local community foundation.
In Port Huron, there is the Community Foundation of St. Clair County. They have a variety of funds already set up with different areas of focus. These funds allow you to give to your favorite charities such as preserving our natural resources or the Marysville community or your favorite charity such as the People’s Clinic.
There are funds for arts, culture, community and nonprofits. There are also funds focusing on youth, education, scholarships, faith and seniors. See http://www.stclairfoundation.org/funds for more detail. And if there is not a fund for your favorite charity, with certain minimum amounts over five years, you can start your own fund
Talk to your favorite charities or your local community foundation. It is very simple to start building your legacy today.
By: Matthew M. Wallace, CPA, JD
Published edited January-March, 2016 in Savvy magazine as: Building Your Legacy Today