Imagine that you and your spouse are updating your wills and you are discussing how to divide your estate. One question is whether to leave equal amounts to your three adult children and another is whether to include any provisions for the charities with which you are connected. Some charitable gifts can also make gifts to your children.
Let’s say your oldest child has always been a high achiever. She went to a top university and then to a prestigious law school. Now she is a partner at a major law firm and has a very good income. Your middle child, a teacher at a public school, has been recognized for excellence in the classroom. However, as a single mother with two children, she struggles financially. Your youngest, unfortunately, dropped out of college, and he has been struggling to find himself. When you give him money it is quickly spent.
In your wills, would you and your spouse leave equal amounts to the children? Or would you possibly leave more to the daughter in a service profession and less to the son who has proved to be irresponsible with money? Would you take into consideration the differing amounts you have spent for each child’s education and various other subsidies? Would you make legacy gifts to charities even though it would reduce the amount available for the children?
These are difficult questions, and avoiding them is one of the reasons parents delay making or updating a will. As you wrestle with these questions, you might keep the following things in mind:
It is possible to provide for children and our organization simultaneously
Under your will or living trust you could establish a charitable remainder trust with us that would pay income to your children for their lifetime and then distribute the remainder to us. If you would like for your children to receive principal when they are older—and in the meantime you want to support our mission—you could establish a charitable lead trust that would make payments to us for a certain number of years and then distribute the principal to your children.
It is also possible to structure a charitable gift so that the tax impact on your children is minimized. This would be the case if you name us as a beneficiary of a retirement fund because those funds (except for a Roth IRA) are fully taxable if given to the children but tax-free if given to us or another charity.
We cannot relieve you of the hard choices you have to make in deciding how to divide your estate among children and other family members, but we can show you some ways to make estate gifts that meet all of your objectives. Please contact us for more information.
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