The Right Way to
Leave Your Money to Charity...
IRAs and Qualified
Plans Best Options
(ARA) - For many people, an important part of their estate
planning includes leaving money to a favorite charity. While you don’t
have to be wealthy to include charitable giving in your plan, you do
need to be sure you make your gift in a way that maximizes the benefits
both for the charity and for your estate.
“The very best place to find money
to leave to charity is in a qualified plan or IRA,” says Lawrence
Wiener, CLU, ChFC, director of the National Association of Estate
Planners and Councils. One reason IRAs and qualified funds are such a
good choice is because the money in these funds is subject to estate
taxes; however, when it is donated to a charity, it can be donated
tax-free.
If you leave money to a charity in
your will, that money will be taxed, which means, in effect, the charity
will be receiving less money. It is also important to note that money
that is donated through a will needs to go through probate, which
involves a time delay as well as a cost to the estate. The average
probate can go on for months before the beneficiaries get anything and
lawyer’s fees and other court costs will be taken out of your assets.
Donating money via an IRA or qualified
plan means there is no delay in the charity receiving the funds you have
earmarked; and since no court processes are involved, there is no cost
to administer the gift.
When making your gift, remember that
the Retirement Equity Act of 1984 requires that the spouse receive at
least 50 percent of the value of an IRA; if you plan to donate more than
50 percent of your IRA to charity, your spouse will have to sign a
waiver agreeing to that distribution.
Also, when the beneficiary of an IRA
or qualified plan is a charity, you will want to include a statement in
your will to the effect that if there are not sufficient funds in the
IRA or qualified plan to carry out your donation wishes that your
executor can step in and supplement or make up the difference from the
estate.
Leaving money to charity is not
difficult, but you need to ensure that your wishes are carried out by
setting up the donation in the most efficient way possible. It may all
sound overwhelming at first, but there are many professionals trained
and qualified to help you make your estate planning effective. Check
with your state or local bar association for a local Certified Estate
Planning attorney, or try the state CPA association. The National
Association of Estate Planners and Councils (NAEPC) offers a list of
members who have earned the special designation AEP (Accredited Estate
Planner).
For more information on the NAEPC, or
to find an Accredited Estate Planner near you, visit www.naepc.org or
call NAEPC toll free at (866) 226-2224 for suggestions.