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Yes, you can; however, the real question is whether you should. Using your Will for anything but a small, one-time charitable gift can be problematic. For example, making charitable gifts in a Will does not allow you to retain any real control over how the gift is used by the beneficiary. Typically, when a gift is made in your Will the funds or assets gifted become the property of the recipient with no strings attached. In addition, if you wish to make any changes to the gifts you make in your Will, you may need to revoke your Will and execute a new one. Adding a charitable gift, therefore, would require you to execute a new Will which is rather cumbersome. Finally, by waiting to make your charitable gift in your Will you miss out on any potential tax benefits you might get from those gifts and, instead, your estate may incur and estate tax debt because the assets remained in your estate until after your death.
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When making charitable gifts in your estate plan, a trust offers numerous advantages over a Will. For instance, you can retain a significant amount of control over how your designated charity uses the assets you gift through the trust terms you create as the Settlor of the trust. In addition, when you create a trust, you choose a Trustee who is responsible for managing the trust and protecting the trust assets, offering additional reassurance that the assets you gift will continue to grow and further your philanthropical goals.
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In a charitable remainder trust assets are first distributed to at least one non-charitable beneficiary for a specified period with the remainder assets being distributed to at least one charitable beneficiary at the end of the designated time. For example, imagine that you established a charitable remainder trust and transferred $5 million into the trust. The trust terms might provide for distributions of $50,000 to each of your four children for ten years. After ten years, the assets remaining in the trust would be distributed to your named charitable beneficiary (or beneficiaries). Keep in mind that the trust should be earning interest during the ten-year period of initial distributions as well which means your remainder beneficiary will receive more than the remaining $3 million from the initial gift.
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A charitable lead trust works just like a charitable remainder trust in reverse. In other words, assets from the trust are distributed to at least one charitable beneficiary for a specified period first. At the end of that time, the assets remaining in the trust are distributed to at least one non-charitable beneficiary. Using the above example of an initial $5 million gift, the trust terms might direct yearly distributions in the amount of $100,000 to be made to your chosen charity for ten years. At the end of that 10-year period the remaining $4 million (plus interest) remaining in the trust would be distributed to non-charitable beneficiaries.
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As the Settlor (creator)of the trust, you may anyone you choose to be the Trustee; however, given the complex nature of a charitable lead or remainder trust you may wish to consider appointing a professional Trustee. One of the most common mistakes settlor’s make is appointing a family member or close friend as their Trustee without considering whether or not the individual is well suited for the position. Given the duties and responsibilities of a Trustee, you should appoint someone who has more than a rudimentary understanding of financial and legal concepts, which is why a professional Trustee is often the best choice.
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Another option for making charitable gifts within your estate plan is to use a donor advised fund or annuity. A donor advised fund works by first transferring gifted assets into the fund. Although you will no longer own the assets, you will be able to direct how the funds are used. If you gift to an annuity, you will also be able to choose the beneficiary who will receive the benefits from the annuity.
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If you have considerable assets to gift and the time to run it, establishing a family foundation is an excellent way to keep your philanthropic legacy alive after you are gone. The benefits of using a foundation as your charitable gifting vehicle are numerous, starting with the amount of control you will retain over how your gifts are used. In addition, creating a charitable foundation makes it much easier to involve your children and/or grandchildren in your philanthropic endeavors. Running a foundation requires a considerable amount of your time and attention while you are alive though, particularly if you plan to grow the foundation by soliciting gifts from other donors as well. Not only do you continue your legacy of charity, but you also pass down that legacy to future generations when you create a family foundation.
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Contact Us
The North Carolina estate planning attorneys at Clarity Legal Group are dedicated to helping you with all your estate planning needs, both now and in the future. Contact the team today by calling 919-484-0012 or contact us online.
