In the past few years, I have created thousands of estate plans, and I have noticed something that is a bit odd. People who are charitable and give regularly while they are alive rarely give in their estate plans. As someone who implements many estate plans, I think this is a lost opportunity. Including giving in an estate plan (and especially a Relational Estate Plan®) can greatly increase its impact. Let’s take a look at why.
The Role of Giving in Estate Planning
Cultivating a Legacy Beyond Wealth
Including giving in your estate plan shows your values and the legacy you want to leave. It highlights the things in life you thought were important. It’s an opportunity to demonstrate the beliefs and causes you were passionate about, extending your influence beyond your lifetime.
[Related Reading: Leave Your Legacy Through Planned Giving]
Emotional and Psychological Benefits
Most people are aware of the emotional and psychological benefits that giving has on the giver. But, in our experience, when it is done as part of an estate plan, it benefits the family and loved ones of the giver as well. We have seen loved ones express joy, gratitude, and even pride in the choice of their family member to be generous in their estate plan.
Encouraging a Culture of Generosity
By choosing to give as part of your estate plan, you set an example for those around you. You encourage them to think about their wealth differently. Recent studies have shown that children of generous parents tend to be more generous than their counterparts. Leaving generosity as an inheritance is one of the best gifts you can give.
Last, but not least, giving as part of your Relational Estate Plan can also lead to substantial tax savings. This is because the government incentivizes giving to non-profits and reduces or eliminates the taxes that non-profits pay. If you are wise in how you create your plan, you can gain substantial tax savings in addition to the other benefits mentioned above.
Strategies for Integrating Giving into Estate Planning
Now that we have discussed the benefits of giving as part of a relational estate plan, here are some tips to keep in mind.
Balance is Key
First and foremost, you can’t let your giving “cart” drive the “horse” of protecting and providing for your loved ones. If your loved ones have needs, those should come first in your planning. That being said, for many people, a small reduction in the amounts going to their loved ones will not have any measurable impact on the financial situation of those loved ones. Every person’s situation is unique, and you need to make sure the financial needs of your loved ones are met before thinking about giving.
Select Recipients Carefully
Once you have decided to give, make sure you do some basic research on the charity before you include them in your plan. Not all charities use the funds they receive wisely. You can use charitynavigator.org to research how a charity is operated and what percentage of gifts are used for administrative costs.
Get Help on Taxes
While deciding what to give and who to give it to can be rather simple, making sure you are not paying more in taxes than necessary is not simple. We strongly recommend that you work with an estate planning professional to optimize your plan for tax benefits. This can involve creating charitable trusts, donor-advised funds, or other vehicles that maximize the impact of your contributions.
Our hope here at Relational Law is that you discover the benefits of giving as part of your Relational Estate Plan and, in so doing, bless yourself, your loved ones, and the charities that you support. If you would like to discuss giving as part of your estate plan or creating your own Relational Estate Plan, please give us a call. We would love to talk with you!
[Related Reading: 4 Planned Giving Benefits to Consider While Estate Planning]
Disclaimer: The information you obtain in this post is not, nor is intended to be, legal advice. This blog shares general best practices when navigating Virginia or West Virginia law, but you should consult an attorney for advice regarding your individual situation.