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Stephen Beroes, Elizabeth A. Beroes, Julie Elizabeth Beroes, and Shanice Williams
Stephen Beroes, Elizabeth A. Beroes, Julie Elizabeth Beroes, Shanice Williams

Giving to charity in your estate plan

On Behalf of | May 26, 2023 | Estate Planning

When many people are planning their Last Will and estate, their main goal is to ensure that they pass on wealth and sentimental assets to their family members. This can certainly be a worthy goal, but it isn’t necessarily the only use or purpose for estate planning.

Many people use the tools of estate planning to provide for their favorite charities. This can be a wonderful thing to do, but if you are considering giving to a charity in your estate plan, you should think about the best ways to achieve your goal.

Making a bequest in your Last Will

One way to provide for a charity in your estate plan is to simply provide a bequest for the charity in your Last Will. However, you should be careful about how you do it.

By way of illustration, imagine that your will provides a bequest of $1 million to your favorite charity, and says the rest of your estate should be divided equally between your two adult children. In some situations, this may work out fine. In others, it may not. Imagine that, after some unexpected expenses later in your life, and then all the taxes, court fees and other costs involved in settling your estate, your estate is left with $1.2 million. Your bequest says to give $1 million to the charity, so your children must split the remainder.

It may be a better idea to do this the other way around: Be specific about how much you want to leave for your children and specify that the remainder should go to the charity.

Note that, for larger estates — the current threshold is well over $12 million — the federal estate tax may come into play, reducing the overall size of the estate. Pennsylvania has an inheritance tax that applies in some situations but does not apply to bequests to charitable institutions.

A trust

Another way to provide for a charity is through a trust.

Your trust can be either testamentary (meaning that it goes into effect after your death) or can go into effect during your lifetime. If you choose a living trust, you must decide whether you want it to be revocable or irrevocable.

A revocable trust has the advantage that you or your family members will have some degree of control over the assets in the trust. However, you will be able to more thoroughly protect the assets in the trust if you choose an irrevocable trust.

There are many other options, including setting up a charitable foundation in your family’s name. If you’re interested in giving to charity through your estate plan, seek out advice from experienced professionals.