You Can’t Take It With You

Create a legacy beyond your friends and children.You Can’t Take It With You Numerous options are available for making sure your wealth lives on.

by Tony Bridges 

It’s only human to want to be remembered after your passing, to create a legacy beyond your friends and children. And there’s a way of accomplishing that.

By leaving the wealth you accumulated over a lifetime to a charity, you can continue to have an effect on the world even after you’ve gone.

{mosimage}However scant or plentiful, that money can live on, changing the future for the people and causes you care about.

“My husband and I have been very blessed,” said Janet Hinkle, a Tallahassee philanthropist who already has made her arrangements. “We’re thrilled that we can share those blessings. It feels very good.”

In some cases, it can even make you a little money in your own lifetime.

Just know this: Donating your estate to charity is no simple process. Complex laws and tax codes govern giving, so you’ll need help and a little time to get it done.

The best way to start is to figure out what you have to give and what you’d like to accomplish.

You’ll also have to decide who will receive your money or property. You can leave it to a charitable organization, such as the Red Cross, to a public or private foundation, or to your own foundation.

Most estate planners recommend against creating individual foundations for smaller estates because of the high administrative costs.
Wayne and Anne Coloney chose the Florida State University Foundation because of their ties to the school.

Anne Coloney, 79, started at FSU back when it was still a women’s college and stayed on to graduate after it became a co-educational university. In addition, FSU’s Institute on World War II and the Human Experience accepted the Coloneys’ extensive archive documenting family military service from the Civil War to the present.

“It was a wonderful opportunity,” Wayne Coloney said of the decision.

Whatever recipient you choose, make sure it’s a 501(c)(3) nonprofit organization or other valid charity covered by federal law. Otherwise, taxes could eat up a large portion of the money you leave behind, said Jim Brewster, a Tallahassee tax attorney.

And don’t try to figure it all out yourself. Turn to an accountant, financial planner and estate lawyer for advice.

“I always recommend folks seek out those types of professionals,” said Bob Conrad, vice president for planned giving at the FSU Foundation.

“Oftentimes, you’re dealing with a whole team of people. Even though you pay an extra cost for that,  it’s better to be penny-wise than pound-foolish.”

Once you know how much you’re giving and where it’s going, the next step is deciding how best to do it.

There are several common options, from fairly straightforward bequests to extremely complicated trusts.

Depending on which one is used, you may be able to get significant breaks on your income and capital gains taxes.

Among the choices:

Will bequests. Upon your death,  specific assets such as cash, securities, marketable investments, collectibles and real estate are given to the charities you designate in writing. A personal representative appointed by your estate is responsible for selling any property and transferring the money. The value of assets given to charity are not included in estate taxes. Wills become public documents after death, so donations may not remain anonymous.

Revocable living trusts. All or part of your assets are put into a trust that lists specific recipients. It can be modified at any time before your death. During your lifetime, you can still use and spend assets from the trust. The trust immediately reverts to your specified charities after your death. The advantage of a living trust over a will is that the estate does not go into probate.

Gift annuities. You give cash or appreciated property, such as stocks, to a charity. In exchange, the charity provides you a guaranteed income for the remainder of your life. The rate of return is based on age and ranges from 5 to 11 percent. A portion of the income is exempt from income tax.

Charitable lead trusts. You put all or part of your assets into a trust, where they are invested and provide a return. That income goes to a charity for a specific period of time. After that period, the assets revert to you or to your heirs. It’s a useful way to pass property on while avoiding heavy gift taxes, according to Conrad.

Charitable remainder trusts. You put all or part of your assets into a trust, where they are invested and provide a return. You keep part of the return as income, and give at least 5 percent to a specified charity. You pay no capital gains taxes on assets sold and put into the trust, and get income tax reductions on the return. After your death, the trust goes to the charity.

Gift life estate. You give your private residence or second home to a charity, get a tax deduction for the donation, and are allowed to live on the property for the remainder of your life. This only applies to homes you occupy, not business or rental property.

Life insurance. You name a charity as the beneficiary of your insurance policy. Many people believe they have little to leave to charity, forgetting that their life insurance will significantly increase the value of their estates upon their deaths, Brewster said.

Retirement funds. You specify a charity as the survivor for your IRA or pension plan. If you leave retirement accounts to family members, they will have to pay taxes on them. Charities do not have to pay such taxes, said Carl Monson, of Strategic Wealth Management Advisors.

The Coloneys settled on a gift annuity when they wanted to give to FSU’s World War II institute. They donated money through the FSU Foundation, and the foundation now gives them an annual income.

“The return is very good,” said Wayne Coloney, 81, the founder of Coloney Bell Engineering. “If you don’t feel compelled to leave that money to your estate and you’re interested in a lifetime annuity, this is very attractive. It’s really a win-win proposition.”

The Hinkles – Janet, 49, and Don, 50 – created their own fund under the umbrella of the Community Foundation of North Florida.

They made a one-time cash donation, and now use the interest it generates to provide grants to charitable groups in the community. In the meantime, they collect tax deductions.

“It’s a gift, but it’s almost like it’s still our money,” Janet Hinkle said.

And when they die, their gift will continue to work for them. They also have started involving their three children in the process, so that the kids can take over once they’re gone, Janet Hinkle said.

For anyone contemplating their own charitable legacy, she advises: “There’s no time to start like the present. It’s important to get started and build on that.”

Categories: Archive