A complete estate plan involves a number of different pieces—a will, trusts, powers of attorney (particularly a durable POA), medical directives, a letter of intent (for the executor), guardianship directives (if applicable), and designations of beneficiaries.
When the time comes, everything works together to ensure that your wishes are respected so that your beneficiaries can access everything should you become incapacitated, and that your assets and properties are appropriately distributed after your death.
Planned giving is one of those pieces that you can add to your estate plan to recognize and donate to your favorite nonprofit when the time comes.
How It Works
Whether you’ve been donating to one particular charity or nonprofit for many years, or you’ve only recently become interested in charitable donations, you can incorporate planned giving into your estate plan with some of the most popular types.
- Bequests in a will or living trust. This is the most popular option because of its simplicity. Bequests can be written into the will or added with a codicil (addendum.) This is generally a specific dollar amount given to the organization at the time of the donor’s death.
- Life Insurance policy. Similar to a will/trust bequest, the nonprofit receives a sum of money at the donor’s death. The donor is then able to donate more than he or she might have at one time, and the donor’s heirs get the benefit of the tax exemption on the donation.
- Personal property. Physical property such as collectibles, artwork, equipment, or other items can be donated to the nonprofit, yielding a charitable deduction for the fair market value (appraisal is required for the deduction) and no capital gains. Upon receipt, the nonprofit has the option to keep and use it or sell it and use the proceeds.
- Real Estate. Making this kind of donation removes a potentially significant and valuable taxable asset from the donor’s estate and getting an income tax deduction that’s equal to the appraised fair market value. The donor will have no capital gains to pay for the transfer. Like a personal property, the nonprofit has the option of keeping the real estate for its use or selling it and use the proceeds.
- Appreciated Securities. This is also a secure donation to make. Appreciated securities that are publicly traded that the donor has owned for a year or more can be transferred to their choice of nonprofit. The donor receives the income tax deduction based on the value of the securities and pays no capital gains on the transfer. The nonprofit can sell the securities and use the proceeds as it sees fit, or as the donor designates, such as after-school programs in a specific neighborhood.
- Retirement plans. A donor can designate some or all of a 401(k), IRA, or other retirement plans to the nonprofit, much like life insurance. The donor’s heirs avoid estate and income taxes, and the proceeds pass along to the nonprofit when the estate is settled.
- Charitable IRA rollovers. Once a donor turns 70½, he or she can make tax-free distributions of up to $100,000 per year directly from their IRAs to an eligible nonprofit. The donation must be a rollover because withdrawing the funds and then paying the nonprofit brings a tax penalty.
This is just a small list of the types of planned giving available. An Illinois estate planning attorney can advise you on the best options for your estate plan, as well as other options not listed here.
Where Can I Donate?
You can donate to any eligible nonprofit that you choose, whether it’s well-known, well-known to you, or any nonprofit that shares a cause you believe in.
If you don’t already have a group in mind, here are some Chicago-area nonprofits that have planned giving programs for interested donors:
- The University of Chicago
- The Archdiocese of Chicago
- Habitat For Humanity
- Chicago Foundation For Women
- The Art Institute Of Chicago
- Meals On Wheels Chicago
- The Salvation Army (Chicago)
- The Chicago Bar Foundation
- The Chicago Philharmonic
- The Chicago Botanic Garden
- Paws Chicago
- The Anti-Cruelty Society
- One Tail At A Time
- Treehouse Humane Society Animals (cat-only rescue group)
These are just some of the many eligible nonprofits that are available in the Chicago area that are available for planned giving.
Provenza Law For Your Planned Giving And Estate Plan
If you’re interested in adding planned giving to a nonprofit to your estate plan, call us for an appointment. We understand Chicago estate planning, how to design the best estate plan for you, your family, and your needs. James C. Provenza is an Illinois estate planning attorney with more than 25 years of estate planning experience and is ready to help. Call our firm today at (847) 729-3939, or use our online contact form.