With a little research, a family should be able to find a suitable home for their estate and leave a lasting legacy — whether they are rich, Bill-Gates-rich, or not wealthy at all.
An important question we should all be asking ourselves, is what kind of legacy do we want to leave? How do we want to be remembered? And we should be asking that by age 30 or 35. We should not leave it until we are “old.” Because that legacy may not be money, it may be the work that we do during our lives, either in our businesses and what we create, the values we create in our children, if we have children, or the legacy we leave in our work for a cause, be it for our personal religious beliefs, our care of the earth, for mankind, or a million other possibilities.
But legacies take some planning. Thinking about using our assets as part of that legacy, leaving an ongoing charitable legacy is not just for the wealthy. You do not need to be Bill and Melinda Gates with a foundation that gave away $3.6 billion last year. While Foundations offer greater control over investing and distribution of gifts, they can be expensive to create and maintain, and there are very strict compliance rules enforced by the IRS.
There is a superb alternative to a Private Foundation, an idea that has several excellent examples here in Dallas, and many more across the Great State of Texas, and the Country. While it is a regular in my planning practice, a recent Timearticle, titled "Give to Charity Like Bill Gates…Without Being Bill Gates," highlighted the relatively simple technique.
How? Amend your will or trust so that upon your death your funds go to a DAF—a donor-advised fund — a type of Charitable Fund that manages contributions made by individual donors. With a DAF, you could map out a lasting legacy of continued giving beyond your own life. In fact, you can also make gifts to your DAF now, during your life, taking the income tax deduction when you can use it, but waiting until a later time to pick the particular charity or charities to whom the property will pass. I have found that this often overcomes one of the biggest hurdles to making a substantial lifetime gift. That hurdle is deciding, once you know, at about the end of the year, that a sizable charitable gift would be helpful, tax-wise, which charities should receive the gift, in what proportions.
DAFs are a simple and relatively low cost alternative with a built-in advisory board which makes them an ideal instrument for securing a financial legacy. Unlike foundations, there is no cost to create, and there are some tax advantages. The IRS allows greater tax deduction for gifts of cash, stock, or property to a donor-advised fund, compared to a foundation. Foundations must give away 5% of their assets annually; there are no distribution requirements for DAFs.
The original article explains that all DAFs have a board of directors, and many are willing to maintain the gifting goals of a donor after their death and insure that the recipient charities are eligible for annual grants. You have many options, and DAFs come in a variety of shapes and sizes. Independent brokerage firms have their own funds with minimum initial contributions typically as low as $5,000. In addition to the DAFs available through brokerage firms such as Fidelity, Raymond James, Charles Schwab, and the like, we also have major institutions like the Communities Foundation of Texas, headquartered here in Dallas, which has done a superb job through the years of fulfilling various donors charitable wishes.
You can easily find a suitable home for your estate and leave a lasting legacy with the help of an estate planning attorney. Make an appointment today.
If you would like to chat with us at the Graham Law Firm, you will always find our information on our website www.thegrahamlawfirm.com.
Reference: Time (Oct. 14, 2014) "Give to Charity Like Bill Gates…Without Being Bill Gates"