A will or living trust is among the most private and sensitive of documents. For most people, family comes first, but many alumni and friends also choose to include a bequest or beneficiary gift to Disability Rights NJ.
Your beneficiaries, both human and charitable, carry on your legacy through your written and executed estate plans. People who choose to include one or more charities in their estate plans usually either make a bequest, which is a provision in a will or living trust describing the gift, or name the charities as beneficiaries of IRA accounts, other retirement plans, or insurance policies. Which method donors choose depends on a long list of factors, including one’s family situation, one’s tax situation, the size of the gift in question, where someone is in the estate planning process, the type of assets owned, the recommendations of professional advisors, etc.
Why an estate gift to support Disability Rights NJ?
Bequests and beneficiary designations are by far the most commonplace and significant planned gifts received by Disability Rights NJ and most other charitable organizations, for understandable reasons:
- Bequests and beneficiary gifts happen only after all lifetime needs, and often loved ones’ lifetime needs, are met, ensuring the assets are available to the donor and the family. Bequests often are made out of residuary funds after specific amounts and assets are first given to individual family members.
- Bequests and beneficiary gifts are revocable, so the donor can change their mind or alter the gift if their circumstances change.
- Although there is no minimum amount to a bequest, they are among the largest gifts ever made and are frequently used to establish permanent endowments such as scholarships, professorships, and research funds.
Provision vs. designation
The primary bequest option is a written provision in a will or living trust document naming Disability Rights New Jersey for a particular program of for the institution at-large. A written provision can be as simple as “… I give X to Y for Z” or highly detailed depending on the desires of the donor. Typical bequest provisions designate a fixed dollar amount or fixed percentage of the estate residuary to the University of Maryland Baltimore Foundation, and then further designated to a school, department, program, or fund. The general suggested language is: “I give to Disability Rights New Jersey [insert dollar amount, percentage of residuary estate] for the [insert name of program, or other designations about the use].”
A majority of wills are still written and executed using professional legal services, i.e., a trusts and estates attorney or one who practices family law. Trusts, established while alive or through a will provision, certainly should be planned and executed through a qualified attorney, as they are highly flexible, state-specific, and have a long list of uses and functions (including charitable remainder trusts and charitable lead trusts).
Beneficiary of a retirement plan
Another popular option, an alternative to writing a will or trust provision, is to name Disability Rights New Jersey a percentage beneficiary of an IRA, 401(k), 403(b), TSP, or other qualified retirement plan. While most people name spouses, family members, or other individuals as beneficiaries of their retirement plans and IRAs (or name no beneficiary at all), others name charitable organizations as part or whole beneficiaries of these funds. What are the reasons to do this?
From a tax planning perspective, IRA assets are among the most expensive to inherit or direct to one’s own estate, because the entire amount is subject to income tax upon distribution, and most non-spousal inheritors must withdraw refunds within 10 years. On the other hand, assets such as stocks, businesses, real estate, and personal property like artwork are inherited at a stepped-up basis and not subject to any income tax due to the transfer. Thus, if the donor were to give IRA assets to charities and the other assets theirs, they likely will pass on 100 percent of the value of their estate without any reduction from taxes.
The advantages of executing an estate gift through retirement plan designation include: 1) ease of execution via single page or online form; 2) revocability by either changing the beneficiary form or spending down the account for lifetime needs; 3) using assets that are otherwise 100 percent taxable to any recipient — including the donor’s own estate — but are not taxable if given to and sold by charity.
The disadvantages are minor, but still important to consider. First, beneficiary forms do not allow any detail beyond the name of thefoundation, so if the donor wishes to direct the gift to a specific fund or purpose, they should write a letter or sign an agreement stating those wishes. Second, beneficiary forms do not allow a fixed dollar amount, so the value of the gift is both unpredictable and fluctuating due to market forces or the account being spent down for life needs. Finally, you should inform the charities you have named on your retirement plans so that they can proactively contact the administrator and collect your gift in the future.
Beyond a will/trust provision or naming charity beneficiary, less common but viable ways to make bequests include: 1) naming a charity beneficiary of a life insurance policy or annuity; 2) titling assets to make charity payable-on-death or successor owners of assets; 3) instructing one’s spouse or relative to make a posthumous gift out of inherited assets. Each of these has advantages and disadvantages, so it is important to speak with your professional advisors before making charitable plans. Likewise, we are happy to address questions or direct donors to outside resources where they can find answers.
NOTE: This information is not intended to provide legal, tax, investment, or other professional advice, and should not be relied upon for such advice. In advance of any charitable gift plan, we encourage you to seek the advice of legal, tax, and investment professionals.
If you have already made provisions for Disability Rights NJ, THANK YOU. We hope you will share your plans with us, without obligation. Documenting your plans ensures that your exact wishes are understood and met by Disability Rights NJ, and it allows us to keep you apprised of any future developments that may influence or impact your intention. Disability Rights NJ confidentially and without obligation can review or provide specific language and answers from Disability Rights NJ for specific wishes or designations you desire for how your gift is used. By engaging Disability Rights NJ, you are in no way entering into a legally binding or irrevocable gift agreement, so you retain full flexibility to change your plans if your circumstances change.
A gift to Disability Rights NJ through your estate plan qualifies you as a member of the DRNJ Legacy Circle, created to recognize and thank donors whose foresight is building the future of the organization.
Please contact Ken Boydan at email@example.com to discuss how you can join others who have set up planned gifts to ensure the future of Disability Rights New Jersey and its work to improve the lives of people with disabilities.