The notion of giving away money after a death is equally rewarding and challenging. No one wants to think about their own mortality for too long, and there is a natural desire to leave as much as possible to our descendants. However, those with a philanthropic nature will see the beauty in giving money to the charities supported throughout their lives. The question is how to do so. A sizable donation while we’re alive isn’t always practical or easy to plan for. So, the two common options are simple. Either you leave the responsibility of a charitable donation to those left behind via a memorial fund, or you plan ahead with a legacy gift through planned giving.
The Benefits of Memorial Funds
Memorial funds are a great way for families to give thanks to organizations in the event of a death. For example, the children of someone who passed away in hospice from terminal cancer may feel better donating money to that facility or a research charity. They can take money acquired from the deceased’s assets and inheritance, create a sizable donation, and make a big difference. What’s great about this is that the living gets a sense of closure and that something good came out of a tragic situation. These memorial funds work particularly well when a death is unexpected or comes on suddenly from a terminal diagnosis. There is also the advantage of seeing the effects of the donation in action, unlike legacy gifts. However, you have to ask yourself if you would be OK leaving these charitable decisions to those left behind.
The Downsides of Memorial Funds
The biggest problem with these memorial funds in your name is the lack of any personal say. You might have given some form of verbal instruction before your death to leave a donation, but that doesn’t mean that your family will follow through. They can spend the next weeks after your funeral debating the best choice for a recipient. The money could all go to a charity you love, get divided among several, or end up somewhere completely different. For example, you might have a desire to see any leftover assets go to a local dog shelter or animal hospital. Instead, your kids decide to give it to a research charity for the disease you died from. You can’t fault them for their sentiments, and the decision would make a lot of sense at that moment. Yet, the point stands that it’s not exactly what you would have wanted. That is why many people take control of the choice early on and look into planned giving and legacy gifts instead.
The Benefits Of Planned Giving
The alternative to a memorial fund is to set up a legacy gift in advance through planned giving. The immediate advantage here is the chance to take full control of your money and where it goes ahead of time. You get to decide which charities and organizations will see a share of your money or estate in the event of your passing. Therefore, if there is a cause close to your heart and you wish you could do more for them, this legacy gift could be perfect. For example, if you’ve been a keen fundraiser for an animal charity or cancer research organization, this planned gift could be the perfect punctuation mark on that story.
You can work with the organization in advance to discuss how a planned giving gift could help. A charity you’ve had a monthly payment with may have contacted you already about the prospect. Don’t forget that these gifts don’t have to be financial. You could bequest possessions and collections, such as giving an art collection to a local gallery. It’s also possible to give land to charities that could use it. Rather than have a plot sold off to developers for a new fast-food joint, look into passing it on to charities to set up new care centers, shelters, or other facilities.
Another advantage of planned giving is the tax incentives. There is the potential to see benefits in capital gains tax, income tax, and estate tax. This can serve to enhance these assets further over time and make the gift even more meaningful for the recipient. Few who sign up for planned giving will do this for tax reasons, but it’s a nice bonus when viewing legacy gifts as a financial investment for the future. However, this aspect of a future gift does highlight one of the biggest downsides.
The Downsides Of Planned Giving
With all this said, there are some drawbacks to the planned giving route that donors need to keep in mind. The biggest issue is the timeframe between setting up a legacy gift and the gift paying off. You could be incredibly proactive in middle age as you think about the future for your kids and future grandchildren. While securing your will and life insurance policy, you might think to add in a planned gift to charity as a clause. You’ll feel great about your philanthropic decision for a while, and then nothing will happen until you die. You don’t know what position the charity will be in when that happens, and you won’t get to see the results of your gift. If you’re putting your affairs in order after a terminal diagnosis, that’s a different story. You could set something up for the charity or hospice involved. If you continue to live for another 40 years, the gift doesn’t have the same impact as a donation during your lifetime.
Memorial Fund Or Planned Giving?
There is no right or wrong answer here because every decision is so personal. No one is obligated to leave anything in the event of their death, even if they were a fundraiser for 50 years. You can trust your family to do what they feel is best after your death and see the immediate impact of a memorial fund and sizable donation. Or, you can take the time to plan ahead, pick a charity with a personal connection, and know they will benefit in the future.
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