Estate Planning Options Continued:
In the previous post, we discussed the importance of incorporating legacy protection into your estate planning for the benefit of your heirs, and we began looking at common strategies for doing so. Inspired by Carnegie, one of our nation’s most famed benefactors, let’s continue the discussion with a look at a few more charitable planning options, including some that give your heirs an opportunity to participate more actively in the process.
Charitable Life Estates (CLE)
A creative way to leverage real estate to benefit a charity, a CLE allows you to donate a piece of real estate to a charity, while giving you and your family the right to continue living there until you and/or your children pass away.
The CLE removes the property from your estate, the gift affords you an instant tax deduction, and the charity benefits from the appreciating value of the property.
If the children have concerns that you are giving away their inheritance, consider supplementing your estate plans with an life insurance policy that will allow children or grandchildren the option of buying the property back from the charity, creating a win-win for all.
Donor Advised Funds (DAF)
This strategy gives you the opportunity to participate directly in the distribution of your giving, or even to involve your children in the process. You create the fund, name the account, name advisors, successors and beneficiaries, as applicable, and arrange for the fund to be administered by a charity of your choice. As a donor advisor, you then have the opportunity to recommend charitable distributions from the fund.
The Council on Foundations offers more helpful information about donor advised funds.
The ultimate solution to establishing a family legacy, a family foundation is a charitable organization that you set up and administer on behalf of your own family. It requires a much higher level of commitment than other strategies: You have to educate yourself on the complex tax ramifications of setting up a non-profit, for example. But it also gives you a greater measure of lasting control on who and what the foundation supports.
It’s also one of the best ways to instill a sense of responsibility in your heirs, as this article from the New York Times demonstrates.
Preparing your children for their inheritance does not just involve teaching them to handle money wisely; it also teaches them to think of money as an instrument for good.
To whatever extent possible, involving your children in the process of charitable planning can benefit you financially, while reinforcing your family’s values and protect your legacy. To learn more about which strategies within your Estate Planning, contact our office at 501-221-7776, or visit our website ILP.ARKANSAS.COM