Options for charitable giving in estate planning

Laramie – In light of the uncertainty surrounding the Estate Tax this fall, many advisors recommend implementing a sound, thorough estate plan on farms and ranches throughout the country.
Tracy Richardson, Director of Planned Giving at the UW Foundation, says it’s a complex area, with a lot to cover. He says CPAs, attorneys and financial planners who are working with donors frequently contact him.
“A very small component of an overall estate plan is charitable planning. I’m one of the few people in the state of Wyoming who gets to devote 100 percent of my time to charitable planning,” he says. “We have a great College of Ag that’s doing a lot of great things to benefit the state’s ranching community.”
Although he’s a strong advocate of charitable planning, Richardson says one must first have a good foundation plan in place. “You have to decide what you’re going to do with your property, and whether your kids want to be involved with continuing the ranch. Those are initial questions that must be looked at and addressed before you say how others fit into the plan.”
“The simplest vehicle for including charitable organization in your estate is a bequest,” said Richardson. “A charitable organization can be a beneficiary of your estate, just like a child, grandchild, niece or nephews. There are various forms of bequests – percentage bequests, specific bequests, residuary bequests, etc. You need to decide how you want to implement that, and your attorney can help you down that road.”
“All a bequest means is that, upon your death, or death of a surviving spouse, the charitable organization will participate in a portion of your estate. It’s a very simple way to include organizations you care about,” he continues. “From my seat as the director of planned giving at UW, I can say it makes a big difference to charitable organizations when bequests show up at the doorstep. Year in, year out, bequests are the largest charitable gifts to charities across the U.S.”
He adds that retirement plans are also easy assets to leave to charitable organizations, through making a beneficiary designation. The donor can include specific dollar amounts or percentages in that plan.
“Retirement plans are ‘toxic assets,’ as we call them in the planning world,” says Richardson. “Your heirs will pay income tax on those distributions if you have an estate subject to estate tax. Next year, if we go to a million-dollar exemption, there are a whole lot of people that will affect.”
He also notes retirement plans are often subject to tax rates of 50 or 60 percent. “All things being equal, they’re a good asset to consider for a charitable organization.”
Life insurance, whether a long-held policy or a new one meant to leverage dollars for a charitable organization, is also a good vehicle for charitable planning, says Richardson.
Richardson says real estate planning tools are another vehicle many people don’t know about. “A retained life estate will only make sense for those who may not want to pass things on to family members,” he says. “You can reserve the right to use the property the rest of your life, and you get a charitable income tax deduction. Upon death, the organization takes title to the property and has the right to hold onto it or sell it.”
Bargain sales are also an option, he says. “They’re a good way to provide some liquidity to you as the owner/donor, and make a nice gift,” he says.
He calls charitable remainder trusts the “Mercedes Benz” of retirement plans. “What you do is transfer the property to the charitable remainder trust, and the trustee then sells the property. It can immediately go to work for you, and pay you at least five percent per year on an annual basis for the balance of your lives, or a maximum of 20 years. When the term of the trust expires, what’s left passes on to the organization.”
For more information, contact Tracy Richardson at 307-766-3934 or trichar6@uwyo.edu. Richardson was present to share information at the Wyoming Stock Growers Association summer conference in Casper in June. Christy Martinez is managing editor of the Wyoming Livestock Roundup and can be reached at christy@wylr.net.