You may not be aware of this but you actually have an estate. Fact is, almost everyone does. Estate refers to the various types of possessions that you have, not only your home and car but also your investments, life insurance, savings and checking account, furniture, and other material possessions. Your estate may be small or big—but the same thing is true for everyone: you can’t take any of these with you when you pass away.
When you die, you will no longer have control over what happens to the things that you left behind. But this can change if you conduct estate planning.
Estate planning refers to the advanced planning and preparation of transferring or leaving your assets behind to specific individuals or organizations.
Aside from the transfer of assets, your estate planning should also include the following:
- Name of the guardian for your minor children and manager for their inheritance
- Instructions for your care in the event that you become disabled
- Healthcare for the family members with special needs
- Special instructions for family members who are irresponsible with finances
- Life insurance to provide death benefits and income replacement for your family
- Transfer of business upon your disability, retirement or death
Moreover, estate planning should not be done at one time but should be regularly evaluated and updated to reflect changes in family relationships, financial situations and so on.
Now apart from all these, you can also include charitable giving as part of your estate planning.
Charitable giving means sharing your fortunes with members of the community who are in need—those who have low or no income, those who are ill or disabled, or those who are unable to work for some reason. This is a great way to get involved in the community and also to feel good about yourself. As you know, sharing, giving and helping out other people gives a sense of fulfillment and reward.
But that’s not all, it’s also a practical way to minimize tax liabilities.
This is why, it’s also a good idea to make charitable giving a part of your estate planning. This will not only ensure that you’ll make a lasting impact in the community even after your death, but will also reduce the tax expenses. This means that you’ll be able to leave more assets to your loved ones.
Charitable giving can be done in various ways:
- Cash donations
- Non-cash donations
- Life insurance
The easiest way to transfer a portion of your assets is by making a cash donation to a specific charitable organization. But you need to have sufficient cash for this to be executed properly. If not, what will happen is that your lawyer will sell one or some of your assets to get the cash needed to make the donation.
It’s also possible to make a non-monetary donation. For example, you can choose a charitable organization and then inquire what specific items they need. You can appoint to give them equipment, vehicle or real estate property. This is up to you to decide. This type of donation is managed the same way as the cash donation. But the value of the donation will depend on the present value of the item prior to the death. The amount should be specified in order to make the official donation receipt.
If you have purchased life insurance, you can designate your chosen charitable organization as one of the beneficiaries of your life insurance policy. If you’ll go for this route, remember that the choice is irrevocable, which means that you cannot remove the organization as the beneficiary at any point. This is why, you need to make the right decision about this matter because you cannot any changes. The premiums that you will have to pay for are considered a donation.
Estate planning can be quite complicated. You need to understand the laws on estate law and trusts in order to do this successfully. It is always a good idea to use mediation or have an attorney by your side during estate planning for your own peace of mind.