How General or Specific Should You Make Your Bequest to Charity?
Most people who make charitable bequests are very specific about their beneficiaries and the amount of money they will give them. For instance, a will or trust may say:
(a) $10,000 to my alma mater, Wonderful College, of Bucolic Town, Vermont;
(b) $15,000 to the Old Codgers Soccer League of Retirement City, Utah; and
(c) $50,000 to the Old Soccer Players Orthopedic Hospital of Retirement City, Utah, for getting me back in the game.
If making larger gifts, donors may limit their bequests to a fixed percentage of their estate, so if their estate ends up significantly smaller over time, the charitable gifts do not end up constituting too large a portion. For instance, an individual with a $1 million estate may give $100,000 to her alma mater, but if her estate dwindles to $500,000 due to health care expenses, bad investment returns, and other unanticipated circumstances, she may not want so much to go to the university instead of to her family. She can plan for such a change by limiting the gift to 10 percent of her estate. If she does so, however, she must be clear about her definition of estate for this purpose. Is she talking about her gross estate before any taxes or expenses, or the final distributable estate after everything has been paid?
Gifts may be given to charities’ general funds or for specific purposes, for instance, to support a scholarship or to create a memorial in the name of the decedent or of someone else. If you are interested in funding anything along these lines, it is important that you consult with the charity in advance to make sure this is something it can manage. If you do not restrict the donation in your gift, the charity will be able to use the money for its own purposes, whether to spend on current expenses or to add to its endowment for the future. Sometimes wills and trusts are drafted to say specifically that the recipient can use the funds “for its general purposes,” but this language is not necessary. In general, charities prefer unrestricted funds because they are easier to manage. They do not have to account for them separately and can deploy the funds as needs and goals develop.
It’s also important to contact the charities or look at their websites to make sure that you identify them appropriately in your estate planning documents. You don’t want to create any confusion if two similarly named groups have a claim on your gift. In addition, many national organizations have local chapters. So, for instance, if you are making a donation to the Alzheimer’s Association, you need to be clear about whether the money should go to the national organization or your local chapter.
The alternative to making specific bequests is to leave the decision to your personal representative or trustee. In that case, your will or trust might read as follows:
I leave $100,000 to be distributed by my personal representative as she, in her sole discretion, determines appropriate to colleges and universities providing low-cost, high-quality education.
You may do this because you can’t decide what charitable organizations should receive your gift and don’t want to hold up executing your plan while you figure this out. Or you may be aware that the organizations furthering the cause or causes you want to support change over time. In the example above, you may not want to support a particular school today that tomorrow may be seeking to raise its US News & World Report ranking rather than continue to support low-income or minority students. By simply stating a purpose and permitting your personal representative or trustee to make the ultimate decision, you create flexibility. However, you also create more work and responsibility for that personal representative or trustee, who would need to research the various organizations that purport to carry out the work you want to support. So, if you can choose the recipients of your largesse, it’s usually better to name them. But if you can’t, a general provision stating your goals will work.