Dear Hayek,
Every year, I give to the Make-A-Wish Foundation, to help make dreams come true for children with critical illnesses. I heard there was a similar group for seniors and those in elder care facilities. What do you know about this? Also does the Farr Law Firm help seniors with charitable giving as part of their Estate Planning? What are some of my options? Thanks for your help!
Macon Drimsappen
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Dear Macon,
It is very kind to make charitable donations to one of the many worthwhile charities that align with your passion and values. Yes, there is such a group called Second Wind Dreams that makes wishes come true for seniors in elder care facilities who may have early-stage dementia and other illnesses. For example, when asked for a “dream to come true,” a few residents from a nursing home asked to go to a Braves and Yankees game one last time. In another example, Sarah Kahmann (91), accomplished a lot in her life so far but always dreamed of being a college graduate. She was awarded an Honorary Certificate for Women’s Leadership from TMU, the first to ever be awarded from the University, and attended graduation. “Just because a person grows older doesn’t mean dreams and desires go away,” Lynn (whose wish to be a clown one more time was granted) said, echoing the mission of Second Wind Dreams.
Planning for Charitable Giving
People give to charities for many reasons — to honor a loved one, to help a cause they feel passionate about, for tax deductions, or simply to do something good. If you wish to structure your charitable giving into your estate plan, here are some ways to do it:
Bequest in Your Estate Planning Documents: State the amount or percentage you’d like to leave, and identify the specific charity to receive it. Optionally, you may state the purpose for which you’d like the charity to use the funds.
Name a Charity as the Beneficiary of Your Retirement Account: Name a charity as a beneficiary of all or a percentage of your non-Roth retirement accounts (IRA, 401(k), 403(b), etc.). Unlike individuals inheriting an IRA, a charity receiving an IRA does not pay income taxes on those assets when they convert the IRA accounts to cash. The value of the IRA accounts will also not be part of your taxable estate.
Give Appreciated Stock: If you give appreciated stock to charity, you will receive a charitable income tax deduction equal to the full fair market value of the stock at the time of the gift, and you will avoid paying capital gains taxes — the charity can sell the stock without paying capital gains taxes because charities are tax exempt.
Charitable Rollover: Individuals who are over 70½ may donate up to $100,000 per year to charities directly from their IRA. This is known as a Qualified Charitable Distribution (QCD). This QCD will count toward any required minimum distribution (RMD) an account holder must take from the IRA. With a QCD you can benefit charity, fulfill your RMD requirement, and exclude that amount from your income. This can be a good strategy for individuals who do not need the distribution to cover living expenses.
Consider a Charitable Remainder Trust (CRT): You can benefit a charity and a family member by creating a charitable remainder trust (CRT) and naming the CRT as the beneficiary of your IRA. You will receive income for a predetermined period of years or for the rest of your life. This income could then be used to pay the premium on a life insurance policy (often called a “wealth replacement policy,” which itself can be owned by an Irrevocable Life Insurance Trust often called a “wealth replacement trust”) that will pay your beneficiaries upon your death, tax free, to help make up for the amount of money you donated to the CRT. When your income interest in the CRT terminates, the remaining amount is distributed to charities of your choosing. Due to the many rules surrounding the creation and operation of a CRT, an experienced attorney is essential to create it properly.
Keep Medicaid Eligibility Requirements in Mind
When it comes to charitable giving, for the average middle-class and upper-middle-class family, it’s important to keep Medicaid eligibility requirements in mind. This is especially important for those who may need nursing home care within the next five years.
Keep in mind that if you have a history of giving small weekly or monthly gifts to a charity, most Medicaid offices will not construe those to be disqualifying gifts. But larger gifts such as the type discussed in this article are typically not ignored.
For more details about this, please see our resource page, “Medicaid: The Perils of Gifting FAQ.”
Be sure to make an appointment at the Farr Law Firm to discuss Estate Planning and charitable giving!
Hope this helps,
Hayek
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