Yes, you can name a charity as a beneficiary in your estate plan. Many people choose to support causes they care about through their wills, trusts, and other estate planning documents. This approach allows you to leave a lasting impact while potentially reducing the tax burden on your estate.
At W.B. Moore Law, we help clients incorporate charitable giving into their estate plans in ways that align with their values and financial goals.
How Charitable Beneficiary Designations Work
When you name a charity as a beneficiary, you’re directing that specific assets or portions of your estate go to that organization after your death. This can happen through several methods:
- Wills and trusts: You can include charitable bequests in your will or designate a charity as a trust beneficiary
- Retirement accounts: IRAs, 401(k)s, and other retirement plans allow direct beneficiary designations
- Life insurance policies: You can name a charity as the primary or contingent beneficiary
- Transfer-on-death accounts: Bank accounts and investment accounts can pass directly to charities
Each method has different implications for how and when the charity receives the funds.
Types Of Charitable Bequests
You have flexibility in how you structure charitable gifts. A specific bequest names a particular dollar amount or asset, such as $10,000 or a piece of real estate. A percentage bequest gives the charity a portion of your estate, which adjusts if your estate value changes over time.
Residuary bequests provide what remains after other beneficiaries receive their shares. Contingent bequests take effect only if your primary beneficiaries don’t survive you. Working with a Loveland will lawyer helps you determine which approach fits your situation best.
Tax Benefits Of Charitable Giving
Charitable donations through your estate may reduce or eliminate estate taxes. Under current federal law, estates over $13.61 million face estate tax in 2024. Charitable bequests reduce the taxable value of your estate because they qualify for an unlimited charitable deduction.
Colorado doesn’t impose a state estate tax, but federal estate tax rates reach up to 40% for taxable amounts. If your estate approaches or exceeds federal thresholds, charitable giving becomes a powerful planning tool.
Retirement accounts present another tax consideration. When you leave an IRA to individual beneficiaries, they typically pay income tax on distributions. Charities don’t pay income tax, making retirement accounts particularly efficient assets to donate. Your individual beneficiaries can receive other assets that don’t carry the same tax burden.
Choosing The Right Charity
Make sure the organization you want to support qualifies as a tax-exempt charity under IRS rules. Most 501(c)(3) organizations meet this requirement, but you can verify status through the IRS Tax Exempt Organization Search tool.
Use the charity’s complete legal name and tax identification number in your estate planning documents. Organizations sometimes have similar names, and precision prevents confusion or delays. If you’re supporting a specific program within a larger organization, clearly state your intentions.
Consider whether you want to place any restrictions on your gift. Unrestricted gifts give the charity maximum flexibility to use funds where needed most. Restricted gifts support specific programs or purposes but may create problems if that program ends or circumstances change.
Updating Your Estate Plan
Review your charitable designations periodically. Organizations merge, close, or change their missions over time. Your financial situation and philanthropic priorities may also shift.
Life changes such as marriage, divorce, or the birth of children often prompt estate plan updates. A Loveland will lawyer can help you adjust your charitable giving strategy to reflect your current wishes while balancing family needs.
Combining Family And Charitable Beneficiaries
You don’t have to choose between supporting family members and favorite causes. Many estate plans include both. You might leave a percentage to charity and divide the remainder among relatives. Or you could leave specific assets to the family and designate retirement accounts for charitable giving.
Some families create charitable trusts that provide income to family members for a period, with remaining assets eventually going to charity. Others establish donor-advised funds that allow children to participate in ongoing charitable decision-making.
Documentation Requirements
Proper documentation matters. Simply telling someone about your charitable intentions doesn’t create a legally binding gift. You need to execute the appropriate legal documents or beneficiary designation forms.
For retirement accounts and life insurance, contact the financial institution to complete beneficiary designation forms. For bequests through your will or trust, work with an attorney to draft clear language that accomplishes your goals.
Keep copies of all beneficiary designation forms with your estate planning documents. Inform your executor or trustee about your charitable intentions so they can properly administer your estate.
Making Your Charitable Legacy Count
Naming a charity as a beneficiary represents a meaningful way to support causes that matter to you. Whether you’re passionate about education, healthcare, environmental conservation, or other missions, your estate plan can reflect those values.
We help clients throughout Colorado design estate plans that honor both family obligations and philanthropic goals. If you’re considering charitable giving as part of your estate plan, contact our team to discuss your options and create a plan that works for you.