Making Charitable Bequests in Your Will or Trust

Upon their deaths, many individuals opt to leave part or all of their assets to a charity of their choosing. This is known as a charitable bequest. In fact, many charities rely on charitable bequests for a significant portion of their annual donations and regularly solicit bequests through fundraising drives. A charitable bequest can be made through a gift or via a will or trust.

Gifting through your will

If you decide to give a gift through your will to an eligible charity, your estate value will be reduced. Akin to how gifts made during your lifetime can be deducted from your annual tax return, a gift made through your will or trust can be deducted from your estate value for purposes of computing your estate tax. While no estate tax will be paid on your charitable donations in the state of Massachusetts, your donations will be included in the calculation to determine if an estate tax return needs to be filed.

An estate is taxable in Massachusetts if the value of the estate is over $1 million. A charitable gift shifts income from your estate to a charity’s possession. Eligible charities are non-profit and will not pay taxes on that income.

The issue with gifting through a will arises when the charity does not use your gift for your intended purpose. When you give a donation through your will, the charity will receive that item or amount of money and can do whatever they desire with that gift.

Gifting through a charitable gift trust

If you have specific goals or desires for the gift, you should instead implement a charitable gift trust. A charitable gift trust will allow you to bequest a gift to your favorite non-profit while also assisting you and your family with income, probate, and tax issues. A donation inside of a charitable gift trust is not considered part of your estate. This allows you to reduce estate taxes.

Eligible charities for charitable gifts include:

  • Churches
  • Non-profit hospitals
  • Non-profit educational organizations
  • Private foundations that distribute all gifts to charities
  • Associations or membership organizations
  • Government agencies or units
  • Community chests

A word of caution: if you gift a charitable donation during the five years preceding your application for enrollment into Medicaid, you can be penalized by Medicaid by having your enrollment period delayed.

If you are in the process of determining how to structure your estate to maximize benefit for your loved ones, contact an accomplished probate attorney at The Sullivan Firm, P.C. for a free consultation. Call (978) 325-2721 today to schedule an appointment.

Troy Sullivan, Massachusetts Estate Planning AttorneyThe Sullivan Firm, P.C. is a boutique probate and estate planning law firm serving the North Shore and Cape Ann of Massachusetts including Gloucester, Rockport, Manchester and Beverly. The firm concentrates on estate planning matters, including trusts, wills, healthcare proxies, life planning, probate, special needs trusts, and trust administration.