Many of my clients wish to make charitable gifts as part of their estate plan. It is common for individuals to leave a share of their estate to their favorite charity, alma mater, fraternal organization or church. If you are considering making a gift to an organization as part of your estate plan, you should really think it through. While you can give a general gift without restriction, a gift with a well-deﬁned purpose may be better. Let’s consider a few examples.
Example 1: Someone gives $25,000 to his fraternity “to be used for scholarships”, with no other restrictions. The fraternity could decide to only award two scholarships of $500 each year. Assuming that the money earned 5% ($1250) a year on average, the scholarships would never stop. On the other hand, the fraternity could decide to award one $2,500 scholarship each year, thereby only awarding ten scholarships from the gift.
Example 2: Someone gives $500,000 to “maintain and improve” the facilities of a non-proﬁt organization, with no other restrictions. If the organization decides to only use the interest on the money to do minor repairs and paint the building every other year, the $500,000 would never get spent. On the other hand, most of the money could be spent rapidly by doing major remodeling, installing state of the art ﬁxtures and purchasing new furniture. If the $500,000 was never spent, did the donor achieve his or her goal?
Example 3: Someone gives $25,000 to an organization with no restrictions at all. Will that organization simply deposit and keep the donation in a bank account, like many of our large universities (thereby amassing billions in their endowments), or will the organization spend every possible dollar immediately, like many charities that provide food and shelter to needy people.
There is no right or wrong way for an organization to handle a charitable gift in the examples given. It is strictly up to the organization’s leadership to decide how to use a gift if there are no restrictions or if the restrictions are nonspeciﬁc. If you have a preference as to how you want your gift to be used, make it clear when you establish your charitable gift. Giving is good, but a well-deﬁned gift might be better.
© 2017 by Marlene S. Cooper. All rights reserved.
(Marlene S. Cooper, a graduate of UCLA, has been an attorney for over 35 years. Her practice is focused entirely on estate planning, estate administration and probate. You may obtain further information at www. marlenecooperlaw.com, by e-mail at Marlene@ MarleneCooperLaw.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).