Because these articles are meant to present various planned giving strategies in a simple, high-level overview format, we’ve designed this little chart you can expect to see with each strategy we cover. Making a charity the beneficiary of an account would be a future gift. It’s a relatively simple strategy to implement. While tax savings isn’t necessarily a major goal with this strategy, depending upon your own personal financial circumstances (and the state of transfer tax laws at the time of your death), there could be transfer tax savings. For this strategy, we are discussing leaving a legacy to a charity that is near and dear to your heart by making it the beneficiary of a cash account or investment account that is non-qualified – not a tax-qualified retirement account such as an IRA. This strategy is mostly focused on making sure that your wishes for your legacy are honored and helping to streamline the process for whomever is settling your estate.
Different financial providers use different terminology for the process of “naming a beneficiary.” It can also be different depending on the type of account, such as a cash account at a bank vs an investment account with a brokerage or other firm. You may find that your institution refers to the process of naming a beneficiary as “Paid on Death” or “Transfer on Death” or it may be called “Naming a Beneficiary.” When a beneficiary is named on the account with the financial institution where it is held, upon the death of the account owner, that asset passes by law to the named beneficiary. In this way, it helps to streamline the task of the estate executor or personal representative.
Current law considers first those assets that have a named beneficiary when settling an estate. It is important when working with legal counsel to create a written estate plan – a will or a trust – that the instructions you write into your estate plan match up with the beneficiary designations you have put onto your accounts with various financial account providers (banks or other financial institutions.) You may be surprised to learn how many people have very carefully crafted a written estate plan with their attorney that accurately reflects their current desires as to how their legacy will pass, only to find out upon death that a beneficiary designation on file with an account provider somewhere still lists the former spouse! It is prudent to remember that beneficiary designations take precedent over provisions that may be included in a will or trust and to make sure your wishes for your legacy are congruous in this regard.
Naming a charity as the beneficiary of an account can help to ensure that a portion of your legacy passes to those causes that are near and dear to your heart. NAZCCA would welcome your gift, whether current or future, in whatever amount your heart and finances dictate.
Bonnie Lane - Member, Board of Directors
NAZCCA is not licensed to give legal or tax advice and any planned giving strategies you choose to pursue should be discussed with licensed tax and legal counsel