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Incorporate philanthropy into an estate plan

Throughout the last year, the onslaught of natural disasters worldwide -- including hurricanes, tsunamis, earthquakes and flooding -- has stirred the collective philanthropic support of donors throughout San Diego. Many have written personal checks to various organizations to support emergency relief efforts. Some have given generous amounts of volunteer time as well.

Natural disasters are just one of the many reasons individuals contribute to charitable causes. You could be motivated by the loss of a loved one. You may have been taught as a child to contribute. You may have learned a new hobby or skill, and want to enable others to learn it as well. Or, perhaps you have been moved by an inspiring cause or event - emotion or passion often ignites charitable support.

Whatever the motivation, charitable giving satisfies a deep-rooted need to make a meaningful difference in one's lifetime. Whether you are a long-time philanthropist or a first-time contributor, your gift connects you to the larger community.

Charitable giving options

Charitable giving is an investment in creating a better world -- either during your lifetime when you can see the results firsthand, or as a legacy gift that extends into the future. There are many options for today's philanthropist to desire a customized charitable giving program.

One choice is to establish a family foundation, which can provide maximum control and flexibility. In addition, there are many set procedures and protocols that need to be met for the government and the Internal Revenue Service.

Another option available to families is to create an ongoing giving plan, utilizing standard charitable giving tools such as a CRUT (charitable remainder uni-trust), a CRAT (charitable remainder annuity trust), a CLUT (charitable lead uni-trust) or a CLAT (charitable lead annuity trust).

While these options take away your control of the money, you will still maintain control over the charitable beneficiaries. These options give you an opportunity to donate highly appreciated stock or property, receive a partial income tax deduction today and reinvest without paying capital gain taxes. Furthermore, they can provide an income stream to you, your spouse or other family members.

Four mistakes to avoid

Even your best intentions can go awry without a well-defined charitable giving strategy. Following are several common mistakes you can avoid.

* Not informing your beneficiaries -- One of the most common mistakes I see people make when they implement a charitable giving program is to fail to inform -- or better yet, involve -- the family.

This is particularly important if you are including a charitable gift or program in your estate plan. Neglecting to inform your family of this decision can lead to a strain in family relations, create animosity toward the lawyer or charitable organization -- even perhaps lead to a beneficiary trying to contest your estate plan.

I recommend you hold a family meeting as you develop your charitable giving program. This meeting will help your beneficiaries understand your passions and/or your desire to support theirs. It also avoids surprises among your beneficiaries regarding your intentions. Note that you do not need to reveal the exact amount you are setting aside for this gift - just that the organization will be a beneficiary as well. The family meeting not only prevents hurt feelings today, but also provides proof of your intent if the estate plan later is contested.

To further increase family understanding, consider having your family begin contributing to the selected cause or organization now. This may include financial gifts as well as family volunteer activities. Even young children can actively support a not-for-profit organization through small gifts, collection drives and participating in age-appropriate events.

* Poor documentation -- Imagine what might happen if down the road, the organization disbands, or radically shifts direction? What if it becomes the target of a local investigation for fraudulent fundraising practices, or the subject of a lawsuit for negligent practices?

A professionally written estate plan or charitable giving document will anticipate changes and clearly articulate funding conditions and requirements. Take steps now to ensure that your gift is used in the manner in which you believe it will be most effective, by ensuring your documents are clearly written and allow for contingencies.

* Outdated giving strategy -- Organizations are not the only entities subject to change -- donors and beneficiaries do, too.

Whenever you find yourself requiring to update your estate plan -- due to major life events, new beneficiaries, asset adjustments, etc. -- be sure to review your giving strategy as well. Do you still hold the same passion for the organization? Does the charity still have the same mission -- or relevance?

Spending a little time to update your giving plan occasionally will enable you to reevaluate your overall gift positioning, and help your gift stand the test of time and intent by showing it received your attention at several times during your estate plan development.

* Under-estimating your resources -- Funding a charitable gift can range from direct cash contributions to stock donations to the establishment of an endowment fund. In addition, newer funding options include 401(k) plans, IRAs, even life insurance. A professionally developed estate plan will give you control over all of your assets, and help you achieve peace of mind knowing that your beneficiaries and favorite charities will benefit from your generosity and planning.


Bas is senior vice president and regional director of The Private Bank, Union Bank of California. She can be reached at luanne.bas@uboc.com.

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