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Reasons for Gifting to a Non-Profit

Since August is Make-A-Will Month, we asked Gordon R. Muir, of Hawkins, Folsom & Muir, to share his thoughts on why people might consider designating a non-profit organization in their wills. Here’s what he has to say. 

There are several compelling reasons why someone might consider gifting money or property to a non-profit organization. First and foremost, such gifts allow individuals to support causes consistent with their philanthropic values. Such gifts can also create a financial legacy that has a lasting, sustaining impact on an organization or cause that is meaningful to the individual, be it for social, environmental, health, science or other purposeful causes. Individuals might also have a personal connection to a specific non-profit that has provided them with support or assistance, and making a gift or gifts to the non-profit can be a way of giving back and expressing gratitude to the non-profit.

Making gifts to a non-profit is a great way for individuals to make a positive contribution to society, both during and beyond their lifetimes, providing them with a sense of fulfillment and satisfaction that they are contributing to make the world a better place for all for future generations. Such gifts can create a financial legacy in memory of a loved one who had a passion for a particular cause, thereby honoring their memory and continuing their commitment to that cause. Leaving a financial legacy to ensure one’s wealth is used for meaningful purposes can also be a satisfying alternative if an individual does not have a spouse, child or other close family member to whom they could and would leave their wealth.

Gifting money or property to a non-profit can also result in various tax benefits. But it is important to note that tax laws vary by jurisdiction, so you should consult with a qualified tax professional or financial advisor to understand the specific benefits available to you based on your location and circumstances. Potential benefits of leaving money to a non-profit include:

  • Tax-deductible gifts to qualified non-profit organizations can effectively reduce or even eliminate your overall income tax liability
  • Such gifts upon death can also effectively reduce or eliminate your estate’s taxable value, thereby mitigating the estate tax burden on your heirs
  • Gifts to qualified non-profits of appreciated assets, such as stocks or real estate, can be structured to avoid potential capital gain taxes that would otherwise be incurred if such assets were sold, instead of gifting them to the non-profit.

Conversations You Might Have with Family Members

If you decide to leave a significant portion of your estate to a nonprofit, it might be wise to communicate your intentions with your loved ones ahead of time. Transparency with family members and would-be heirs can help prevent misunderstandings and ensure your wishes are carried out. Conversations about your decision with those heirs can also help them understand your motivations and the importance of supporting charitable causes.

In such conversations, you could share the reasons behind your decision and discuss your personal values, the causes that matter to you, and how you believe the non-profit’s mission aligns with your personal goals and beliefs. You could describe the potential projects or programs the non-profit might undertake and how they could make a positive impact on the world. You could discuss any past personal experiences and family traditions related to charitable giving and emphasize how your decision aligns with your family’s history and values. You could also use this conversation as an opportunity to educate your heirs about the importance of philanthropy and how non-profit organizations contribute to our society’s well-being, encouraging them to personally get involved with a non-profit of their own choice by volunteering their time, skills, and/or expertise, thereby carrying on the family’s tradition of giving back.

You might want to also help your heirs understand that while you have designated funds for a non-profit, circumstances in the future might change, requiring a change in your designation of non-profits and/or a modification in the amount of funds allocated to it. You could clarify the legal and financial aspects of your decision by explaining how the funds will be disbursed, how tax and financial matters will be implicated, and how the process will be managed.

These conversations can be used to create an open and non-judgmental space for your heirs to ask questions and express their thoughts and feelings about your decision so you can address their concerns and provide reassurance as appropriate. Let them know you value their input and thoughts. Encourage them to explore their own charitable interests and consider how they might want to give back in the future. You could also share personal stories that highlight the importance and positive impact that charitable giving can have on individuals and communities.

Conversations with your heirs about your charitable giving plans can foster understanding, respect, and alignment among family members regarding your decision to give money or property to a non-profit organization. Such conversations can also provide you with the opportunity to share your values with your heirs and help to create a positive influence for generations to come.

Considerations in Selecting a Non-Profit

Choosing which specific non-profits to give to is an important decision, and there are several factors you should consider to ensure that your gift has the greatest positive impact. You can start by identifying causes and issues that matter most to you.

Do you care about education, healthcare, poverty alleviation, animal welfare, environmental conservation, or something else? Global, national or local issues?

Since you can specify exactly how your gift is to be used, consider non-profit organizations that align with your personal values, passions and priorities. For example, you could specify that you want your gift used to fund a particular project, to establish a specific scholarship, or to support a specific program aligned with your personal values and passions.

Before making a non-profit organization one of your beneficiaries, you’ll want to thoroughly research any potential considerations. Here are some tips to keep in mind:

  • Look for organizations that have clear missions, goals, and track records of effectively addressing the issue you care about.
  • Look at their website, annual reports, financial statements and any available audits to understand how they operate and utilize funds.
  • Look for financial stability and responsible use of funds with reference to administrative costs and program expenses.
  • Evaluate the leadership team and board of directors.
  • Choose organizations that are transparent about their finances, operations, and impact; and avoid those that are not.
  • If you prefer to be actively engaged, consider an organization that offers volunteer opportunities.

Also consider the benefits of a non-profit that collaborates or partners with other organizations, government agencies and businesses which may have a broader reach and more efficient operations. Evaluate an organization’s effectiveness by looking for evidence of measurable outcomes and positive change in the communities they serve. Third-party evaluations and reviews, as well as websites like Charity Navigator, GuideStar and GiveWell, can also provide valuable insight into an organization’s stability and effectiveness.

Personal benefits that one might derive from a gift to a non-profit include: a feeling of personal fulfillment and satisfaction, knowing that your financial resources will be used to support causes you deeply care about; name recognition that perpetuates a legacy for you or a loved one; and name recognition which provides a sense of acknowledgment for your contributions.

Consulting with legal and financial professionals can help ensure your gift is structured in a way that maximizes the gift’s financial impact and other benefits for both you and the non-profit. Legal and financial professionals can also help you navigate the complexities of tax and estate planning laws to ensure that your charitable giving aligns with your overall financial goals and intentions.