Options Abound When It Comes
To Charitable Giving

October 20, 2006
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GRAND RAPIDS — West Michigan is well known for its giving nature and Grand Rapids Community Foundation and other area nonprofits have a large pool of benefactors — but giving to charity can be more complicated than just writing a check.

Marilyn Zack, vice president of development for the Grand Rapids Community Foundation, said there are many ways to give, including bequests, charitable gift annuities, charitable trusts, donor-advised funds and IRA charitable rollovers.

Choosing which is best is where attorneys such as Andy Saewert of law firm Buckman, MacDonald and Bauer in Holland, and Anna Urick Duggins of Parmenter O’Toole in Muskegon enter the picture.

The two specialize in estate planning, helping people decide how to best manage their assets during their lifetime and how to distribute them upon their death.

According to Saewert, how much an individual wants to give to charity is the determining factor in choosing which “gifting tools” to use.

Zack said bequests are the most common way to give, and one of the simplest. Another simple way is to name a charity as the beneficiary of a life insurance plan or an IRA.

Other vehicles, such as charitable gift annuities and charitable trusts, are funded during a donor’s lifetime, during which time interest is paid to the donor. Then, upon their death, the balance of the trust or annuity goes to a nonprofit. The rate of return is higher for those who are older, paying as much as 11.3 percent to people who are over the age of 90.

“There are a lot of benefits to charitable gift annuities,” Zack said.

For the first time — and for a limited time — people who are older than 70½ can roll money from individual retirement accounts into a charity without having to declare it as income (see related article on page B7). Zack said this should result in a new infusion of charitable dollars into the sector.

With donor-advised funds, donors can start a fund with more than $50,000 and use a portion of their earnings in the form of spendible income for charitable causes. The donors can recommend the charities to which they would like the funds to be given.

Urick Duggins said when planning a gift to a nonprofit, benefactors can be as specific as they want to be, or can opt to give to a program’s general fund.

While only 25 percent to 30 percent of the people she works with give to charity, Urick Duggins said, those who do give, give generously. They may give primarily to their churches. Most people know before they talk to her where they want their money to go. “They generally have a really good idea, and we want to find the best way to do it,” she said.

People who are involved with charitable organizations or nonprofits are more likely to give, Urick Duggins said. “The more people are involved with an organization, the more they want to give to it.”

People often start to think about estate planning when they have their first child, or when there is a serious illness or death in their family or community of friends, she said. Others may begin thinking about estate planning when they are planning a big trip and want to make sure their plans are in place if something were to happen to them.

Saewert said one of the challenges of charitable giving is also providing for surviving family.

“One of the biggest (challenges) would be balancing the interests of the people wanting to be charitable and giving to their church, mixing it in with wanting their family taken care of,” he said.

When people come to his firm to plan for their estate, Saewert said, one of the first priorities is taking care of last expenses such as a funeral. While people often will express a desire to leave a life insurance plan to a charity or nonprofit, that may not allow for payment of funeral expenses. Instead, Saewert suggests that people name a spouse or their trust as a beneficiary of a life insurance plan, provide for any expenses, and then specify that any funds that are left are to be donated to a charity or nonprofit.

Saewert said another way to take care of final expenses is to prepay and preplan for a funeral.

“They just contract with a company and they are able to fix their costs,” he said. “People have some comfort in the fact that those issues are addressed and paid for.”

Zack said one of the most important issues to consider when giving to nonprofits is communicating one’s wishes to the estate planner, to the nonprofit entity and to one’s survivors.

“I think the single most important thing that people can do when they’re making these kinds of long-range plans, if it’s appropriate, is to talk to their families about it and let the charities know,” she said.

She said this allows the charities to thank the donors, and it also ensures that the donor’s wishes can be carried out without confusion. It can also help the donor tie up any loose ends they may not have been aware of or have taken into consideration when donating to a charity or a nonprofit organization.

Though she is used to discussing estate planning, Zack said sometimes it can be difficult for people to deal with their own mortality. Nonetheless, it is an important issue to discuss with those involved.

“If you can include your family in your plans and discuss what your long-range goals are, it’s very helpful,” she said.

As the charities are compelled to follow the donor’s intent, Zack said it is important that all who are involved in the estate know the wishes of the donor.

She said those who are interested in donating to the community foundation can sit down with a foundation staff member and discuss the options.

“The community foundation has been around since 1922, making grants since 1930,” she said. “All of those years have allowed us to build up a body of knowledge about the needs to the community and about the bodies in the community that are addressing them. Lots of donors know exactly who they want to give to; they can do that through us.

“If a donor comes to us and they have an interest in addressing the issue of hunger, they can sit with grant-making staff and receive information about organizations that are addressing that need in the community. We’ll try to help that donor become more strategic and better informed about the gift that they’re making.”

Though some people like to be specific in their gifts, Zack said they are encouraged to consider the variable of the future.

“Because we’re an endowment, we ask people to be as broad in their thinking as possible, understanding that an endowment means forever,” she said. “We try to help our donors achieve their interests while still being broad enough to be useful in the future.”    

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