Lining the Pockets of Few or Serving Many?
Filed under: Blog, Estate Planning
When considering your distribution in your estate plan, there are often obvious choices: your spouse, your children, and your grandchildren are the most frequent beneficiaries. However, your lawyer will generally ask you to think of all the people closest to you, and even some you hope to know who aren’t born yet, and assume you go on a massive family vacation and all die at once. Indeed, contemplating your own mortality means contemplating the mortality of the rest of your loved ones. Then who do you name as your beneficiary?
In many cases, your attorney will add a clause that basically says if everyone named has predeceased you, then your “next of kin” will inherit your estate. However, you might consider giving your estate to a charity that supports a cause close to your heart. Giving to charity may also be an effective planning tool if you happen to have a taxable estate at the time of your death. When deciding on a charity, even as a residual beneficiary, you will usually want to pick one that supports programs or efforts that you support. However, it is also important to ensure that the money you donate is actually used for those purposes.
Non-profit organizations use the funds they collect for a variety of expenses including, but not limited to, administrative expenses, salaries and employee benefits, programs, and education. Some charities are much more “lean,” meaning that more of their collected funds are used toward promoting their stated goal, and others are much more “fat,” meaning that most of the charity’s collections pay for administrative costs and salaries. The leaner the charity, the more good you can do for the cause itself with your donation.
The California Attorney General, Kamala D. Harris, recently announced that she is suing Help Hospitalized Veterans of Winchester for misusing donations. According to the article, only 35% of donations actually go to help veterans at Help Hospitalized Veterans of Winchester, compared to almost double that for the industry standard. The suit claims $4.3 million in damages for squandered funds on inflated pensions and golf memberships for board members. Additionally, the suit seeks the removal of the President and several members of the Board of Directors. The charity received approximately $41 million in 2011 alone, of which $30 million was in the form of cash donations.
Oversight of charitable organizations is not always aggressively pursued in the courts, leaving those who do not research their charity of choice on their own. However, when you decide to leave money to charity, you have complete control over what organization receives your estate funds. Additionally, you can often tie your donation to certain restrictions. If you are thinking of donating all or a portion of your estate to charity, consider checking the charity with independent review sites like Charity Watch or Charity Navigator. Doing so will not only make it more likely that your donation goes to the positive work you support.
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