What's a good way of thinking how much money to leave to charity?
March 12, 2022 2:48 PM Subscribe
Having discussions on estate planning with some friends and family. What's a good way to frame the question about how much to leave to charity vs how much to leave to family and loved ones?
There is no definitive answer, but what are the ways of approaching the question?
It will depend a lot of both the size of the estate and the number and ages of the loved ones.
In one approach, you might start with nothing or a token amount for charity until you have provided for a certain level of financial security for your family. Depending on the resources and the family this could range from "enough to buy a reliable car" to "pay off student loans/pay for education" to 'downpayment on a house" to "enough to provide a minimum income flow for their lifetime". Once that is taken care of, the rest or a large percentage of the rest might go to a more extensive list of people and/or charities.
The amount of money it would take to fund those security goals will depend on not just the goal but also the number of people that you are trying provide for. Something around $4 million per person can generate a very safe yearly income of about $100k per year for a lifetime using a 2.5% safe withdrawal rate), with a good chance there would be more left at the end than they started with. But I don't know that you and friends are talking about that kind of multi-million dollar estates.
If you have a disabled family member, taking care of their needs (since they can't take care of themselves) might be the highest priority. Other people might feel like they raised their kids to adulthood and that is the end of their obligation, leaving a relative small amount or none to family.
In a different approach, you have a moral perspective that says that certain split is right - say tithing (10%) to charity or 50/50 between family and charity or charity gets the same percent as a child (2 children, charity gets 1/3, 3 children, charity gets 1/4)
posted by metahawk at 3:29 PM on March 12, 2022 [2 favorites]
In one approach, you might start with nothing or a token amount for charity until you have provided for a certain level of financial security for your family. Depending on the resources and the family this could range from "enough to buy a reliable car" to "pay off student loans/pay for education" to 'downpayment on a house" to "enough to provide a minimum income flow for their lifetime". Once that is taken care of, the rest or a large percentage of the rest might go to a more extensive list of people and/or charities.
The amount of money it would take to fund those security goals will depend on not just the goal but also the number of people that you are trying provide for. Something around $4 million per person can generate a very safe yearly income of about $100k per year for a lifetime using a 2.5% safe withdrawal rate), with a good chance there would be more left at the end than they started with. But I don't know that you and friends are talking about that kind of multi-million dollar estates.
If you have a disabled family member, taking care of their needs (since they can't take care of themselves) might be the highest priority. Other people might feel like they raised their kids to adulthood and that is the end of their obligation, leaving a relative small amount or none to family.
In a different approach, you have a moral perspective that says that certain split is right - say tithing (10%) to charity or 50/50 between family and charity or charity gets the same percent as a child (2 children, charity gets 1/3, 3 children, charity gets 1/4)
posted by metahawk at 3:29 PM on March 12, 2022 [2 favorites]
When I wanted to give to our local hospital, I let myself be guided by what they viewed as a big gift vs a small gift as demonstrated by levels of recognition. That turned out to be less than what we gave to the local food bank in the first year of the pandemic. Fine with me; to some extent, I viewed the former as giving to rich people and the latter as giving to poor people.
The point that I came in to make is that once you get past giving in routine amounts at a routine frequency, you might think in terms of giving for a specific thing. College expenses are an example, but another example in the extended family might include help with down payments on a mortgage or car. Outside the family, it might be a piece of equipment or a repair for local church. For a larger institution like my hospital, it might be contributing tona fund set up for a special purpose.
posted by SemiSalt at 6:36 PM on March 12, 2022
The point that I came in to make is that once you get past giving in routine amounts at a routine frequency, you might think in terms of giving for a specific thing. College expenses are an example, but another example in the extended family might include help with down payments on a mortgage or car. Outside the family, it might be a piece of equipment or a repair for local church. For a larger institution like my hospital, it might be contributing tona fund set up for a special purpose.
posted by SemiSalt at 6:36 PM on March 12, 2022
I'll be watching this thread with great interest as we're currently revising our wills and grappling with similar issues. Our strategy so far has been to arrange for his daughter to receive enough to assure a comfortable retirement, provide enough money for my niece and nephew (who we've given power of attorney) to take a once-in-a-lifetime trip, then divvy the rest up to charities.
posted by DrGail at 7:07 PM on March 12, 2022
posted by DrGail at 7:07 PM on March 12, 2022
I will spare you the finicky details (I find them interesting, but few others do) and just say that, as a childless person, I have taken the future of my niece and nephew into account in my planning. I've arranged Trusts to their benefit, such that their future is reasonably bulletproof (see Buffett quote above), barring total global financial collapse of course. They will both have a basic income and a place to live more or less no matter what. Not a high-flying life, but a good life nonetheless.
...everything else goes to charities with some minor restrictions (just small hoops to be jumped through prior to receipt of funds; once the funds are theirs they can spend however they like, including just having a party for the staff), and a codicil now covers what happens if those charities no longer exist upon my death (dunno why I didn't think of that before).
Now, to allude to the finicky details mentioned above, I should say that I expect climate change to seriously wreck a lot of places, and I have taken this into account in my Trust arrangements but even so there's a force majeure clause that'll give them all the money right away if things go seriously to shit sooner than I expected the funds are disbursed immediately and the properties can be taken out of Trust and placed under their direct control sooner than would have otherwise occurred.
Also, while they are a Force For Evil in the world, South Dakota Trusts can be immensely useful for this kind of thing because they allow all kinds of weird restrictions and clauses that many other jurisdictions do not permit. I'm not saying go to them right away, but if a lawyer expresses concerns about your requirements, well, South Dakota probably doesn't give a shit and will do as you ask.
posted by aramaic at 7:32 PM on March 12, 2022 [2 favorites]
...everything else goes to charities with some minor restrictions (just small hoops to be jumped through prior to receipt of funds; once the funds are theirs they can spend however they like, including just having a party for the staff), and a codicil now covers what happens if those charities no longer exist upon my death (dunno why I didn't think of that before).
Now, to allude to the finicky details mentioned above, I should say that I expect climate change to seriously wreck a lot of places, and I have taken this into account in my Trust arrangements but even so there's a force majeure clause that'll give them all the money right away if things go seriously to shit sooner than I expected the funds are disbursed immediately and the properties can be taken out of Trust and placed under their direct control sooner than would have otherwise occurred.
Also, while they are a Force For Evil in the world, South Dakota Trusts can be immensely useful for this kind of thing because they allow all kinds of weird restrictions and clauses that many other jurisdictions do not permit. I'm not saying go to them right away, but if a lawyer expresses concerns about your requirements, well, South Dakota probably doesn't give a shit and will do as you ask.
posted by aramaic at 7:32 PM on March 12, 2022 [2 favorites]
It might be worth looking into the kinds of charitable trusts described in this article. I’ve not researched it myself beyond this article and the expanded article on Slate but it seems like instead of setting up a trust for someone to live off of and donating the rest to charity, you’re instead basically donating it all to a perpetual charity from which someone could draw a salary administering it.
https://www.vox.com/platform/amp/future-perfect/2018/10/29/18009790/lottery-megamillions-powerball-win-charity-donate-private-foundation
posted by cali59 at 8:36 PM on March 12, 2022
https://www.vox.com/platform/amp/future-perfect/2018/10/29/18009790/lottery-megamillions-powerball-win-charity-donate-private-foundation
posted by cali59 at 8:36 PM on March 12, 2022
This thread is closed to new comments.
posted by yclipse at 2:56 PM on March 12, 2022 [4 favorites]