How to make a gift to someone who doesn’t seem ready

Jul 28th, 2011 | By | Category: Everything Else

Many people wonder how to plan for their estate if they have concerns about the ability of a beneficiary to handle a bequest.  They want to know what options they have and how a charity might be involved in the solution, if at all.

Usually the best option for a beneficiary who might not be capable of handling a lump sum gift is to create a trust for the beneficiary.  In a trust, you can name a trustee to handle the financial management and make distributions to or for the benefit of the beneficiary.  Trusts can be very flexible, so you can structure the distribution provisions to fit the needs of your beneficiary.

The trustee can be a family member, a friend or a professional.  Often, however, family members are not the best choice because distribution decisions may place stress on family relationships.  Under the best of circumstances it can be awkward to manage funds for another family member.  If you are dealing with a beneficiary who is financially irresponsible, the situation can be much worse because the beneficiary may put pressure on the trustee to increase distributions.  For similar reasons it may be difficult for a friend to serve as trustee.  Banks and trust companies are a good option because they are experienced in working with difficult, inexperienced or irresponsible beneficiaries.

If you like the idea of providing a beneficiary with a regular income stream for the beneficiary’s lifetime and you would also like to support a charitable organization, then there are two options that allow you to meet both of these goals.  These options are charitable remainder trusts and charitable gift annuities.  Both of these options provide a stream of income to an individual beneficiary.  Upon the death of the beneficiary, the funds remaining in the trust or annuity belong to the charity.

Many charitable organizations offer charitable gift annuities administered by the charitable organization.  These are simple to set up and can be funded with relatively small dollar amounts.  Although it is a good idea to consult your attorney, accountant or other financial advisor, you do not need the services of an attorney to create a charitable gift annuity.  Charitable remainder trusts do require an attorney to draft the trust document.  A charitable organization can often serve as the trustee if the organization is designated to receive all or a significant portion of the remainder following the death of the beneficiary.

Trusts offer an effective solution if you have concerns regarding a beneficiary’s ability to handle a gift or inheritance.  If you want to combine planning for your beneficiary with a charitable gift, then a charitable gift annuity or a charitable remainder trust might be the best option for you.

 

Amy Lewis is an attorney with Eisenhower, Carlson, PLLC, in Tacoma. She specializes in charitable gift planning, estate and tax planning.  Please consult a qualified attorney or estate planner before making a gift in your estate.

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