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Expert Insights for Smart Financial Planning

Use Charitable Bequests to Improve Your Estate Plan

Uncle Sam isn't going to solve his debt problems with your money. You can redirect money headed to the IRS toward your family and philanthropy.


I was recently making a presentation to a board of a local charity. The topic: planned giving. I asked the board members a question to open their minds about charitable estate planning: "If you could only leave your money to the IRS and charity after your death, what percentage would you leave to each?"

See Also: 5 Reasons You Need as Estate Plan

Most of the board members replied that they would leave 100% to charity and nothing to the IRS. However, one lady said, "I would leave 30% to the IRS."

"Why?" I asked.

She stated that she was patriotic. The government needed the money, too.


"Let me take a few minutes to give you some perspective on that," I replied. "At the end of 2015, the national debt was about $18.2 trillion. Do you know how big a trillion is?"

She was puzzled. "What do you mean?"

I gave her the following information: There are 60 seconds in a minute. There are about 1 million seconds in 12 days. There are about a billion seconds in 32 years. There are a trillion seconds in 32,000 years. So, the difference between $1 million and $1 trillion is the difference between 12 days and 32,000 years.

It took $402 billion just to pay the interest on the national debt in 2015. That's about $1.1 billion per day. It's about $45 million per hour and $765,000 per minute.


If your estate owed $10 million of estate tax and just sent the money to the IRS, it would be gone in about 13 seconds. Is that the legacy you wanted to leave? Or do you think you could make a bigger impact by leaving it to charities that you care about?

Everyone has three types of capital in their estates: (1) personal capital, which supports your lifestyle; (2) legacy capital, which goes to your heirs; and (3) social capital, which goes to society. For most people, their social capital goes to the IRS, and the U.S. government decides how it's used.

Most people think that if they leave money to charity when they die, it will reduce their family's inheritance. However, if you use knowledgeable estate advisers, you can include philanthropy in your estate plan and, in many cases, redirect money that is currently targeted to the IRS back to your family and charities you care about.

See Also: Are You Losing Big Tax Savings on Your Charitable Bequests?

Bruce Udell has more than 40 years of experience in the financial industry. He designs solutions for wealth accumulation and enjoyment for high net worth individuals.

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