Tags: estate planning | charity | foundation | henry ford

Estate Planners Must Consider Some Charities Eventually 'Go Bad'

Estate Planners Must Consider Some Charities Eventually 'Go Bad'
Henry Ford II on July 12, 1960. Ford succeeded his grandfather, Henry Ford, manufacturer and founder of the Ford Co. in 1945. (AP Photo)

By Monday, 07 August 2017 03:30 PM Current | Bio | Archive

The U.S. Congress and the president have left Washington, D.C. While there has been much discussion about reforming the tax code, nothing yet has been done. Whatever will be decided about the marginal rates, the estate tax (sometimes called the death tax), corporate tax rates, and all the rest, individuals should think about how these matters may affect their financial planning for 2017 and their longer-term estate planning.

In terms of annual planning, the higher the tax rate the more advantageous it is to make a charitable gift. This is especially so if the stock market has been good to you. Best in these circumstances, when it comes to charity, to think of by-passing capital gains taxes by giving stocks, or other appreciated assets, directly to the charity of your choice. If your tax bracket is greatly reduced in the coming months, there is less of a tax consideration involved.

Estate planning is a weightier matter, but it is good, at the very least, to have a will. I have met people over my life who are worried in these ultimate matters to leave a large gift to charity for fear that the charity “will go bad.”

Some, of even greater wealth, worry that if they set up a foundation, the foundation might go bad. There are numerous cases of foundations that would make their founders groan, if not roll over, in their graves. The Ford Foundation was called out by Henry Ford II in 1976 when he resigned, because the foundation was supporting programs contrary to the founder’s vision. It happens.

One solution is not to make a bequest to a charity or to set up a foundation and to give all the inheritance to heirs. There is a problem with that solution. Heirs with a great inheritance could “go bad.” It’s understandable. Some of the next generation often have a little bit of rebellion in their nature. Others are simply spoiled rotten. Often many things are provided them with no effort or initiative and “friends” are not necessarily true. It happens. Family “constitutions” and family offices are attempts to mitigate this risk. They too can “go bad.”

If an estate is greater than $5.49 million, admittedly not a widespread condition, every dollar over that is now taxed by the feds at a whopping 40 percent. Some states add to taxation at death. Government is not known to spend money efficiently or effectively. Often, it spends in ways that the deceased, were they alive, would find maddening. People who plan rigorously all their lives to avoid taxes, sometimes fail when they exit this life.

Considering death is not cheerful matter. Of course, family should be included in any plan. When facing these above-mentioned considerations in larger estates, providing for a charity, or charities, in a will that speaks to a person’s deeply held convictions should be seriously considered. Charities should have a clearly defined purpose, serious leadership, sound board members, and evidence of best practices when it comes to managing scarce resources.

Michael Y. Warder Sr. is the author of "The Right Ask: What Every Advancement Officer Should Know," available on September 26, 2017. Warder has held a variety of leadership positions in a broad array of public policy think tanks and non-profits before establishing The Warder Consultancy in 2014. He was for more than nine years Vice Chancellor of Pepperdine University. Prior to that he was Executive Director of the West Coast for the Children's Scholarship Fund, VP for Development of The Claremont Institute, and EVP of The Rockford Institute in Illinois. In Washington, D.C., he was EVP of the Ethics and Public Policy Center and Director of Administration of The Heritage Foundation. To read more of his reports — Click Here Now.

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The U.S. Congress and the president have left Washington, D.C. While there has been much discussion about reforming the tax code, nothing yet has been done.
estate planning, charity, foundation, henry ford
Monday, 07 August 2017 03:30 PM
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