As 2006 comes to a close, individuals throughout the country will begin to review their financial matters and finalize philanthropic commitments. In this vein, Elisabeth R. Straus, executive vice president/executive director of the American Psychological Foundation (APF), answers questions about an important form of giving for both donors and charities: the charitable bequest.
Q. What is a charitable bequest?
Straus: A charitable bequest is essentially a stipulation in a donor's will that states that a certain sum of money or percentage of one's estate be given to a charitable organization, in this case, APF.
Q. Why do people make charitable bequests?
Straus: There are various reasons why people give. A donor may have a personal connection to an organization or might, quite simply, believe in its mission. Many people make charitable bequests to APF because they want to give back to psychology and see their name and legacy perpetuated in the field.
Q. What are the benefits if I were to make a charitable bequest?
Straus: Well, there are some tax benefits (e.g., heirs will not be taxed on a bequest) as well as the benefit of knowing that you are perpetuating psychology and giving back to the discipline after your lifetime. Many donors feel unsure about making a gift of current assets because those monies may be needed. A bequest ensures that the organization will receive a gift and that the donor's assets remain intact for as long as he or she needs them. A bequest allows a donor to provide for heirs first and the charitable organization second.
Q. At what age should individuals begin thinking about drafting a will with a charitable bequest?
Straus: It is never too soon to draft a first will. However, I believe the average age to make a will is around age 45. At this point in life, people begin to understand the importance of providing for loved ones and leaving a lasting legacy that will benefit others. A will drafted at any age can always be amended or expanded as an individual's life circumstances change.
Q. In general, how would I go about making a bequest?
Straus: You would simply ask your attorney to include language in your will expressing your wish to do so. When making a bequest, you have the ability to stipulate that a charitable organization receive a percentage of the estate, a fixed amount of money or the residuary, which is what is left of an estate after all other debts, taxes, expenses and bequests have been fulfilled. Your attorney or tax adviser would be able to instruct you on which bequest would best serve you and your heirs.
Q. Why would I want to consider APF as a beneficiary in my will?
Straus: APF provides benefits for those who include the foundation in their estate plans. These individuals become members of APF's Legacy Club, and they receive preferred seating at the opening session of APA's Annual Convention and invitations to special foundation events. Their names are listed in the American Psychologist, the APF newsletter and in APF's annual report.
Q. What about a new law that will allow me to donate my retirement distribution directly to APF and avoid paying tax on it?
Straus: Yes, for the first time, in 2006 and 2007, if you are 70 1/2 or older, the Pension Protection Act of 2006 will allow you to donate directly from your traditional or Roth IRA to APF, which will reduce your gross adjusted income and decrease your taxes. The new law permits direct contributions of up to $100,000 per year. It is a good idea to speak to your tax adviser so that you can take advantage of this option while it is still available.
Q. How can interested individuals contact the foundation?
Straus: Individuals interested in making a bequest or another planned gift can contact me via e-mail or at (202) 336-5843, or Elizabeth Merck, assistant director, via e-mail or at (202) 336-5622.
APF is a nonprofit, philanthropic organization that advances the science and practice of psychology as a means of understanding behavior and promoting health, education and human welfare.