Each year, thousands of individuals designate a portion of their assets by bequest to benefit charitable organizations. Gifts under wills have become an important part of the American philanthropic tradition because they enable individuals to make significant gifts that they may not have been able to make during life. Bequests can take various forms:

A specific bequest directs that a charitable organization is to receive a specific piece of property. Example: "I give to the Community Foundation all of my shares in XYZ Mutual Fund to be used for the general purposes of said charity."

A general bequest directs that the charity receive a specified dollar amount. Example: "I give to the Community Foundation the sum of $100,000 to be used for the general purposes of said charity."

A residual bequest designates all or a portion of whatever remains after all debts, taxes, expenses, and all other bequests have been paid. Example: "I give to the Community Foundation fifty percent (50%) of the rest, residue, and remainder of my estate, to be used for the general purposes of said charity.

A contingent bequest takes effect only if the primary intention cannot be met. Example: "If (PRIMARY BENEFICIARY) does not survive me, then I give to the Community Foundation all the rest, residue, and remainder of my estate to be used for the general purposes of the Community Foundation." This ensures that property will pass to the Community Foundation rather than unintended beneficiaries - including the government.

While all of the above examples provide for unrestricted support of the Community Foundation, any of them may be designated as a restricted bequest for a specific purpose of the Community Foundation. For example, if you wish to memorialize a family member or an honored colleague, you can establish a named fund that will provide support for a program of special interest to you or the honored person.

A charitable bequest can also provide payments for life to a selected beneficiary by establishing a testamentary charitable remainder trust (established under the donor's will) that provides payments to the beneficiary for life with the principal then being paid to the Community Foundation. If it is an annuity trust or a unitrust, the estate will be allowed an estate-tax charitable deduction for a portion of the initial value of the trust. The deduction will be calculated in a manner similar to that for a living trust.

Notes:

Because of this deduction, a bequest in any of these forms can significantly reduce the tax burden of your estate. If, for example, you are subject to the top estate-tax rate of 55%, a $100,000 charitable bequest saves $55,000 in taxes, and you exercise the privilege of directing your lifetime accumulations as you wish.

If the only life-payment beneficiary of a testamentary trust is the donor's spouse, the entire value of the trust will be exempt from estate tax. In addition to the charitable deduction from the Community Foundation's remainder interest, the spouse's incoming interest will qualify for the marital deduction.

The same result also occurs for charitable remainder unitrusts and annuity trusts created during the donor's lifetime.  

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