Third parties such as the donor’s grandchild, sibling, or housekeeper.
To a large extent, gift planning depends upon the age of the individual to be benefited. For example, if the individual is a newborn grandchild and the goal is to provide future college education funds, the best planning may be to set up a purely non-charitable fund (such as a 529 Plan) for the grandchild and provide entirely separately for charity.
Sure, there are charitable gift plans that can be used to provide for future education, plans such as the college tuition deferred payment gift annuity and the term-of-years flip unitrust, but these can prove tricky and unwieldy in practice. So, a full grasp of the potential risks and pitfalls is advised before presenting such a plan to a potential donor.
If the individual to be benefited is well along in years, the door to employing a panoply of charitable gift plans is typically wide open. Typically. There will be a problem, for example, if the elderly housekeeper is a non-U.S. citizen who doesn’t have a social security number. Lacking an SSN, the housekeeper can’t be provided a reportable income such as a gift annuity.
If the individual to be benefited is incapacitated, due to injury, illness, or some other cause, there can be some real challenges to fashioning a gift plan. For example, consideration may need to be given to whether a trust or gift annuity that provides an income to the individual would disqualify him or her from receiving Medicaid benefits. Planning assistance in this arena is often required from an elder care lawyer. Elder care lawyers usually are specialists, not in charitable gift planning but in planning to provide for incapacitated individuals without disqualifying the incapacitated individual for Medicaid. There are some clever ways charitable gift planners and elder care lawyers can weave together a suitable plan.
This blog merely scratches the surface of a deep topic. When dealing with third-party beneficiaries, be sure to take into account economic considerations due to age, U.S. citizenship status, capacity, Medicaid qualification and elder law issues.
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By Jon Tidd, Esq