BRMM’s Andy and Danielle Mayoras recently authored an article for Forbes discussing why Mark Zuckerberg and Priscilla Chan’s charitable plan to give away 99% of their Facebook stock over their lifetimes should be applauded.
Many, including Bill and Melinda Gates and Warren Buffet, have praised the plan. Zuckerberg and Chan say their motivation is to benefit the future generation — “to join people across the world to advance human potential and promote equality for all children in the next generation.” They want the focus to be on “personalized learning, curing disease, connecting people and building strong communities.”
Yet some critics have blasted Mark Zuckerberg, arguing that his plan is less about selfless charity and more about avoiding taxes. They point to the fact that Zuckerberg and Chan chose a limited liability company as the vehicle for their charitable venture, the Chan Zuckerberg Initiative, instead of a charitable foundation.
It is true that organizing as an LLC avoids certain limitations that 501(c) charitable foundations are subject to — you must provide public financial reports because the assets are for the public good, you can only donate to certain kinds of recipients, and the amount of donation is limited. But using an LLC instead of a charitable foundation does not increase tax savings. As Zuckerberg pointed out in defense of this choice, an LLC offers flexibility to donate to political causes and earn profits that would be reinvested for charitable purposes.
Keeping Your Estate in Mind When Planning Charitable Giving Is Smart, Not Wrong
Zuckerberg and Chan are doing nothing wrong by expressing their charitable intent and taking advantage of the tax laws that exist for the very purpose of incentivizing charitable giving. To the contrary, they should be applauded! Zuckerberg earned the money he is now choosing to give away, and it is completely his right to do so in the manner he chooses. Zuckerberg and Chan should not be shamed by choosing to give charitably and doing so in a way that helps the public while also protecting aspects of their own estate. This isn’t wrong, it’s smart. And more people in a position to give charitably should be encouraged to follow Zuckerberg’s lead.
Charitable Giving Options
- What Is It? Lifetime giving entails giving money or assets directly during one’s lifetime to a legal, qualified charity.
- Pro: The greatest benefit is that the giver gets immediate tax benefits through deductions.
- Con: Giving away the money or assets means losing control over it.
- What Is It? You can provide for donating money or assets in a will or trust, which will be administered after the testator’s or trust settlor’s death.
- Pro: You retain control over money or assets during your lifetime.
- Con: You do not benefit from immediate tax deductions, except in some circumstances, estate tax deductions for high net worth individuals are available.
Charitable Remainder Trusts
- What Is It? Trust settlors who set up these trusts allows the giver to receive income from the trust during the trustor’s lifetime, and the remainder passes to the beneficiaries after the settlor’s death.
- Pros: Receive income during the giver’s lifetime, benefit from an immediate tax deduction, and retain control.
- Con: These trusts make sense for substantial charitable donations only, or when there are greatly-appreciated assets like real estate or stocks owned for a significant period of time. With these types of assets, givers can can avoid substantial capital gains taxes.
Charitable Lead Trusts
- You can think of charitable lead trusts as the inverse of charitable remainder trusts. Charitable beneficiaries receive income during the lifetime of the giver and the remainder passes on to heirs once the giver dies.
- Pros: Like charitable remainder trusts, charitable lead trusts allow for maximizing gift-giving to charities, retention of control, and immediate tax deductions.
- Con: These trusts also work best with highly-appreciating assets or when the giver intends to make a substantial charitable bequest or gift.
BRMM: Your Choice for Effective, Savvy Estate Planning
BRMM’s estate planning practice is your choice for all your estate planning needs. It is never too early to make plans about your estate. Our elder law and estate planning attorneys are compassionate and knowledgeable about the ways in which you can craft an estate plan to meet your specific needs, especially if you have a charitable intent or a substantial estate that gives rise to tax concerns.
Our attorneys also work in areas that may be of particular interest to certain individuals including planning charitable giving, planning for those with special needs, handling veterans benefits, informing caregivers about concerns and issues relevant to them, and planning for long-term care.
Making decisions today will offer you peace of mind and security, knowing that your loved ones and your estate will be taken care of just as you wish. Our attorneys will walk you through the many options and issues to consider. Some of the issues we handle include:
- Conservatorships and Guardianships
- End of Life Decisions
- Healthcare Durable Power of Attorney
- Medicaid Planning
- Nursing Home Planning
- Planning for Incapacity
- Revocable Living Trusts
- Special Needs Planning
- Veterans Planning
Visit our Center for Elder Law webpage that will give you more information about elder law and estate planning and how we can help. Contact our Michigan estate planning attorneys today for a free consultation at (248) 641-7070 or fill out our online form.