Let's say that there is a nonprofit organization that you feel passionate about and would really like to support in a much bigger way. Perhaps you have been periodically contributing modest amounts of money and your even scarcer resource - your time.
Here are some reasons why you may not be making a major contribution now: times are tough, you are saving for or spending money on college or a wedding or a home down-payment for your children. Or maybe family members - children or parents or others - need your help.
You might have concerns about the future. Will you have enough money to meet your lifetime need for income? What will be the future needs of family members that you might want to help? What about providing for your own future health issues and expenses?
To solve this issue, why not make your favorite cause(s) the contingent beneficiary(ies) of some of your IRAs (or 401(k)s or 403(b)s, etc.)? Your spouse/partner could remain as the primary beneficiary of the IRA so that you would both have access to that money during your lifetimes. After both of you have died, then the money would go to your cause.
Here are the advantages of this approach:
• If you need the money over your joint lifetimes, you have it. Money goes to your charity only after you are both done with it.
• It is really easy to do. You just need to get an IRA (or 401(k)) beneficiary form, fill it in, and then send it back. This is much easier than redoing your will.
• You can change your mind if you need to, simply by changing your beneficiary.
• You can do it on any scale, subject only to the amount you have in IRAs (or 401(k)s).
• You can easily leave a 5- or 6-figure amount to charity without materially affecting your children's inheritance.
• If you left this money to your children, they would have to pay taxes on it. Charities will not have to pay taxes.
If you want a way to amplify what you are already doing, seriously consider this method of contributing.