For some people, helping others and contributing to worthy causes is a defining part of their character. If you are among them, you undoubtedly want to include your charitable gifting in your estate plan. While gifts should be made without expecting anything in return, that does not mean that you cannot consider benefits that might be available to you as part of those gifts. With that in mind, the attorneys at Eghrari Law Firm discuss how to maximize the benefits of charitable gifting in your estate plan.
Charitable Gifting and Your Estate Plan
When you make investments, you undoubtedly do your research and consult with your financial advisor beforehand to ensure that you make wise decisions. The same attention to detail should go into making charitable gifts, both to ensure that you maximize the value of the gifts you make and maximize any benefits to which you may be entitled as a result of making those gifts. Whether making a gift while you are alive or posthumously, choosing the right method and structure for your gifts is one of the keys to making the most out of charitable gifting within your estate plan.
Benefits of Charitable Gifting
The goal of making a charitable gift should be to enrich the life of a loved one or support a cause that is important to you. Your own estate plan, however, may benefit from making a charitable gift in several ways, including:
- Federal gift and estate taxes. As a general rule, the combined value of all assets gifted during your lifetime and at the time of your death is subject to federal gift and estate taxation at the rate of 40 percent. Charitable gifts, however, are exempt from taxation. Consequently, making charitable gifts can reduce your estate’s exposure to federal gift and estate taxes.
- Income taxes. Donations made to qualified charitable organizations also qualify as a tax deduction on your yearly income tax return, reducing your taxable income or even moving you into a lower tax bracket.
- Legacy planning. If legacy planning is part of your overall estate plan, charitable gifts can offer a way to further your goal of passing down your legacy. Creating a family foundation, for instance, allows you to directly involve younger family members in your charitable gifting endeavors.
Charitable Gifting Methods
The methods you use and the manner in which you decide to structure charitable gifts within your estate plan will depend on numerous complex factors. As such, you should always consult with an experienced estate planning attorney when deciding how to incorporate charitable gifts in your estate plan. Some commonly utilized methods, however, include:
- Charitable lead or remainder trust: Charitable lead trusts (CLT) and charitable remainder trusts (CRT) are specialized trust arrangements that enable you to make contributions benefiting both charitable and non-charitable recipients.
- Charitable gift annuity: A charitable gift annuity is as a contractual agreement between the donor (you) and a qualified charitable organization wherein the donor contributes cash or other assets to the charity (the “donee”), and in return, the charity commits to providing the annuitant (the donor) with a lifelong income.
- IRA beneficiary: You can donate up to $100,000 annually directly from your IRA to charities, fulfilling any required minimum distributions (RMDs), as well as designating the charity as the beneficiary of your IRA.
- Donor Advised Fund: Establishing a charitable fund within a recognized community foundation provides a tax deduction and allows you to maintain control over donation recipients.
- Private Family Foundation: If you plan to donate significant assets to charity on an ongoing basis, a private family foundation allows you to do so while also involving future generations. The foundation operates under your guidelines and is overseen by a board of directors.
Are You Ready to Discuss the Benefits of Charitable Gifting?
For more information, please join us for a FREE estate planning seminar. If you have additional questions about the benefits of charitable gifting in your estate plan, contact the Long Island estate planning attorneys at Eghrari Law Firm by calling us at 631-265-0599 to schedule your appointment.
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