09 May Making a Difference: How Charitable Giving in Your Estate Plan Can Benefit Your Community and Your Legacy
Making a Difference: How Charitable Giving in Your Estate Plan Can Benefit Your Community and Your Legacy
One of the most common ways of charitable giving is through a charitable bequest in a will or trust. This allows you to leave a specific amount of money or assets to a charitable organization. By doing so, you can support causes you care about and leave a lasting legacy. Additionally, philanthropic donations can also reduce your estate taxes, as the amount of the bequest is deducted from the value of your estate.
Charitable Remainder Trusts
A charitable remainder trust allows you to donate assets to a charitable organization while retaining some benefits during your lifetime. In this arrangement, you transfer assets into a trust, which then pays you a fixed income for a specified period. After you pass away, the remaining assets go to charity. Charitable remainder trusts can also provide tax benefits, as the donation can be deducted from your income taxes, and you may also avoid capital gains taxes on appreciated assets.
A donor-advised fund is a charitable giving vehicle that allows you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund to your favorite charities over time. Donor-advised funds are becoming increasingly popular as they provide flexibility and convenience while providing significant tax benefits.
Establish a Charitable Foundation
Establishing a charitable foundation is a great way to support the causes you care about while creating a lasting legacy. You can create a foundation that promotes specific causes or charities that align with your values and passions. This type of giving can also provide significant tax benefits and flexibility in how your charitable contributions are distributed.
Donate Appreciated Assets
Another way to maximize your charitable impact and minimize taxes is by donating appreciated assets such as stocks, bonds, and real estate. By donating appreciated assets, you can avoid capital gains taxes and receive a charitable tax deduction for the total fair market value of the asset.
Charitable IRA Distributions
If you are over 70 ½, you can make charitable donations directly from your IRA account. These donations can be up to $100,000 per year and can be a tax-efficient way to support your favorite charities while reducing your taxable income.
Charitable Lead Trusts
A charitable lead trust is a great way to provide ongoing support to charities while preserving assets for future generations. In this arrangement, the trust pays a fixed amount to a charity for a specified period; after that period, the remaining assets pass to your designated beneficiaries.
By utilizing one or more of these charitable giving strategies in your estate plan, you can make a real difference in your community and your legacy. Charitable giving can also provide significant tax benefits, reducing your estate taxes and income taxes while providing a sense of fulfillment and purpose.
For example, let’s say you want to support a local food bank in your community. You could include a charitable bequest in your will, leaving a specific amount of money to the food bank. Alternatively, you could establish a charitable remainder trust, which would provide you with income during your lifetime while supporting the food bank. Additionally, you could donate assets to a donor-advised fund, allowing you to make grants to the food bank over time.
The Bottom Line
Charitable giving benefits the community and the causes you care about, helps solidify your legacy, and makes a difference for future generations. By working with a professional, you can explore different charitable giving strategies and find the one that best suits your needs and goals. At Guideway Legal, we are passionate about helping our clients leave a lasting legacy through charitable giving. Contact us today to learn more about charitable giving and how we can help you make a difference in your community. Some strategies will require the assistance of a lawyer and/or CPA. We are not lawyers and do not give legal or tax advice, but you can always contact us for a referral to an appropriate professional.