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Addressing charitable gifting in an estate plan

On Behalf of | Feb 23, 2024 | Firm News |

Incorporating charitable gifting into your estate plan can help you to support causes and organizations you care about. It’s a way to better ensure that your legacy has a lasting impact, aligning your charitable values with your financial planning.

By understanding the different methods of including charitable gifts in your estate plan, you can make informed decisions that can benefit your other beneficiaries and your chosen charities alike.

Choose an informed vehicle for your charitable gifts

One effective way to incorporate charitable giving into your estate plan is through your will. This straightforward method lets you specify the amount or percentage of your estate you wish to leave to charity. It’s flexible, allowing you to change your mind at any time and doesn’t affect your finances during your lifetime. Bequests can significantly reduce your estate tax burden, potentially leaving more for your beneficiaries.

Another option is setting up a charitable remainder trust (CRT). This allows you to receive income for life or a specified term of years, after which the remainder of the trust goes to your designated charity. CRTs can offer tax benefits, such as a charitable income tax deduction and potential savings on capital gains taxes. This option is particularly attractive if you have highly appreciated assets.

Maximize your tax benefits

Understanding each method’s tax implications is essential to ensure you and your beneficiaries receive the maximum tax benefits from your charitable giving. Donations made through your estate can reduce the size of your taxable estate, potentially lowering estate taxes. If you’re considering large gifts, it might be worth consulting with a financial advisor to navigate the complexities of tax laws and regulations.

Incorporating a donor-advised fund (DAF) into your estate plan is another way to manage your charitable giving efficiently. With a DAF, you can make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time. This option provides flexibility and control over how and when your gifts are distributed, allowing you to respond to changing needs and interests.

Clear communication is vital when including charitable gifts in your estate plan. Discuss your plans with your family and the receiving organizations to avoid surprises and better ensure that your wishes are understood and respected. Leaving detailed instructions in your will or trust can help prevent misunderstandings and help you to meet your charitable goals.