Charitable Giving and Estate Planning

For both practical and philanthropic reasons, charitable giving can be an important part of your estate planning strategy. However, it is important to approach charitable giving in estate planning in a responsible manner to make sure that you are getting the most out of it while being sure your objectives for charitable giving are being met.

Keep Tax Consequences in Mind

Tax consequences can play a significant role in our decisions to give to charity on a yearly basis, so it is no surprised that they play a significant role in our decision as to how to distribute assets to charity on death. Donations to qualified charities are tax deductible up to 50 percent of your adjusted gross income, which means that giving a little extra to charity could help you and your family save on taxes when it comes to inheritances.

Allow for Disclaimers

Basically, a disclaimer is a way for an individual to turn down his or her inheritance. If you allow your heirs to disclaim all of part of their inheritance in favor of a qualified charity. The portion of the inheritance that is disclaimed in favor of a charity will allow both you and the heir to share in providing charitable contributions from your estate while helping to minimize their own tax liability.

Consider a Qualified Terminable Interest Property Trust

With these trusts, you typically leave assets to a spouse in the form of a trust. The spouse receives income from this trust for life, and when the spouse dies then the income remaining in the trust will go to remainder beneficiaries. Often, individuals choose their children as the remainder beneficiaries. However, you can select a qualified charity to be the remainder beneficiary. Just remember that your spouse or whomever you nominate as the primary beneficiary cannot change the remainder beneficiaries.

Explore Other Trusts

You may also want to consider another trust vehicle known as a charitable lead trust. This estate planning tool allows you to designate a specific amount within the trust that will be donated to qualified charities for a specified period of time. After that period of time has passed, the remaining funds can be distributed to other beneficiaries – like your children.

Charitable remainder trusts might also be an option for you. These trusts operate by allowing you to claim income from the trust during its existence or not, depending on your particular needs. At the end of the day, the main requirement for these trusts is that qualified charities must receive a minimum amount of value of at least a portion of the estate.

Talk to Your Attorney

Estate planning is an individual process that is unique to each person that engages in it. An experienced estate planning attorney understands how intimate an estate plan is and will work with you to explore various options that might be right for you. It is also important to make sure you revise your estate plan whenever major life changes occur, and that you make sure all of your charitable giving goals are updated and accurately reflect your wishes.   

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