Trust and Estate Expertise in Charitable Giving

When you estate plan you are able to dictate who inherits your assets and who will be able to make financial and medical decisions on your behalf. The planning process can be overwhelming, as navigating a will, beneficiary designation forms, durable power of attorney, health care proxy, and a trust can be a whirlwind.

Sadly, charitable giving is often forgotten or pushed aside. Unless advised to include it in the estate planning process, people are often too confused about the best way to incorporate their charitable wishes or may have simply forgotten.

If you are uncertain what to do with the money you have earned and saved, consider what you want to leave as your legacy upon your passing.

If your answer includes serving and helping others, charitable giving should be considered in your estate planning. The Germany Law Firm offers compassionate planning for those wanting peace of mind before and after major life changes.

A plan for what will happen to your estate upon your passing ensures that your assets will go exactly where you wish. The following strategies include some excellent ways to include charitable giving in your trust and estate planning.

Choosing a Charitable Cause

One of the most important steps when planning your charitable giving is to choose a charity that aligns with your values and passions and where your giving can make the biggest impact. You could review previous causes you have donated to, or consider choosing new ones.

If you are still determining which organization you would like to provide funds to, using websites, such as Charity Navigator, can help you evaluate a variety of nonprofit organizations.

In order to receive tax benefits for financial donations, you must choose an organization that the Internal Revenue Service (IRS) considers to be a “qualified organization,” which includes the following:

  • A state or possession of the U.S. that is used for public purposes
  • Foundations, funds, or trusts created only for scientific, educational, religious, charitable, or literary purposes or for the prevention of cruelty to animals or children
  • War veterans’ organizations
  • Religious organizations
  • Nonprofit volunteer fire companies
  • Fraternal societies (contributions may only be used for charitable purposes)
  • Civil defense organizations
  • Nonprofit cemeteries

Bequests To Charities In Your Will

A will outlines where you wish to have your assets go upon your death. Not only can you identify who will receive what, but a will can also be used to designate a charitable bequest and arrange trust funds for the charities you specify.

Choosing to name a charity as a beneficiary of your living trust or will is a simple way to donate funds to a charity through estate planning. Additionally, this can lower the taxable amount of your estate as well as any estate taxes.

It is important to note that charity bequests are paid out off the top of the estate before m allocating any remaining assets. You can opt to cap the amount given to a specific charity by specifying a dollar amount rather than a percentage. For example, if you only have $250,000 in your estate and have listed specific bequests totaling $250,000, no assets will remain for the residuary beneficiaries. Typically, the largest portion of an estate is the residuary portion. This is not always the case, and especially if you have incorrectly allocated your assets.

Contributing A Charitable Rollover From Your IRA

It is possible to name a charity as one of your IRA beneficiaries, but now you can utilize a charitable tax break for IRAs. Annually, people can give $100,000 or less  to charities directly from an IRA, and the amount can qualify toward required minimum distributions (RMDs). RMDs are the distributions that you are required to take from a retirement account upon reaching a specific age.

There is, however, a perk to this requirement: Taking these funds directly from your IRA and giving them to a charity is considered to be a qualified charitable distribution (QCD), which allows you to exclude that amount from your annual income, so you do not have to pay taxes on it.

You should make note that not every plan qualifies for this type of distribution, not every charity is considered “qualified”, a benefit can not be received in exchange for the distribution (i.e., tickets to a charity event), the gifts must be directly funded to the charity from the retirement account.

Gifting Of Property

Charitable giving does not only have to be in the form of cash. Another great way to include charitable giving in your estate planning is the addition of non-cash gifts, such as real estate. For instance, if you own a ranch, farm, vacation home, or condo, you can gift the property directly to a charity while continuing to use it throughout your life.

Gifting Appreciated Stock

According to Fidelity Charitable, one of the easiest ways to make a significant gift to a charity is through the donation of appreciated stock. Donating an appreciated stock that has been held for one year or more (which also qualifies for the treatment of long-term capital gains), can allow you to avoid payment of capital gains tax on your holdings.

Creation of a Charitable Remainder Trust

If you are interested in creating a way to give back before your passing, you can set up a charitable remainder trust. A charitable remainder trust allows you to donate tax-free while reducing taxable income. Check with your accountant or financial planner on creating a charitable remainder trust. They can help you set up the trust using funding from your other accounts.

Using Life Insurance or Charitable Gift Riders

A crucial part of estate planning is life insurance. Your loved ones can utilize life insurance proceeds to cover burial and funeral expenses. It is also possible to choose one or more charities as a life insurance policy beneficiary.

Another great option is charitable giving riders. A qualified charity can be paid a percentage of the policy’s face value. These riders do not typically reduce death benefits or the cash value of the policy, but they limit the amount you can gift this way.

Create Gifting Through a Community Foundation

When you use a community foundation, you establish a financial legacy with your own charitable fund. The benefit of gifting through a community foundation is that you are able to give whatever amount you would like to just about anyone you want for as long as you want. Community foundations are generally an option for large and small donors to structure their giving in the best way to have the maximum impact and tax benefits.

Donating Through a Donor-Advised Fund

A donor-advised fund is a fund created for the sole purpose of supporting a charity of your choice. Any assets can then be transferred to an existing or newly created fund. These transfers are irrevocable. Once transferred, the assets can be donated to the qualified charities that the donor has designated.

The donor can determine at what point they would like the donated funds to go to the charities. This account grows tax-free. At the time money is placed in the funds, the donor would receive a tax deduction, even if the disbursement of the funds has not been sent to a charity.

Contact an Estate Planning Attorney To Learn More

If you have humanitarian objectives you are trying to achieve, you will want to communicate your plans with an estate planning attorney at The Germany Law Firm when you set up a new estate plan or edit an existing plan. Estate planning and charitable giving can go hand-in-hand when an effective plan is created, providing for your beneficiaries as well as your legacy.

Our law firm has a dedicated team of estate planning attorneys who can provide legal advice and review your estate plan to achieve your financial goals. Contact us today via our online form to schedule your initial consultation.

Contact us to schedule your initial consultation.