Charitable giving through estate planning is often a win-win estate planning strategy for both charities and donors.  Many charitable gifts, while benefiting the charity receiving the gift, also allow for tax benefits to the donor.  It also allows the donor to leave a legacy and impactful message as to what is most important to them.  This article explores numerous options to make charitable giving a part of your estate planning.

Specific Gifts

The simplest way to work charitable giving into your estate plan is by making a specific, outright gift.  Outright gifts that are made from the donor’s estate following their death give the donor a tax deduction.  Lifetime specific gifts are also a way to remove assets from the donor’s estate.  Where lifetime gifts of highly appreciated assets (such as stocks or real estate) are gifted, the donor may avoid significant capital gains taxes.  However, more often than not, donors depend on their assets for their livelihood and choose to designate specific gifts thought their estate plan.

Charitable Remainder Trusts

A Charitable Remainder Trust can also be created, which allows for the donor to continue receiving income from the trust during his or her lifetime.  A Charitable Remainder Trust is irrevocable and tax-exempt.  Assets are transferred into the trust (irrevocably), and the trustee invests the trust funds for a specified period of time – most often the lifetime of the donor and possibly also the lifetime of the donor’s spouse.  Any income made during the lifetime of the donor can be paid out to the donor, or the donor’s spouse.  There are also numerous potential tax benefits to creating a Charitable Remainder Trust.

Charitable Lead Trusts

A Charitable Lead Trust provides income to a charity for a specified number of years, with the remainder of the trust passing to the donor’s heirs.  This is essentially the reverse of a Charitable Remainder Trust.  Donors may wish to put their assets in a trust and direct the income to be paid to a specified charity until their heirs are of a certain age.  Charitable Lead Trusts also have their own unique tax benefits.

Retirement Benefits

Retirement Benefits can be gifted to charities.  Donors simply name the charity as the designated beneficiary.  Retirement Benefits are subject to income and estate taxes, but charities that receive retirement benefits may be exempt from such taxation and receive 100% of the gross retirement assets.  This allows donors to still make a charitable contribution through their estate plan, and allow their hers to receive non-retirement assets that do not have the same income tax burden as retirement assets.  Further, the heirs may receive a step up in the bases of non-retirement assets, lessening the tax burden even more.

There are numerous strategies, beyond those addressed in this article even, to make charitable giving a part of any estate plan.  Not only does charitable giving through estate planning benefit deserving charities, but it can also provide significant tax advantages.  Schromen Law, LLC assists and counsels clients in working charitable giving into their estate plan in a way that makes it a win-win for both the charity and the donor alike.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Schromen Law, LLC and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.


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