If you want to give to charity, consider doing so through your estate plan. The right charitable giving strategies through estate planning distribute money to those in need while offsetting potential tax burdens. Our Houston estate planning attorneys are here to help you make the most of your estate plan through strategic philanthropic gifts.
A Lasting Legacy Through Charitable Giving
Giving to charity at the end of life requires allocating assets to the right organizations. Choose the right charities and philanthropic organizations and your estate plan will make a truly lasting impact. This is your opportunity to guarantee that your beliefs and values are reinforced after you pass.
When done right, charitable gift-giving minimizes taxes and the burden on family members. This is your inside look at the benefits and process of strategic giving through estate planning.
Decrease Your Estate’s Tax Liability
A financial or other valuable gift to a recognized charity enhances the greater good while also decreasing your estate’s tax burden. Such gifts are almost always exempt from the overarching federal estate tax. The exemption ensures that even a portion of the estate paid toward a charitable case greatly decreases the estate tax liability.
The outcome is a preservation of estate value for heirs and charitable groups as opposed to the federal government. Though some federal government programs are worthwhile, there is a better chance of your money making a meaningful impact on the needy and those who are deserving when redirected to charities.
Though few know it, charitable donations are also deducted from one’s income tax. The IRS empowers United States taxpayers to claim deductions up to but not in excess of 60% of adjusted gross income when making cash charitable donations. Choose one or several charities as estate plan beneficiaries and you’ll pay less on that year’s income taxes.
Capital Gains Tax and Charitable Giving
The donation of specific assets such as real estate and stocks makes it easier to sidestep dreaded capital gains taxes. If such assets increase in value, donating them to charity ensures there is no need to pay capital gains tax after appreciation.
In contrast, selling such assets and then donating the cash proceeds would trigger arguably punitive capital gains taxes.
Use of a Private Foundation in Your Estate Plan
Using a private foundation in estate planning can offer significant benefits, including tax advantages, maintaining control over the charitable use of the assets, and creating a lasting family legacy. By setting up a private foundation, individuals can transfer assets into the foundation either during their lifetime or as part of a bequest. This not only helps to reduce the taxable estate and potentially lower estate taxes but also allows for continued family involvement in philanthropy. Family members can be involved in the foundation’s governance, thereby perpetuating family values through charitable activities.
Moreover, the foundation can receive a variety of assets, including cash, stocks, and real estate, and it can also be named as a beneficiary of retirement accounts, life insurance policies, or charitable trusts. This flexibility makes it an attractive tool for estate planners looking to meet both personal philanthropic goals and family estate planning objectives.
How to Implement Charitable Gifts Into an Estate Plan
The incorporation of charitable gifts within an estate plan is accomplished through will bequests and more. Will bequests are a direct means of ensuring one or several charitable donations are made. Simply state the percentage of the estate or amount of money each charity is to receive and it will be distributed accordingly.
Your estate planning attorney may also recommend a charitable trust. Such legal entities empower you to donate your assets to one or multiple charities while you retain the legal right to income that the assets accumulate throughout the remainder of your life.
It is even possible to name charities as beneficiaries in a life insurance policy. Such an approach does not decrease one’s current income yet creates the potential for tax benefits.
Consider naming several charities as beneficiaries within your retirement plan. Your retirement assets will be donated to those selected charities in accordance with your expressed desires, reducing estate taxes and providing a helping hand to those in need.
Donor-advised funds are also available. Such funds are contributed to as time progresses. The funds receive tax benefits with each donation. The fund balance is transmitted to your selected charities at the time of passing.
Incorporating a private foundation into an estate plan enables individuals to manage the charitable distribution of their assets while potentially reducing estate tax liabilities. It provides a structured way for families to maintain control over philanthropic activities and to ensure that their charitable goals continue to be met long after they are gone, solidifying a legacy of giving that can influence future generations.
Learn More During a Consultation With Our Houston Estate Planning and Corporate Attorneys
Charitable giving is only one component of estate planning. Our attorneys are here to help you plan comprehensively with asset protection, tax planning, and more. Learn more about charitable giving in estate planning during a consultation with our team. Contact us for a consultation today.