Charitable Giving: Estate Planning Opportunities

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Charitable Giving: Estate Planning Opportunities

Estate planning can have many goals, from providing for grandchildren to ensuring the family land stays in the family. Charitable giving estate planning focuses on providing at least a portion of an estate to tax-favored charitable organizations. Estate planning can be used in several ways to accomplish charitable giving goals, many of which can also have tax benefits for the planner and their other beneficiaries as well. Creating an estate plan with an eye toward charitable giving also provides an individual with a chance to leave a legacy for years to come. Loughlin Law, P.A. may be able to help Florida individuals and families with their charitable giving estate planning goals. Call (561) 677-8384 to learn more.

Opportunities for Charitable Giving Within A Comprehensive Estate Plan

Most people probably recognize the importance of a Last Will and Testament to estate planning. Some would also consider an irrevocable trust, or beneficiary designations on transfer-on-death assets like life insurance policies. However, estate planning can go far beyond documents that only dictate what will happen to assets after someone passes away. Individuals who consider charitable giving an important part of their long-term asset management and distribution plans should consider some of the several options available for accomplishing their charitable giving goals, both during and after their lifetime. Below are just a few ideas to consider.

Charitable Trusts

A charitable trust is a method of providing money or other assets to a charitable organization over time. This type of trust will often provide income over a period of months or years, but can also be structured to provide hard assets upon the occurrence of specific events. Assets that might go into a charitable trust could include:

  • Cash
  • Stocks and bonds
  • Art or other valuable collectibles
  • Real estate

A charitable trust is a flexible estate planning tool that can allow grantors to be creative with not only what they provide to a charity, but how and when it is provided. In some cases, the grantor may also be able to leave instructions for how the funds are spent, or the other non-monetary assets used, as well.

Charitable trusts offer some tax advantages for the grantor. They can sometimes be used to reduce the total value of an estate to decrease or avoid estate taxes. Depending on the assets contained, charitable trusts may also help the grantor to avoid the income tax implications of assets that have appreciated in value over time. Consult with Loughlin Law, P.A., to learn more about this unique benefit of charitable trusts.

Private Foundations

A private foundation fulfills functions similar to those of a charitable trust, but it generally requires significantly more involvement from family or friends to administer and manage assets. If set up and managed correctly, however, a private foundation could last virtually indefinitely, which can be a very appealing charitable giving avenue. There are also some tax benefits for this type of charitable giving as well.

Private foundations can be a great way to leave a true legacy, and they are relatively popular in Florida. In fact, as of 2018, the Florida Philanthropic Network notes that this state has 7,977 charitable foundations that administer about $98.8 billion in assets. Talk to a Florida estate planning attorney to learn more about options for creating a private foundation for charitable giving.

Leaving Money to Charities Directly

Individuals can also leave money to charities directly through a Last Will and Testament. The will can simply state that a certain amount of funds or a percentage of the total estate should be provided to the charity, which should be named explicitly in the document so as to avoid any confusion (this step is especially important because often several charitable organizations will have similar names, or a charitable organization may have several branches which all have slightly different legal names). The executor of the will sets the designated assets aside to provide to the charity after paying all expenses and debts associated with the estate, or if the will specifies a percentage of the estate’s total value the executor will first discharge all of the estate’s debts and then calculate the amount due to the charitable organization once the legitimate claims of the estate’s creditors have been satisfied.

Charitable Rollover From an IRA

Individuals sometimes overlook that their retirement plans play a key role in their estate planning. In many cases, funds saved in retirement plans can be left to loved ones simply by naming a beneficiary for the account.

Many people also do not realize that they can name a charity as a beneficiary for an IRA. The Internal Revenue Service has reminded IRA-holding taxpayers over the age of 70 ½ that annual contributions they make to a charity from their IRA of up to $100,000 can count toward any required minimum distribution. Giving in this way can help decrease tax obligations while also giving directly to charity.

Giving Non-Cash Gifts

Not every gift has to be cash, either. Gifting personal property or real estate can support a charitable organization while decreasing the giver’s tax obligations, as well. Gifting appreciated stock may be especially welcome in many organizations, and in addition to providing helpful funds for the charity can also keep the giver from needing to pay capital gains taxes on the amount of appreciation.

Life Insurance Gifts

Like IRAs, life insurance policies often allow owners to set out who should receive the funds available from the policy by naming a beneficiary. While most individuals name family or friends as life insurance beneficiaries, it is also possible to name a specific charity as a life insurance beneficiary. The policy payout is tax-free to the charity, but if the charity is listed as the beneficiary, the policyholder can actually deduct the premium payments as a charitable contribution during their lifetime.

What Are the Best Assets To Leave to a Charity?

From the charity’s perspective, cash is often the best asset to provide to the charity because it is very flexible. The organization can use that gift however it would like, to serve the area of greatest need. However, you can incorporate specific directions to a charity if you want them to use the funds in a certain way. Creating a trust is perhaps the most foolproof method, but even some direction in your will can have some sway on how the charity will use your funds.

There are some tax-advantaged methods to provide money to charity. Using tax-exempt or tax-favored methods can allow you to reap some monetary benefit from the giving as well. For instance, giving funds that would otherwise be taxed can be a good idea. These might include IRA distributions or appreciated assets. Gift giving during your lifetime can also decrease income tax obligations year after year, and, if done properly with long-term planning, it can decrease estate taxes as well.

Get Help With Charitable Giving Estate Planning

Charitable giving has lots of benefits for both the charity and the giver. However, taking full advantage of the tax benefits of incorporating charitable giving in your estate plan might take some advance planning. Loughlin Law, P.A. may be able to help with this process—so you can take steps to maximize both your giving and tax benefits. Call (561) 677-8384 for more information.

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