Few things in life can be as important as helping others in need. Did you know that the government provides certain benefits for donors and charitable organizations to stimulate giving? There can also be benefits associated with leaving money to charity after you pass away. Let us take a look at three reasons to include charitable giving in your estate plan.
- Support a worthy cause. Knowing that your future donations may help find a cure for a terrible disease, provide opportunities for abused children, or perhaps find homes for abandoned animals can be immensely gratifying. There is no shortage of worthy causes and you can be as general or specific as you wish when directing your charitable estate gifts. Dedicating a percentage of your estate, rather than a numeric dollar amount, can also help protect your heirs from future asset devaluations. Remember, you cannot take money with you after you are gone.
- Avoid estate tax liabilities. If the value of your estate exceeds the applicable threshold for an estate tax exemption, then donating a proportionate piece of your estate to a tax-exempt charity would generally reduce its overall value and potentially spare your family from a significant tax bill. People with moderately sized estates can also benefit, as appreciating assets have the potential to put them at risk of estate taxes and large capital gains liabilities down the road.
- Preserve assets for children and grandchildren. Certain financial arrangements can allow estate-holders to donate to favored charities while also providing a legacy inheritance for their loved ones. A Charitable Remainder Trust, for example, can accomplish this dual benefit using standard tax-advantaged retirement accounts like 401ks and IRAs. Instead of leaving an IRA or 401k directly to a family member, the charitable trust becomes the beneficiary. Selected family members would then receive annual income payments from the trust for a specified period of time, or even “stretched” over the trust beneficiary’s lifetime. After the time period lapses or the beneficiary dies, any remaining trust assets would be donated to a designated charity. Charitable Remainder Trusts also skirt new retirement account reforms contained in the SECURE Act of 2019.
To maximize the potential benefits of charitable giving, contact our office to schedule an appointment.