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5 Ways to Incorporate Charitable Giving Into Your Estate Plan

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Ask yourself this question: “How much is enough?”

You take care of your family, build a home, somehow amass a small (or large) stack of assets. What do you do with them when you die?

For many families, sharing their time, talents and resources with others is a way of life. If your children are adults and successful on their own, do you plan to provide adequate support for your children and continue giving to your causes?

An emotional connection to a charity that has touched your life in a meaningful way, loyalty to a school that guided on the path to success, or simply a worthy organization are all excellent reasons to give.

Passing on your assets after death requires some advance planning. You don’t need to be a multimillionaire to make an impact. You have many choices to give within your estate plan. Some options for charitable giving have favorable tax advantages now and in the future.

Read on to learn more.

Make the Most of Your Legacy

Although death is something no one wants to think about, failure to put your estate in order can cause unnecessary costs. Preserve the maximum value of your estate by making a charitable gift at death through a will or trust.

This reduces the amount of the taxable estate, and thus any estate taxes that your children need to worry about.

Preplanning also reduces unnecessary drama and squabbles, the expenses of probate and uncertainty. If you own a business, estate planning affects not just your family, but the families of all of your employees and customers.

Use Life Insurance or a Charitable Gift Annuity

Integrated into your estate plan, a structured life insurance policy can equalize benefits to your heirs, pay for funeral or other expenses so that your estate assets pass as you see fit, or offer tax benefits in the present.

A Charitable Gift Annuity is a lump sum gift to a charity, with the gift being used to purchase an annuity. The annuity pays the donor a percentage of the gift during the donor’s lifetime and the charity gets the remainder after the donor’s death.

This way the donor has an income stream while living and a charitable gift is made after death.

An experienced estate planner can guide you on the proper way to designate insurance beneficiaries or structure an annuity to meet your needs.

Designate an Outright Gift

You can make charities your heirs. You can bequest a certain amount, designate a percentage of your estate or name a contingent beneficiary. You can update your will throughout your life whenever your family needs, priorities, and wishes change.

If you have no will to specify your instructions, state laws dictate where your property passes. In most cases, this would be first to a surviving spouse, then to your children, and then any other family in accordance with state law.

If you don’t leave a will and don’t have any living relatives, your estate could belong to the state.

Create a Charitable Remainder Trust

A charitable remainder trust allows you to give to the trust and get a partial tax deduction. You or someone you name have an income stream for up to 20 years or for the life of one or more non-charitable beneficiaries. At the close of the trust, one or more of your named charities receive the remainder of the donated assets.

A charitable remainder trust is an irrevocable transfer of cash or property. It is required to distribute a portion of income or principal. At the end of the specified lifetime, the remaining assets must be distributed to the designated beneficiaries.

Use a Community Foundation for Your Charitable Giving

A community foundation allows you to set up your own charitable fund, giving any amount you want, to almost anyone you want, for whatever time period you want. Community foundations are usually geographically bound and allow big and small donors to structure their gifts for maximum impact and tax benefits.

A gift to a community foundation fulfills certain tax objectives. You get a charitable income tax deduction in the year you make the gift AND your gross estate is reduced for estate planning purposes. In addition, you can eliminate capital gains taxes when you give appreciated property.

Create Your Own Family Foundation

Form your own foundation to support a charitable mission during life or at death. For certain families or purposes, a community foundation can be too confining. A private family foundation is a vehicle for assets while you are living and endures as long as your family needs it to.

Family members can participate in charitable grantmaking and governance. There are no specific legal requirements for private family foundations. A family foundation is simply a type of private foundation governed by IRS guidelines.

The IRS estimates that 50% of private foundations are family foundations.

Family foundation assets are public and the setup and maintenance can be complex. However, for high net worth individuals, the benefits may be worth the trouble.

How Do You Want to Be Remembered?

Taking care of your family is the usual first priority for estate planning. After that, people want to think about the things that are important in their lives. Dedicating a portion of your remaining wealth to charitable giving is one of the ways to continue what is important to you, even after death.

Whether dedicated to researching a medical cure for a rare disease or to helping the homeless or your local teachers, you can leave a legacy of generosity. You can make a bequest, designate a beneficiary or enter into more complex plans.

An attorney and qualified estate planner can ensure that your intentions are satisfied. Contact us today to make an appointment.

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