Charitable Giving and Estate Planning: 4 Things You Need to Know

Charitable Giving and Estate Planning: 4 Things You Need to KnowThere are many different reasons people give to charities, both during their lives and after they have passed on. Whether you’re considering charitable giving as part of your estate plan to support a cause you care about or to honor a loved one, it is vital to work with local lawyers for wills who can help you determine the most effective way to give.

Donate To Charity in Your Will or Revocable Trust

Donating to a charity in a Will or Trust is a simple way to reduce the amount of your taxable estate. Your Will specifies how you want your assets to be distributed after your death. In addition to outlining what individual beneficiaries will receive, you can use your Will to designate a charitable bequest to the nonprofit organizations of your choice.

You can also add assets to a revocable Living Trust while you are still alive and name the charity as the beneficiary. Using a trust can help certain assets avoid probate, and make things a lot easier for your loved ones at a difficult time. Having experienced estate planning lawyers’ or probate attorneys‘ assistance can ensure the trust is set up correctly.

Give a Charitable Rollover from a Retirement Account

You can also name a charity as a beneficiary of an IRA, 401(k), 403(b), or pension. If you have an IRA, you can make yearly tax-free charitable donations of up to $100,000 beginning at age 72 ½. Doing this while you’re still alive means you will not pay income tax on the money you donate and it will count toward any required minimum distributions (RMD).

If you plan on donating this money after your death and do not need it for living expenses, it can be an effective way to reduce the amount of income taxes you pay on your IRA distributions. Before you decide to follow this path you should talk to your accountant and estate planning attorney to find out if it is a beneficial option for you.

Gift Appreciated Stock

Another way to give a significant gift to charity and reap tax benefits is to donate appreciated stock. When you bequeath appreciated stock that has been held for more than one year, it qualifies as a long-term capital gain and you can avoid paying capital gains tax on these holdings.

Other Ways To Give as Part of Your Estate Plan

Some other methods to donate to charity as part of your estate plan include establishing your own charitable foundation, creating a charitable remainder trust, donating real estate or other property, and naming one or more charities as beneficiaries on life insurance policies. It is important to understand the financial and tax implications of any approach you may take to charitable giving. An experienced estate planning attorney can do a comprehensive evaluation of your assets and advise you of your options.

Are you ready to learn more about charitable giving and estate planning? Our full-service law firm in West Chester, PA can help.