Creating a Plan for Charitable Giving

  • Robert S. Thomas,
  •   Estate Planning
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Creating a Plan for Charitable Giving

Many of us have causes that we are truly passionate about, causes that are personal, or that hit us at our moral core. We volunteer, we advocate, we fundraise, and we donate. Estate planning allows for us to continue our commitments to the causes we believe in.

In fact, charitable giving can be a smart, effective method of protecting your estate from estate taxes. The federal estate tax exemption is $5.49 million for individuals and $10.98 million for a married couple. This means that the value of your estate that exceeds those amounts is subject to significant federal and state taxes. Of course, most people do not have combined estates that large; nevertheless, there are still tax advantages that everyone can utilize through the various methods of charitable giving.

Annual donations — You can begin doing this now. Giving to charity on an annual basis allows you an annual deduction in your annual tax return, and it also reduces your overall estate for estate planning purposes.

Life insurance or retirement accounts — Some people choose to make charities the beneficiaries of their life insurance policies, or open life insurance policies specifically for a charity. The same is true of certain retirement accounts. It is also possible to name a contingent beneficiary, which would give your spouse flexibility to decline benefits so they instead go to charity.

Will — One of the most common mechanisms to leave property to charity is through a will, since that what the vast majority of people use as their primary method of distributing their property.  

Charitable Remainder Trust — A charitable remainder trust is one into which you transfer your property and live off distributions from that trust for as long as you live. After you pass away, the remaining property is transferred to the charity that you have designated. The benefits of this include distributions that are paid to support you, an immediate income tax deduction, and the beneficiary of your donated property does not have to pay capital gains taxes.

Charitable Lead Trust — This is essentially the inverse of a charitable remainder trust, where your property is placed into a trust, with regular distributions paid to your charities of choice. Upon your passing, or some other pre-determined point in time, the remaining property is transferred to your heirs. This property would potentially transfer to your heirs without gift tax or estate tax consequence.

The Law Offices of Robert S. Thomas Can Help You

Charitable giving for estate planning purposes can be a win-win for you and the charitable causes that you value. However, there are many legal and technical requirements that your plan must meet, especially if you want to use numerous of the aforementioned giving methods. Call The Law Offices of Robert S. Thomas. I have practiced in the areas of tax law, estate planning, and probate for over twenty years and can offer you customized tailored planning to address your goals. I have a Master of Law Degree (LLM) in Taxation, and am licensed to practice in the United States Tax Court. Contact The Law Offices of Robert S. Thomas at 847-392-5893 to schedule a consultation or visit our website today.

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