September 5 is International Charity Day. You may have causes or organizations that you care about. As a result, you may want to leave money or other resources toward accomplishing the goals so important to you. It is not enough to verbally tell someone about your wishes. You need
to specifically express your wishes through creating and implementing an estate plan.
There are several advantages of strategically including charitable giving in an estate plan. For
one, you can direct your money to promote a cause or provide a community resource that leaves a legacy. Planned charitable giving may also provide tax savings for your estate while achieving other goals, like providing for loved ones.
Here are three ways to leave assets to charity: through your will, through a trust, and beneficiary
Charitable Gifts By Will
Money and other assets left in a will are outright gifts. Generally this means that the charity
receiving this kind of gift can use that gift however it pleases. The advantage of leaving a gift in
a will is that it is simple. The disadvantage is that there is no way to monitor how the
organization uses your gift.
Charitable Gifts Through Trusts
A trust, on the other hand, allows you to control how your gift is used. A trust is its own legal
entity in which a trustee manages the assets according to the trust’s (your) instructions. Because you do not own the assets, you are not taxed on them. Income from the assets provides payments to the trust’s beneficiaries. There are two main types of trusts for charitable giving: charitable remainder trusts and charitable lead trusts.
In a charitable remainder trust, you donate property or money to the charity now, but you get to
use the property or receive income from the trust for a specified period of time. At the end of the
designated time period, the charity receives the trust’s assets. A charitable remainder trust is
irrevocable, meaning you cannot regain ownership of the assets. However, you may have control over how the assets are used.
In a charitable lead trust, the charitable organization receives income from your assets for a
defined number of years or for the duration of your life. At the end of the trust’s term, the
remaining assets go to you, your spouse, or to your designated beneficiaries. This is a way to
preserve assets for children or grandchildren. The trust’s remainder is a taxable gift if
beneficiaries receive it during your lifetime. Post-death, it is subject to estate tax.
Gifts To Designated Beneficiaries
Investment instruments, retirement accounts, bank accounts, and insurance policies let you leave your assets to a “transfer on death” beneficiary, including charities. In most cases, all you have to do is fill out a form with your beneficiary designations. Be sure that your beneficiary
designations are up-to-date, as the beneficiaries listed on those forms may supersede those
mentioned in a will or trust.
Using beneficiary designations to leave high-tax assets, like retirement accounts, to charity offers a double benefit in reducing your estate’s tax liability by a.) generating a federal estate tax
charitable deduction while b.) making a higher-impact donation to the charity, which receives it
Need Help Maximizing Your Charitable Impact?
Balancing your income needs, needs of your loved ones after you are gone, tax liabilities, and
desire to leave a legacy is a challenge. You want to provide all with maximum effect and benefit.
Let the attorneys at rb LEGAL help you create an estate plan that supports your favorite causes
and charities while meeting other estate goals. Call us today at 763-582-1414 to schedule a
meeting in person or over the phone. Or, message us directly on our contact page.
Our Golden Valley firm works with clients throughout the Twin Cities metro area. Let rb
LEGAL help you.
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