Giving to charities and non-profit organizations is a loving way to leave a legacy that can touch many people’s lives long after your death. According to the National Philanthropic Trust (NPT), Americans donated a staggering $449.64 billion to charitable causes in 2019 alone. Figures from the NPT show that the causes most benefitting from Americans’ generosity included:
- Human services
- Grantmaking foundations
Americans tend to give to charities for various reasons, such as in memory of a loved one that has passed away, to help a cause close to our heart, or simply to share our good fortune with others. As an added benefit, donating to charity comes with tax benefits during an individual’s lifetime and after their death. Charitable giving can minimize your taxes when your estate is passed on, lowering the estate tax bill for your beneficiaries. Estate planning and charities are often intertwined. Considering charitable giving in your estate plan can be an act of love for people, animals, the environment, and other causes. We can help you devise a comprehensive estate plan that includes charitable giving and minimizes tax liabilities. Contact our experienced estate planning attorneys at Ibekwe Law, PLLC, today with any questions and concerns regarding your estate planning and charitable giving: 512-505-2753.
Charitable Giving in Your Estate Plan
Once you and your family have decided which causes you would like to support in your estate plan, there can be various options for you to put this into practice. Most individuals consider donating cash as the main way to show love to their causes and charities. However, you can potentially donate various assets to the causes you want to support, including:
- Stocks and mutual funds
- Real estate
- Life insurance policy
- Valuables such as artwork or cars
While there are many possibilities, the tax implications can vary widely. A seasoned estate planning attorney can assist you in deciding on the assets best suited for donation in your particular circumstances.
Mentioning a Charity in Your Will or Trust
Individuals drawing up an estate plan have the option to leave a request for a charity in their will or revocable trust. The request in your will or trust can simply state the amount you are leaving to a specific charity. You can also include the purpose of the donation or simply designate the money to be used for general purposes, meaning that the charity can decide how it will use the funds. In most states, donating to a charity on your passing can help to reduce estate taxes.
Naming a Charity as Your Retirement Account Beneficiary
When you have children or other heirs, naming a charity as the beneficiary of your retirement account can seem like an odd thing to do. However, consider that when you name your children or your spouse as a beneficiary, they will have to pay income tax on any amounts they withdraw from the retirement account. A charity, on the other hand, is tax-exempt and can benefit fully from retirement accounts. If you have additional assets, therefore, you may wish to distribute those to your loved ones and let a charity benefit from your retirement accounts.
Consider the Creation of a Charitable Foundation
There are several ways to ensure charitable giving plays a role in your estate plan. In addition to the above, you could consider establishing a charitable foundation in your lifetime, for example. The foundation can then continue to do good in your and your family’s name after you pass away, and potentially for many generations to come. The options to show love to your causes are seemingly endless. However, the various possibilities and tax implications can also be confusing when it comes to estate planning and charities. An experienced estate planning attorney can walk you through the various choices and their pros and cons when it comes to charitable giving in your estate plan.
Exploring Potential Charities for Your Plan
For some of us, certain causes and charities have been close to our hearts for many years and perhaps even decades. In this case, the decision on which charity to include in estate planning can be an easy one. However, if you are not sure which charity you want to leave money or assets to, you may wish to do some research to ensure the charities you are considering align with your family’s values and interests.
Many charities show gratitude to legacy donors by establishing so-called “legacy societies;” this can allow individuals to get involved with a charity on a more intimate level, meet like-minded donors and receive appreciation at special events and receptions.
Some potential donors are keen to find out about how a charity handles its finances to ensure that the bulk of their gift arrives where it is needed the most rather than getting swallowed up in running costs, wages of CEOs, or general administration. You can find detailed information about a charity’s finances on the Charity Navigator website. In general, charities such as food banks and humanitarian relief organizations have relatively small overheads. Others, such as museums and research organizations, for example, may have relatively high expenses that can include considerable staff costs as well as costs for equipment and property.
Deciding on a charity can be challenging. However, many individuals choose to follow their hearts when deciding on worthy causes. The decision on which charity to support will ultimately depend on your personal preferences and the causes that are dear to you.
An Experienced Estate Planning Attorney Can Help You
An estate planning attorney can assist you with all aspects of estate planning and charities, including how you can leave a legacy of love and care for the charities you support. However, charitable giving is only one part of your whole plan. We can help you with all aspects of estate planning, including but not limited to:
- Establishing an extensive estate plan that can include various assets such as retirement accounts, life insurance, trusts, etc.
- Ensuring your loved ones receive your assets according to your wishes.
- Helping to reduce tax liability and legal expenses for your beneficiaries.
- Naming a legal guardian for minor children.
- Determining what happens to your business if you become incapacitated or pass away.
- Helping to preserve generational wealth.
- Drawing up a power of attorney and healthcare provisions.
Estate planning can leave you with peace of mind and reassurance that all is taken care of in the event of any unforeseen circumstances. Contact an experienced estate planning attorney at Ibekwe Law, PLLC today for a complimentary consultation at 512-505-2753.