Charitable Planning
14 ways to make a dent in the universe with charitable planning.
Feel the need to make a dent in the universe and want to “do well by doing good”? Charitable planning may be the answer. Do tax minimization and the opportunity to set yourself and your loved ones up as respected members of the community sound intriguing? Charitable planning has it all.
Charitable Planning
When you think of charitable planning, perhaps, you picture the Bill and Melinda Gates Foundation, the Clinton Foundation, or the Hearst Foundation. Fortunately, for most of us, it doesn’t take billions to leave a legacy, obtain tax benefits, and set yourself and your loved ones up as important members of the community.
Charitable planning is one part of an estate plan and, of course, charitable planning always benefits a charitable organization, in one form or another.
What is a Charitable Planning?
If you want to help make the world a better place, anonymously or in your name, charitable planning is one way to do it. Ask your estate planning attorney for her good advice on the best way to go about it.
Here are examples of commonly used charitable planning tools:
- Outright Gifts
- Life Insurance
- Charitable Lead Trusts and Testamentary Charitable Lead Trusts
- Charitable Remainder Trusts and Testamentary Remainder Trusts
- Private Foundations
- Community Foundations
- Donor Advised Funds
- Retirement Plan Gifts
- Supporting Organizations
- Pooled Income Funds
- Qualified Conservation Contributions
- Bargain Sale Transactions
- Below-Market Interest Loans
- Charitable Gift Annuities
Do I Need Charitable Planning?
For those of you with a federally taxable estate (over $5 million) what if we told you that you could pick 2 of 3 possible estate beneficiaries, but that you had to pick 2? Which two would you pick?
The 3 choices are:
- Your loved ones.
- Your favorite charities, including, but not limited to, your own private foundation or donor advised fund.
- Uncle Sam
If you’re like most folks, you’d choose to benefit your loved ones and your favorite charities, not Uncle Sam. Fortunately, the U.S. government is totally okay with being left out of your estate plan because the funds that flow into a charity provide services that it no longer has to provide.
But charitable planning is not just about minimizing tax dollars. Even if your estate is not likely to be taxable on a federal level (and most estates aren’t) charitable planning includes leaving a legacy of helping and setting yourself and loved ones up as important members of your community. It’s a win-win for everyone.
What are the Benefits of Charitable Planning?
When most of us think about making a donation to charity, our thoughts automatically jump to that valuable income tax deduction and there’s nothing wrong with that. “Doing well by doing good” has a long history in our country.
In addition, to the income tax deduction, there are other significant benefits as well:
- Streams of income from a charitable trust to you or your loved ones are taxed at a lower overall income tax rate than regular income.
- Reduction of the size of your estate reduces federal estate taxes, generation skipping taxes, and state estate and inheritance taxes.
- Contributing to a charity during your lifetime or at your death provides a good feeling that you’re giving back and creating a better community and world for those you care about.
- Your job or business will likely benefit because you’ll be seen as a generous and caring member of the community – and – even if you don’t make the gift during your lifetime, when you commit to the gift irrevocably, you’ll be listed on all the charity publications as having made that gift already.
- Some well-to-do folks, who incorporate charitable planning into their estate plan, set up a foundation in their family name and have their children and grandchildren serve on the board of directors. This teaches succeeding generations about how to contribute to the community and sets them up for success and respect.
To determine how to incorporate charitable planning – whether big or not-so-big – into your estate plan, consult with a qualified estate planning attorney and let her know that making the world a better place is one of your estate planning goals.
