The Benefits Of Charitable Estate Planning

Research shows that giving to charity makes people happier, and many give back whenever possible. One method for giving to charity that is often overlooked is to incorporate charities into your estate plan. Naming a charity as a beneficiary for some of the assets in your estate plan can offer many benefits, including the beautiful opportunity to make a beneficial impact, even after death, and leave behind a lasting legacy. A carefully constructed estate plan can allow you to direct the distribution of your assets so that they continue to support your values long after you are gone. To learn more about charitable estate planning, schedule a consultation with one of the knowledgeable estate planning attorneys at Fleurinord Law, PLLC by calling our offices in Texas at (713) 346-2011 or Florida at (305) 900-3139.

The Many Benefits of Charitable Giving in Estate Plans

Incorporating charitable giving into a comprehensive estate plan offers many benefits. Financially, charitable gifts can help to minimize the taxes on a decedent’s estate. Giving back through careful estate planning has the potential to provide several tax benefits, including a reduction in estate taxes, income tax deductions, and avoiding capital gains taxes on stocks, bonds, and other appreciated assets. During an individual’s lifetime, building charitable giving into an estate plan can also provide them with the peace of mind that comes from knowing the causes they care about will continue to be supported after they are gone.

Charitable Remainder Trust Payments and Taxes

Charitable remainder trusts, or CRTs, allow the grantor to give cash and property to an irrevocable trust that could provide them with a charitable tax deduction. Per the Texas Property Code § 114.003, charitable trusts give the maker authority to direct the trustee to transfer assets to the charity of their choice as per their instruction and take advantage of the tax benefits of an irrevocable trust.

Three Potential Benefits of Incorporating Charitable Giving Into an Estate Plan

Charitable giving is a vital part of estate planning, allowing individuals to support charities they are passionate about, leave lasting legacies, and enjoy tax benefits. Three of the primary benefits include the following:

Alleviates Your Personal Tax Burden

Most decisions made during estate planning have some tax implications, whether for the planner or for their intended beneficiaries. Understanding the relevant tax laws and how they apply facilitates informed choices. With careful planning, gifts to charities help reduce federal estate and gift taxes, as charitable gifts are generally exempt from gift taxes.

Reduce Federal Estate Taxes for Designated Beneficiaries

For those with larger estates, exceeding the threshold for a federal tax exemption, donating a portion of the estate to a tax-exempt charity can reduce taxes for beneficiaries. Making charitable contributions early could reduce the taxable value of the estate and tax burden, thereby actually increasing the assets that will pass to the estate’s other beneficiaries.

Allows Estate Planners To Establish a Generous Legacy

Charitable giving in estate plans allows planners to support causes they care about. Even after death, the gift will reflect their priorities and values. Naming a charity as a beneficiary is an excellent way to leave behind a lasting legacy. 

Bequest: To Give or Leave a Gift

The most straightforward way to designate a charity in an estate plan is to leave a bequest in an estate planning document. A bequest is a statement in a trust instrument or Last Will and Testament naming a specific charity and the amount the grantor would like to transfer to the organization upon their death. Using the charity’s exact legal name is important to ensure there is no confusion, especially if there are other charities with similar names.

What Are the Advantages of a Charitable Remainder Trust?

One of the most effective ways to include charitable giving in an estate plan is to create a CRT. This estate planning tool is an irrevocable trust with a charitable remainder. The estate planner transfers assets into the trust. After funding, they can name themselves, or anyone they wish, as the beneficiaries for payments, while the remainder of the assets will pass to charity.

Individuals do need to be aware that while the estate planner enjoys tax benefits on the payments, according to the Internal Revenue Service, non-charitable beneficiaries do not. The potential advantages trust makes could enjoy from a CRT include the following:

• Taxes deductions for donated assets
• Donated assets are not part of the estate assets
• The potential to receive an income stream
• The trust maker controls which charities and how much they contribute, even after their death

CRTs allow estate planners to control charitable contributions and enjoy tax benefits with careful planning. 

What Are the Pitfalls of a Charitable Remainder Trust?

While there are many advantages of using a Charitable Remainder Trust to give back, there are also pitfalls to be aware of before deciding on the best option. One potential cause for caution is that CRTs are irrevocable trusts. In other words, once grantors make and fund them, they cannot usually make changes or cancel the trust. Understanding how to prepare the trusts to receive the maximum potential tax benefits is also essential. Speaking with a seasoned attorney at Fleurinord Law, PLLC, about charitable estate planning can help determine if they are the right tool for an individual’s unique situation.

Some of the planning strategies besides using a Charitable Remainder Trust to designate a charity in an estate plan include the following:

• The testator can name a charity in their will
• Name a charity as an IRA beneficiary or give up to $100,000 per year straight from the IRA
• Establish a financial legacy by gifting through a Community Foundation
• Donate non-cash gifts, such as real estate, to a charity
• Create a life Insurance or a Charitable Gift Rider
• Donate appreciated stock to a charity

Many estate planning options allow planners to leave assets to the charity of their choice. Every estate planner has unique goals and desires they wish to accomplish. Determining the best strategy that meets individual needs is essential. With thorough estate planning, people can ensure they donate to the charities important to them, and enjoy the benefits of knowing their legacy will continue to support the work that matters to them.

Schedule a Consultation With an Experienced Estate Planning Attorney

There are many reasons people give to charity. The donations allow you to help an important cause and feel good about helping. Significant tax benefits can also decrease income taxes during life and estate taxes after your death. Charitable giving offers the unique benefits of sharing your values and supporting the community you love, while also making astute financial choices for your estate plan. Call Fleurinord Law, PLLC today at (305) 900-3139 in Florida or (713) 346-2011 in Texas to schedule a consultation with one of our knowledgeable attorneys and learn how charitable estate planning can work for you.