Palm Springs Law Blog

Friday, February 9, 2024

Options for Charitable Giving in Your Estate Plan

When you create your estate plan, you’re establishing your legacy. And if you’re someone with considerable assets, you might be thinking about donating some of that wealth to a beloved charity or two.

Your charitable gift can have a life-changing impact on organizations you love. But did you know that the right charitable giving strategy can also minimize estate taxes for your heirs and potentially even lower your tax liability during your lifetime? Here are a few charitable giving options to consider.

A Bequest in Your Will

This is probably the simplest way to make a charitable gift. In a will or a revocable trust — a trust you can change or cancel — a bequest is a line that specifies three things:

  • The amount you’d like to leave to a charity

  • The specific charity to receive that amount

  • What the charity may use the funds for

The easiest way to do this is to offer a gift that may be used for an organization’s “general purpose.” This means the charity can use the funds in any way it sees fit. If you want your gift to be used for something specific, it’s a good idea to get in touch with the charity ahead of time to make sure it will be able to accept a gift under those conditions.

Designating a Charity as a Beneficiary

Another relatively straightforward way to leave money to a charitable cause is by naming a charity as a beneficiary of your retirement accounts. While you can’t do this with a Roth IRA, it’s a strategy that can work with a traditional IRA, 401(k), 403(b), or similar account.

Note that any beneficiary of a retirement account, charity or otherwise, will have to pay income tax on any distributions they receive. However, this strategy has the potential to significantly lower estate taxes after your death.

Giving Appreciated Stock

If you sell stock that has grown in value, you’ll have to pay capital gains tax. And depending on the total value of the stock, these taxes can add up. If you’re planning to give a gift to a charity of your choice at your passing, you might consider giving the appreciated stock itself. 

Why? When you give a stock to a charity, you avoid capital gains tax. You also get an income tax deduction of the stock’s full market value.

Creating a Charitable Remainder Trust (CRT)

Charitable remainder trusts can be a challenge to set up. However, they offer you the best of both worlds: you can benefit a loved one as well as a charitable cause. 

CRTs are tax-exempt trusts, and the individual you choose will receive periodic distributions from the trust until they pass away. Once that person has passed, the remainder of the funds will be given to the charity. 

This is just a very general overview of CRTs. The laws surrounding them are highly detailed and complex. A qualified estate planning lawyer can help you set up a CRT that benefits a friend or family member, supports a charity of your choice, and possibly even qualifies for an estate tax deduction.

Need an estate planning attorney in Palm Springs?

Estate planning can be a daunting process. But if you take the time to plan your estate, you can spare your loved ones the legal hassle of settling your affairs while grieving. 

At Heritage Legal, PC, our experienced team of estate planning lawyers can help you craft a charitable giving plan that’s best for you, your loved ones, and the causes you support. Reach out today to set up a consultation.

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