Put Giving Into Your Estate Plan

5 Ways to Incorporate Giving Into Your Estate Plan

Put giving into your estate plan.  Ask yourself this question: “How much is enough?”

You don’t need to be a multimillionaire to make an impact.

You take care of your family, build a home, somehow amass a small (or large) stack of assets. What do you do with them when you die? For many people, gifts to charity are an important aspect of their lives. Therefore, it is only natural that you find ways to incorporate charitable giving into your estate plan.

There are many options for creating an estate plan that includes gifts to charity. Many Americans give to charities on an annual basis – it’s part of achieving true wealth. True wealth is about having the freedom to achieve your goals, and for many that means being able to leave a legacy to their church, alma mater, charity or other organization that they care about.

Charitable giving through your estate plan is a more comfortable way to donate money as you might need the assets to support your income during retirement, but upon your death the money, or part of it, can be passed on to a charitable goal.

With charitable giving as part of an estate plan, you can set up outright gifts to charities or set up a charitable remainder annuity trust (CRAT) to provide income to a surviving spouse or heir, with the remainder going to the charity.

Interestingly, you can even set up a CRAT at death by passing along your IRA, which can be an effective way to both generate income for a loved one and give to charity in a tax-efficient manner.

Most people want to plan for a good life and a good retirement, so why not plan for a good end of life, too? Let’s look at 5 ways to incorporate charitable giving into your estate plan.

Put Giving Into Your Estate Plan - Make the Donation in Your Will

Charitable giving is an important component of many people’s estate plan.

When hearing about charitable giving and estate planning, many people may get intimidated by estate taxes.  People fear their heirs will not get as much of their money as intended. However, including a charitable contribution in your estate plan will reduce your estate tax liabilities—helping to maximize the final value of your estate for your heirs.

A charitable donation given in a will is a strategy used to ensure the gift qualifies for the charitable tax credit and is issued in the year of death in the deceased’s name.

If you plan to leave a gift in your will, please ensure you have the full legal name of the organization and also ensure this organization is a registered charity, and not just a non-profit organization. There are many non-profit organizations that do not have a charitable registration and therefore are not authorized to issue tax receipts.

Put Giving Into Your Estate Plan - Creating a Charitable Trust

A charitable trust is another way to give back through estate planning. A split-interest trust allows a person to donate their assets to a charity but keep some of the benefits of holding those assets.

A split-interest trust funds a trust in the charity’s name. Those who open one get a tax deduction any time money is transferred into the trust, however, the donor still controls the assets in the trust, which is passed to the charity at the time of their death.

There are several options for charitable trusts, so speak to an experienced estate planning attorney to help you select the best one for you, your family, and the charities you want to support.

Put Giving Into Your Estate Plan - Use Life Insurance for Planned Giving

Life insurance is a popular and effective way to incorporate charitable giving into your estate plan so that it arrives at the time that a taxpayer needs the tax credit.

Designating a charity as a beneficiary, you can purchase a new life insurance policy or alternatively change the beneficiary on an existing life insurance policy and designate the registered charity as the beneficiary of the death benefit.

The donor (taxpayer) would continue to own the policy,the policy would be on the life of the donor, and the donor would also continue to pay the premiums for the life insurance policy. At the time of death, the full-face amount of the life policy (death benefit) would be paid directly to the registered charity and the charity would then issue a tax receipt for the full amount of the donation.

This substantial tax receipt can help offset the income tax payable by the estate and ensure the remaining assets are distributed to the beneficiaries with less income tax paid.

You can also transfer the ownership of a life insurance policy to the registered charity who would also be the named beneficiary, and the yearly premiums paid for the life insurance policy would qualify for the donation tax credit. This is more beneficial when a donor is looking at ways to reduce the current annual tax bill.

In this situation, the donor would make the annual or monthly payments to keep the policy in force and each year the registered charity would issue a charitable donation tax receipt for the premiums paid. However, at death the proceeds for the life insurance policy would not qualify for the donation tax credit.

Put Giving Into Your Estate Plan - Donate Your Retirement Account

Another way to leverage your estate plan, is to designate the charity of your choice as the beneficiary of your retirement account. Note that charities are exempt from both income and estate taxes.

In choosing this option, you guarantee that your favorite charity will receive 100% of the account’s value when it’s liquidated. Many people don’t realize this, but you can name a charity as the beneficiary on your IRA or 401k. That is a great way to preserve the full value of the gift of the retirement account, because of the taxes that won’t have to be paid.

Put Giving Into Your Estate Plan - Charitable Rollover

The Charitable IRA Rollover allows individuals age 70½ and older to make direct transfers of up to $100,000 per year (and up to $200,000 per year for married couples) from individual retirement accounts to qualified charities without having to count the transfers as income for federal tax purposes.

Since no tax is incurred on the withdrawal, gifts do not qualify for an income tax charitable deduction but are eligible to be counted toward an individual’s minimum required distribution.

Get the Help of an Experienced Trust and Estate Lawyer

Call now to start planning for the future!

There are several options for charitable trusts, and I can help you select the best one for you, your family, your situation, and the charities you want to support.

If you are living in California and want to protect your assets, call me for a free phone consultation.  I am an expert attorney in the fields of estate planning and living trusts.

Please call (760) 758-1565 or email aaston@trustandestatelawyer.net for more information about professional services on trust and estate planning, asset protection, trust administration and probate.

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Andrea Aston

Trust and Estate Planning Attorney




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