While estate planning can help an individual decide who inherits his or her property after death, it can also be used to support charitable causes that align with the person’s values. In addition to the intrinsic benefit of giving part of your estate to charity, you can also take advantage of certain tax benefits. However, you will need dedicated legal counsel to ensure that your estate plan actually meets these and other important objectives. SederLaw’s Estates & Trusts attorneys are here to create a customized estate plan that serves you and your family.
Essential Elements of Your Charitable Planning Strategy
Before deciding what the charitable portion of your estate plan will look like, there are a few significant considerations you should address. You may want to invest time in researching the causes that you either currently back or plan to assist through your estate. Our legal team can review these matters with you, including:
Making sure the charity you support is legitimate. There are countless resources online for determining whether the charity you want to give to is real, transparent, and legal in its operations. We can help you answer questions like:
- How long has the charity been in existence?
- How much money collected by the charity goes to overhead, salaries, and other expenses that don’t directly advance the charity’s stated mission?
- Have there been any lawsuits or governmental investigations into the charity’s activities?
Balancing your charitable ambitions with other estate planning goals. Although you may strongly believe in what your desired charity does, don’t forget that there are other purposes in adopting an estate plan. For instance, you will want to be able to provide for your spouse and children after you pass away, so you need to make sure there are enough assets for them.
Determining which assets will best fund your charity. Not all assets are equal from an estate planning perspective, and some can better accomplish a charity’s objectives than others. As an example, if you own stocks, you should consider gifting them directly to the charity instead of liquidating them and donating the cash. This can avoid capital gains taxes and ultimately be of more value to the charity.
Methods of Charitable Planning
A well-designed charitable plan can reap financial and estate planning benefits while helping the causes you believe in. For instance, you may be able to provide a continuous stream of supporting income to a designated beneficiary while also retaining sufficient assets to be gifted to your preferred charity. Our attorneys will examine a number of potential options with you, including:
- Charitable Lead Trust (CLT). Also known as a CLT, this is an irrevocable trust that provides fixed payments to a charity or other cause for a set amount of time. When this time period ends, the assets that are left over will then be distributed to the trust maker (if you establish a grantor CLT) or to your designated beneficiaries (if you create a non-grantor CLT). The trust can hold various assets including securities and real property. The specific tax benefits you gain will depend on whether a grantor or non-grantor CLT is set up.
- Charitable Remainder Trust (CRT). The CRT is essentially the reverse of the CLT. First, assets are transferred into the CRT, which provides an immediate tax deduction plus income that is paid to the trust maker (also known as a settlor) or spouse. After the trust maker’s death, the remaining assets are distributed to the desired charity.
- Charitable Gift Annuity (CGA). A CGA is a contract between the testator (donor) and the charity of the testator’s choice, which is often a university or nonprofit organization. The donor transfers assets to the charity, and in return, the donor can take a partial tax deduction plus a lifetime fixed stream of income from the charity. CGAs are more regulated than other options and you will therefore need to work with your lawyer to structure it carefully.
- Donor-Advised Fund (DAF). The DAF is a charitable investment account that is established as a 501(c)(3) organization, which is also known as a sponsoring organization. The donor makes a contribution of cash, real property, or other assets, and is allowed to make as many of these gifts as he or she wants. The donor receives an immediate tax deduction and has the ability to make recommendations for how the sponsoring organization will distribute the assets.
- Private Foundation. We can also explore how establishing a private foundation can accomplish your charitable goals. A foundation is not only a wonderful way to create a lasting legacy that honors you and your family, but it may reduce your annual income tax liability and eliminate assets from your taxable estate.
The Benefit of Having SederLaw Develop Your Charitable Plan
Our attorneys have extensive experience using the above and other charitable planning tools to meet your gifting aspirations while ensuring you take advantage of various tax and estate laws. By working with our knowledgeable team, you can preserve more of your estate assets for both your family and your charity of choice.
For instance, our law firm has a Tax Law practice group that we consult as needed for estate and personal tax liability questions. No estate planning matter is too simple or too complex for our seasoned counsel, and we are proud to have assisted many individuals and families over the years with their legal needs.
Contact Our Worcester Charitable Planning Attorney
An estate plan can benefit not only individuals and their families but also the causes and communities that matter most to them. SederLaw can walk you through each step of the charitable planning process, from vetting your desired charities to executing a plan that reflects your estate, financial, and personal goals. Connect with our Estates & Trusts team today to get started.
