How To Donate To Charity With Your Estate Plan

There is no shortage of laudable charitable organizations and causes. According to the National Center for Charitable Statistics, there are more than 1.5 million registered nonprofit organizations, and that is just in the United States. Whether the cause you most support is protecting children, demanding fresh water, fostering pets, or encouraging world peace, there is an organization that shares your values. One of the ways that charitable organizations survive is through donations that are part of grantors’ estate plans. If you want to donate to charity in your estate plan, consider contacting the experienced estate planning lawyers with Harrison Law, PLLC at (480) 320-2310.

Benefits of Donating to Charity in Your Estate Plan

There are numerous benefits of donating to charity with your estate plan, including:

• You support an organization that shares your values – With charitable giving, you can support causes that are meaningful to you. You can leave behind a legacy that you are proud of.
• You can direct how the funds are used – When you give a gift to a loved one, you may not have much control over how the gift is used. However, when you make a gift to a charity, you can include specific instructions on how you want the gift used. This gives you greater control over how your donation can positively impact others.
• You can receive tax savings – There are numerous tax advantages of charitable gifts for both you and the charity. The charity can sell assets you leave behind without paying capital gains tax because it has tax-exempt status, according to the IRS. Additionally, your charitable gift can reduce your estate taxes.
• You can also provide for your loved ones – Various estate planning methods allow you to donate to charity while also providing for your loved ones.

Most Common Ways to Donate to Charity with Your Estate Plan

There are many ways that you can donate to charity with your estate plan. An experienced estate planning lawyer with Harrison Law, PLLC can discuss the following options with you and recommend which methods are best for your particular situation:

Name a Charity in Your Will

One of the most common ways to donate to charity with your estate plan is to make a bequest in your will. The bequest is a sentence or two that states the amount you would like to donate, the name of the charity, and the purpose for the donation. You can leave a set amount, a percentage, or a specific asset to a charity in your will. Specific bequests are taken care of first in your will before assets are divided to residuary beneficiaries. Charitable bequests help reduce estate taxes.

Make a Gift Through a Community Foundation

Community foundations allow you to structure your gift in a way that maximizes tax benefits and your impact. You create a charitable fund that gives the amounts you designate to your specified charities for the duration you choose. This method can be helpful if you want to make more than one gift to more than one charity.

Use a Trust

Another way to donate to charity with your estate plan is to use a trust. With a trust, you transfer certain assets and direct how they are used during your lifetime and after your death. While there are many different types of trusts, a charitable remainder trust is one that is particularly well-suited to charitable giving. With a charitable remainder trust, you name a beneficiary to receive annual payments for the trust for a certain term. After that term, any funds remaining in the trust go to the charity you name. Your donations are tax-free and reduce your taxable income.

Make an IRA Charitable Rollover

Eligible individuals can gift up to $100,000 per year from their IRA to charities as a qualified charitable distribution. The amount counts toward any required minimum distributions. Required minimum distributions are typically considered taxable income and taxed at ordinary income rates. However, qualified charitable distributions allow you to exclude the amount from your income so you do not have to pay any taxes on it.

Use Life Insurance

You do not have to name a person to receive your life insurance proceeds. You can name a charity if you would like. If you do not want to gift the entire policy, you may be able to use a charitable gift rider that pays a percentage of the policy’s face value to a qualified charity.

Give Appreciated Stock

Another tax-advantageous way to donate to charity through your estate plan is to gift appreciated stock. Typically, when you own stock, it appreciates, and you sell it, you will be subject to capital gains tax. However, if you give the stock to charity, you receive a charitable income tax deduction that is equal to the fair market value of the stock and are not subject to capital gains tax. The charity can sell the stock and will not be subject to capital gains tax because of its tax-exempt status.

Designate the Charity as a Beneficiary

If you do not have liquid assets you want to give to a charity, you could consider naming the charity as your beneficiary of other assets or accounts, such as:

• Your IRA, 401(k), 403(b), or other retirement account
• Money market, checking, or savings account
• Stocks and bonds

Typically, the charity can withdraw assets from your account without being subject to income taxes.

Use a Donor-Advised Fund

Donor-advised funds are irrevocable gifts of an asset to a qualifying charity. The funds are used to set up an account for the charity. You can manage and invest these funds during your lifetime. You name the charity you want the funds to go to upon your death. The gift is considered complete and qualifies for an itemized income tax deduction.

Contact an Estate Planning Lawyer for Help

If you would like to donate to charity in your estate plan, you can talk to an estate planning lawyer. The experienced estate planning lawyers with Harrison Law, PLLC can discuss your goals, identify charities that share your values, and provide customized advice based on your particular situation. We can incorporate charitable giving into your estate plan so you can leave a legacy you are proud of. Consider calling us today at (480) 320-2310 to schedule a confidential consultation.

© 2023 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.