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The Heritage Law Center, LLC Blog

Charitable Giving Through Estate Planning

POSTED ON: October 8, 2018

According to Giving USA, the total estimated charitable giving in the U.S. increased by 5.2% from the prior year to $410.02 billion in 2017. Giving to charity not only makes you feel good, it does good. Many people want to include charitable giving in their estate planning to make it part of their legacy.

As a motivated donor, you need to determine how much you want to leave as part of your estate plan and who you want to leave it to. It’s important to investigate the reputation of any charity or organization you wish to make your contribution to. By doing a little research, you can be sure that the charity you wish to donate to will use your assets wisely, and that your donation will be applied to charitable purposes, not administration costs.

The options for charitable giving within an estate plan are varied. One option is to make a gift at death through a will or trust, which would then reduce the amount of the donor’s estate, and thus any estate taxes that would need to be paid. Other options:

Gift Annuity
The basic structure of this annuity is that the donor makes a lump sum gift to the charity, with the gift being used to purchase an annuity. The annuity would pay the donor a fixed percentage of the gift each year during their lifetime, with the remaining value of the annuity paid to the charity after the donor’s death. This offers a way for the donor to give away cash or assets while still receiving an income stream.

Gifting Assets
For donors who own real estate or a stock portfolio with a large appreciation, the assets can be passed on to the charity so that the donor receives a tax deduction for the fair market value of the gift. The charity can then sell those assets without having to pay the capital gains tax on the appreciated value.

The gift can also be left in a trust, giving a family member or a corporate trustee control over the trust. The terms of the trust would then direct how and when the assets of the trust are to be distributed to the charity or how the assets are used for charitable purposes.

Family Foundations
For larger donations or donations to be made over time, creating a family foundation is an option. A family foundation can be useful for those who wish to devote some part of their assets to charitable causes during their lives and have the work of the foundation and its charitable efforts continue after death.

If you are inclined to make a charitable donation in your estate plan, we can help. We’ll talk to you to find out your thoughts and then clearly explain your options and how the best ones for you can ensure the gift is mutually beneficial from a tax perspective. You can contact us at 617.299.6976 or