In this season of giving, we often think about how we’re giving back to the world we live in. You might donate here or there during the year when you remember to, but you could develop a well-thought-out charitable giving plan that would benefit the charities of your choice as well as your estate.
Do the Research
There are close to two million charities, so it’s important to do some research to make sure your plan involves donating to reputable ones. Is the charity fiscally responsible, ethical, and effective? Does it use its assets wisely and apply them to the cause vs. using the funds for administrative costs? Take the time to confirm that a charity’s programs and services work toward the cause that you want to help.
Options for Charitable Giving Within Your Estate Plan
There are many options for charitable giving within an estate plan. It’s a good idea to discuss your intentions with an estate planning attorney to ensure your wishes are fully thought-out, appropriately documented, and to ensure that the gift is mutually beneficial from a tax perspective.
Will or Trust
One option is to make a gift at death through a will or trust. When the gift is left in a trust, you can give a family member or a corporate trustee control over the trust. The terms of the trust then direct how and when the assets of the trust are to be distributed to the charity or how the assets should be used for charitable purposes. Both the will and trust options would reduce the amount of the donor’s estate, and thus any estate taxes that would need to be paid. When left through a simple will, the charitable gift won’t be able to be executed until after probate has completed.
Charitable Gift Annuity
Another popular option is a Charitable 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 his 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.
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.
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.
The ideas above are some examples of ways to use the estate planning process to make a charitable gift and provide tax benefits for your estate. Planning your charitable giving can be complicated and the best options for you depend on your situation. Contact The Heritage Law Center at 617.299.6976 or firstname.lastname@example.org for help and guidance in setting up your charitable giving as part of your Massachusetts estate plan.