If you’re thinking of making a charitable donation, there are likely financial benefits to both you and your community. But it takes some planning. Here I share some important considerations as you evaluate the prospects of what and how big a role this form of giving may play in your estate planning.
As we weave through our respective lives we are impacted by schools, religious entities, health advocates, political causes or a myriad of other organizations that drive your inclination to contribute to a particular group. In fact, some of these organizations survive, in part or wholly, on your generosity!
From an estate planning perspective, charitable giving is a great way to support causes and organizations that you care about while potentially reducing your overall tax liability or the impact of taxes on your estate. Where do you start as you consider your charitable inclinations?
- Charitable Goals: Determine the charitable organizations or causes that are important to you. Think about the impact you want your donations to have and whether you prefer to give to local, national, or international charities. Visit www.charitywatch.com to understand a charity’s effectiveness, finances, and governance.
- Identify the Right Assets: Decide which assets you want to donate to charities. Common options include cash, stocks, real estate, or even a portion of your retirement accounts. Each type of asset may have different tax implications. Please consult a tax professional before deciding which assets to donate.
- Types of Charitable Giving: There are several methods for making charitable donations as part of your estate plan, including:
- Bequests: This is likely the most straight forward where you can include specific charitable organizations in your will to receive a certain amount or a percentage of your estate.
- Charitable Trusts: This is more complicated and will likely require you to work closely with an estate planner. In this situation you can establish charitable remainder trusts (CRTs) or charitable lead trusts (CLTs). These are compelling solutions as they can provide income to beneficiaries with an ultimate benefit to the selected charity. Please consult a tax professional before making your decision.
- Donor-Advised Funds (DAF): When you contribute cash, highly appreciated securities, cryptocurrencies or other assets to this vehicle you are generally able to take an immediate tax deduction up to a percentage of your AGI. For those that are inclined, this can help you establish a legacy of giving while maintaining anonymity.
- Private Foundations: Create your own charitable foundation, which gives you more control over how your charitable assets are used.
Important reminders related to charitable giving:
- Tax Benefits: Donations to qualified charitable organizations are often tax-deductible, which can reduce your estate’s overall taxable value. Be aware of the specific tax rules and limitations associated with different types of assets and giving methods.
- Estate Tax Reduction: Charitable giving can reduce the size of your taxable estate, potentially lowering the estate tax liability for your heirs.
- Seek Legal and Financial Advice: Consult with an attorney who specializes in estate planning, a tax professional with knowledge of the tax implications of a charitable gift and a financial advisor with expertise in charitable giving. They can help you navigate the legal, tax and financial aspects of charitable giving within your estate plan.
- Maintain Proper Records: Keep detailed records of all charitable contributions and related documents to ensure you can substantiate your deductions if audited.
- Update Your Plan: Periodically review and update your estate plan to reflect changes in your financial situation, charitable interests, and any changes in tax laws or regulations.
Charitable giving as part of estate planning can be a meaningful way to leave a lasting legacy while also providing potential tax benefits. It’s important to carefully consider your options and consult with professionals to ensure your intentions are carried out effectively.
Stansberry Asset Management (“SAM”) is a Registered Investment Advisor with the United States Securities and Exchange Commission. File number: 801-107061. Such registration does not imply any level of skill or training. This presentation has been prepared by SAM and is for informational purposes only. Under no circumstances should this report or any information herein be construed as investment advice, or as an offer to sell or the solicitation of an offer to buy any securities or other financial instruments.
SAM does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.