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How to Make Charitable Gifts Within Estate Plans



Typically, a person can make charitable gifts within his or her estate plan from funds or property that are left over after he or she has provided for surviving family members' future and financial stability. The majority of charitable gifts offer the giver personal benefits and, beyond that, a charitable income tax deduction now. Depending on the estate-planning charitable gift strategy implemented, a donor may also be able to save on capital gains taxes, raise income streams, and provide oneself or a designee with lifetime income. Many charitable gifts additionally provide estate tax deductions, if planned appropriately to maximize benefits and advantages to the donor and her family.

There are several ways that this type of charitable gifting through estate planning can be achieved:

  • will bequest
  • trust gift
  • designation of a charity to receive proceeds from a life insurance policy as the beneficiary
  • designation of a charity to receive proceeds from a retirement plan as the beneficiary
  • other types of charitable designations

Specific Vehicles That Further Facilitate Charitable Giving

Within each of the above-named categories, there are, of course, more specific and complex vehicles and devices available to prospective charitable donors to facilitate their giving. These are just some of the many available ways in which to effectuate a charitable gift and enumerate some of the key advantages of each option:

  • Charitable remainder trusts provide an income tax deduction immediately, while also providing an income stream for a lifetime, as well as a capital gains tax waiver on the particular property that is contributed.
  • Charitable gift annuities operate similarly to charitable remainder trusts and offer many of the same benefits.
  • Charitable lead trusts establish an income stream for a designated charity for a set time period, and the trust's remainder goes to the testator's children. There are no estate or gift tax implications to this type of trust vehicle.
  • Private foundations afford a great deal of flexibility to the testator to make determinations of the giving amounts. This flexibility is created through the testator's enacting of restrictions on the manners in which the charitable gifts are to be utilized by the recipient institutions or entities.
  • Donor-advised funds permit a testator to maximize savings on income taxes for the monthly or weekly contribution gifts made to churches and charities.

Significant Tax Implications to Charitable Gifts Require Prudent Planning With Competent Advisers

Admittedly, the topic of charitable gifting can be a sophisticated and complex subject matter with significant tax and financial implications. As such, it is prudent to discuss such charitable gifting within estate plans with a financial planning professional, trusts and estates attorney, and/or other qualified, trained, and experienced professional before undertaking any major or significant decisions.

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