When you start estate planning, you decide who you want to inherit your assets and who can make medical and financial decisions on your behalf.
People without children or heirs tend to leave their assets to their favorite charities. However, anyone can leave any portion of their estate to charities. Doing so is beneficial for you and other people. However, in some cases, it could be more tax advantageous to start during one's lifetime in order to maximize deductions. You can set up a charitable trust with funds to be distributed to the charity of your choice over a specific amount of time.
In order to properly include charitable giving into your estate plan, consulting an experienced estate planning attorney will be necessary. Here are five common ways to include charitable giving into your estate plan:
1.) Include Charitable Giving in Your Will
A will states specifically how you want your assets to be handled after your death. Not only can you state who gets what, but you can also use a will to designate a charitable bequest and set up trust funds for specific charities. Naming a charity as the beneficiary in your will is one of the simplest ways to donate to charity through estate planning.
2.) Donate Your Property
Charitable giving does not have to be limited to cash. Non-cash gifts, like property, can also be a great way to incorporate charitable giving into your estate plan. For example, if you have a condo, vacation home, farm, or ranch, and do not plan on passing it to people in your life, you can gift it to a charity while also reserving lifetime use. You can continue to use the property for the rest of your life and stipulate that you wish to donate it upon your passing. Consult with an estate planning attorney on the best strategy to do this.
3.) Charitable Remainder Trust
If you wish to start donating while you're still alive and then continue your donation after you die then setting up a charitable remainder trust is another strategy. This method allows you to make donations tax-free and reduce your taxable income. To create a charitable remainder trust, check with your estate planning attorney and financial planner as they can help set one up.
How Do Charitable Remainder Trusts Work?
If you choose to give by using a charitable remainder trust, an estate planning attorney will help guide you through the process. You will have to name a trustee who will then be in control of the trust.
Your attorney will:
- Ensure that the organization you designate has approval from the IRS.
- Move the assets you’re donating into the charitable remainder trust.
- Designate the charity as either the beneficiary or the remainder beneficiary.
- Explain to you and/or the trustee that they are responsible for making the distributions you specified for either a fixed number of years or for the rest of the beneficiary’s (organization’s) existence.
4.) Life Insurance
Life insurance is also an important part of estate planning. People can use the proceeds from life insurance to cover funerals or other expenses. There is also the option to name one or more charities as a beneficiary on your policy.
5.) Community Foundation
A community foundation is a public charity set up for a geological area (ex: Brooklyn Community Foundation) that pools donations to support the needs of the community and nonprofit organizations. If you use a community foundation, you can establish your own charitable fund or create a legacy by establishing a bequest. You may give any amount you like, to almost any fund you want, for however long you want. Community foundations are typically an option for big and small donors alike to arrange gifts for maximum impact and tax benefits.
In order to properly and successfully include charitable giving in your estate plan, contact the Law Office of Inna Fershteyn at (718) 333-2394.