While being generous may come naturally to you, weaving charitable giving into your estate plan can be more complicated than you might think. At Surprenant & Beneski, our skilled estate planning attorneys assist clients throughout Southeastern Massachusetts and Cape Cod in planning their estates. We have multiple goals: to protect their assets, their families, and their futures, and to fulfill their wishes to support charitable causes close to their hearts.
Following are some questions to think about as you plan your charitable giving:
Do I want to take immediate action or do I want to plan to leave my chosen charity funds when I pass away?
Although taking action now will satisfy your immediate desire to put your money to charitable use, you may have anxiety that you may not always feel as flush as you do at this precise moment. On the other hand, there may be a chance that your family will not be in agreement with a future donation and it may cause familial conflict after you’re gone.
How can I best minimize my tax burden?
Let’s face it, you want to give in the way that works in your family’s best interests. This is an area in which our charitable planning attorneys can be invaluable. We know tax laws inside out and will advise you about your best options.
Methods of Charitable Planning
1. Naming a Charity as a Beneficiary
In the same way you name a spouse or child as a beneficiary of your IRA, 401k, or life insurance policy, you can name a charity as a beneficiary.
2. Charitable Lead Trust (CLT)
Because a charitable lead trust provides income payments to a charity for a fixed period of time, leaving the remaining assets to the grantor or a designated beneficiary, it can provide several benefits:
- Fund a cause you favor for the time period you choose
- Give you an income tax deduction for the foreseeable future
- Minimize both estate and gift taxes
You should be aware, however, that the CLT is irrevocable, meaning that once the assets are transferred to the trust, they cannot be removed.
3. Charitable Remainder Trust (CRT)
Conversely, a charitable remainder trust pays an upfront income to a beneficiary you designate for a prearranged period of time. Because the assets in the trust are no longer owned by you, this offers you an immediate tax deduction in addition to aiding someone close to you. When you pass away, the assets in the CRT go to the charity you have chosen. Like the CLT, the CRT is unalterable once in place.
4. Charitable Gift Annuity (CGA)
A charitable gift annuity differs in structure from the previously mentioned trust in that the donor transfers cash to the charity (which the charity will invest) in exchange for a partial tax deduction and an ongoing annual income. In a CGA, the payment to the donor is backed by the charity’s assets whereas CRT payments are subject to the availability of trust assets.
Donor-Advised Fund (DAF)
A donor-advised fund is a charitable investment account that is managed by a 501(c)(3) sponsoring organization. The donor contributes cash, real estate, and other property and in return receives an immediate tax deduction. To the donor’s benefit, the contributed assets increase in value without tax consequences. Although the donor’s recommendations for prospective charities are taken into consideration by the sponsoring organization, the latter has the final say on which charity receives the funds.
Contact Our Experienced Charitable Planning Attorneys Today
Giving to a cause you believe in or an organization you admire and respect can provide you with a sense of pride and achievement. Contact us now so we can help you solidify your legacy in a way that is satisfying and beneficial.