Doing Good with Your Estate: Gifts and Estate Planning

Creating an estate plan may not seem like the most fun activity, but it can be meaningful  especially if you choose to leave a legacy through charitable gifts. 

You may already be building that legacy now with current donations to nonprofits. However, you can continue to make an impact with your estate after you pass. Further, your donation will be beneficial to other recipients of your estate, as charitable giving reduces the amount of taxes your estate is subject to.

Let’s discuss the process of incorporating charitable gifts into your estate.

Determine Your Passions

Charitable gifts can be given to nonprofits, religious organizations and schools. However, only you can determine which of these organizations you’re passionate about, or maybe grateful for. A good way to find your passions is to see where you’re currently giving your time and money. 

A way to evaluate the quality of a charity is to confirm that the majority of the funds received goes toward the charity’s work, rather than administrative costs. If you’re comfortable with their financial practices, you’re on the right track. Another aspect to consider when selecting charities is what assets you would like to give to them, and whether they can receive it. 

Evaluate Your Assets

The next step in the process is to evaluate your assets. What do you want to give to a nonprofit? This step is a good time to consult with an estate planning advisor. An advisor can help you take stock of your assets and determine a strategy that helps optimize the giving benefits you and the nonprofit. 

For example, you may want to give a large gift upon your passing. However, it may be more beneficial to you and the nonprofit to give a certain amount after you pass but divide up the remainder of the sum to give while you are alive. That way you can receive tax benefits, leaving more funds for the nonprofit, and possibly other beneficiaries of your estate. 
 
In any case, strategies are best determined with an advisor and are contingent on your giving method.
 
Determine Your Giving Method

As mentioned previously, make sure that a nonprofit can receive a gift in the manner you intend. Most nonprofits accept cash, but others are capable of receiving other types of benefits, such as the following. 

• Trusts. You can create a trust that would reduce the amount of taxes your estate would otherwise have to pay. Further, you can name trustees and allow them to distribute the funds as needed after you pass, making sure the charity you’ve chosen uses the funds as you have directed. 
• Retirement accounts. Donating retirement accounts to charities maximizes your gift because the charity does not have to pay taxes on the amount, unlike other commonly named beneficiaries. Further, donation of the fund can reduce the estate tax burden for your other beneficiaries.
• Annuity. For an annuity, you set aside a sum in which a fixed amount is donated to an organization each year. In this case, you support the organization and receive tax benefits while you are alive. 
• Assets. If an asset has appreciated greatly and is donated at your death, the recipient of the asset receives a step-up in basis to the fair market value of the asset, which can eliminate a capital gains tax when the asset is sold. 
• Foundation. If you have the means, you can set up a charitable foundation where you can direct its funds and work. This way, you can do good with the foundation while you are alive, and have its work continue after you pass. 

 
Next Steps
 
While it’s beneficial for anyone to include charitable gifts into their estate plan, it’s best to review the plan with an advisor to ensure you are doing the most good possible with your estate. 

If you are ready to start the process of leaving a legacy by incorporating charitable gifts into your estate plan, contact SLN Law. We are excited to help you on this important and meaningful journey!