Incorporating charitable giving into your estate plan can help create a legacy. It allows you to support causes that matter to you while also benefiting from significant tax advantages. Charitable giving can be integrated into various types of trusts, providing you with a smart way to manage your assets and reduce your tax burden. We review several strategies for including philanthropy in your estate plan through trusts and how ALTA Estate can help you craft a charitable trust that aligns with your values and long-term financial goals.
Charitable Remainder Trusts (CRTs)
A Charitable Remainder Trust (CRT) allows you to transfer a variety of assets, such as real estate, stocks, or cash, into a trust, receive income during your lifetime, and ensure that the remainder goes to a designated charity after your death.
- Benefits: CRTs provide income during your lifetime while preserving your assets for future charitable donations. This option is handy for individuals seeking to balance income generation with philanthropy.
- Tax Advantages: CRTs offer tax benefits, such as deferring capital gains taxes on appreciated assets and reducing estate taxes, making them a powerful tool for high-net-worth individuals.
Donor-Advised Funds (DAFs)
A Donor-Advised Fund (DAF) allows you to contribute to a fund you control, giving you flexibility in choosing the recipient charities over time.
- Flexibility: DAFs allow you to manage your charitable giving according to your timeline. You can contribute to the fund and decide on the distribution to charities at your discretion, giving you more control over the timing and impact of your donations.
- Tax Benefits: Contributions to DAFs are eligible for an immediate tax deduction, even if you distribute the funds to charities later.
Private Foundations
A Private Foundation allows you to establish a charitable entity funded by your trust, giving you long-term control over its mission and charitable activities.
- Control: With a private foundation, you retain control over the organization’s charitable activities, grant distributions, and investments. This is ideal for individuals or families who wish to maintain high involvement in their philanthropic work.
- Family Legacy: Private foundations also engage future generations in charitable work, creating a long-lasting family legacy.
Charitable Lead Trusts (CLTs)
A Charitable Lead Trust (CLT) provides income to a charitable organization for a set period, after which the remaining assets are passed to your heirs.
- Benefits: CLTs allow you to support your chosen charities while reducing your taxable estate. After the trust term ends, the remaining assets pass to your heirs, often with reduced estate or gift taxes.
- Charity First: The charity receives income for the trust term, and any remaining assets are transferred to your heirs, making CLTs an attractive option for individuals seeking philanthropic and estate tax benefits.
Direct Donations from Retirement Accounts
Through your trust, you can name charities as beneficiaries of your retirement accounts, such as IRAs or 401(k)s.
- Tax Incentives: Designating charities as beneficiaries of your retirement accounts can reduce income taxes for your estate. You can also make charitable contributions directly from your IRA, potentially reducing taxable income while meeting required minimum distributions.
- Efficient Giving: This strategy ensures that charities receive the full value of your retirement assets without taxing them, maximizing the impact of your donation.
Testamentary Charitable Bequests
A Testamentary Charitable Bequest allows you to leave specific amounts or assets to charitable organizations through your will or trust.
- Customizable: Testamentary bequests allow for much customization, from specifying a particular dollar amount to creating an endowed fund to support a cause you care about.
- Flexible: You can include provisions in your will or trust that adjust your charitable gifts depending on changes in your estate or the charity’s status, ensuring your goals are met even as circumstances evolve.
Pooled Income Funds
A Pooled Income Fund (PIF) allows you to pool your contributions with other donors to generate income for you or your beneficiaries, with the remaining assets going to charity after death.
- Ideal for Smaller Estates: Pooled-income funds benefit individuals with smaller estates who want to maximize the impact of their charitable giving while still receiving an income stream during their lifetime.
- Tax Benefits: Contributions to a PIF provide immediate tax deductions and allow you to spread your charitable giving over time.
Getting Started with ALTA Estate
Incorporating charitable giving into your trust can help you leave a legacy while enjoying significant tax benefits. From Charitable Remainder Trusts to Donor-Advised Funds and private foundations, many options exist for integrating philanthropy into your estate plan. ALTA Estate, led by Mark Fishbein, specializes in helping clients design personalized estate plans that align with their charitable and financial goals. Whether you are setting up a charitable trust, managing a foundation, or making retirement account donations, Mark Fishbein offers the expertise and guidance needed to make your philanthropic vision a reality while protecting your estate and benefiting your family.
Feel free to call the Estate Planning Documents at (520) 462-4058 to learn more about proper and complete Tucson Estate Planners and Asset Protection, including the Emergency Telephone Hotline Program afforded to you and your family members at no charge during times of crisis and the other benefits of estate planning described above. Follow Mark Fishbein, Tucson Estate Planner, on LinkedIn or Facebook.
The text above is for general informational purposes and should not be considered legal advice. For more information, click Contact Us.
The text above is for general informational purposes and should not be considered legal advice. For more information, click Contact Us. Follow Mark Fishbein, ALTA Estate Planning, on LinkedIn or Facebook.
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