What is Charitable Giving in Estate Planning?
Charitable giving is one of the ways to maximize the impact and benefit on your estate plan while satisfying your desire to give to a cause you care about. One of the benefits of charitable giving in estate planning is the tax advantage it provides. However, knowing how to approach charitable giving is a skill that requires the expertise of experienced legal experts in Florida.
The concept entails making donations of cash or property to non-profit organizations. You can give out items like:
Stocks
Real estate
Vehicles
Works of art
Household appliances
Jewelry
While you don't receive anything in return for charitable gifts, you can benefit from them because of the wide range of applicable tax exemptions. However, the receiving charity must be a qualified organization. Skilled estate planning lawyers in Florida can provide more legal guidance.
Qualified Organizations for Charitable Giving
According to the IRS, qualifying organizations where you can make charitable gifts include religious, scientific, charitable, educational, or literary organizations. They can also be organizations that work to prevent child or animal cruelty. Florida estate planning attorneys give the following as examples:
- Churches, mosques, synagogues, or temples
- Some non-profit cemetery corporations
- War veterans' organizations
- Non-profit schools
- Non-profit hospitals
- Domestic fraternal societies, associations, or orders, if created for charity
- Red Cross, Goodwill, Salvation Army, or United Way
- State, local, or federal government agencies if the funds are for public use, such as public park renovation
Money given to individuals or political groups doesn't pass as qualified donations. Seek further clarification from your estate planning lawyers to ensure you only donate charity to eligible organizations.
What Charity Giving Strategies Can I Use in My Estate Plan?
Navigating charitable giving strategies to maximize the impact and benefits can be challenging. The interrelationship between philanthropy and financial efficacy calls for an in-depth understanding of the nuances of public and private charities and how they affect tax matters. Here are some crucial considerations:
Public vs. Private Charities and Tax Treatment
Donating to public charities that serve public interest, such as the Red Cross and UNICEF, may have a more significant tax advantage than private charities. Private foundations, although charitable, tend to support specific causes and are more donor-directed. The tax treatments between private and public charities may differ widely, for example:
- Donations to public charities often attract more significant tax deductions, generally up to 60%
- Private charities may have lower deductibility limits, often capped at 30% of AGI for gifts in cash and 20% for appreciated assets
Retirement Account Gifting Strategies
Another critical consideration in charitable gifting for estate planning purposes is choosing what assets to donate and when. Given the multiple changes in tax treatment of giving, here are some factors to remember:
- Determine the cause you wish to donate to, whether through a private or public charity
- Consider making charitable gifts in bunches, as deductions may no longer be available for standard deductions.
- Take advantage of specific asset types to maximize your tax benefits. Appreciated assets, such as stocks with significant capital gains, could provide additional tax benefits. You can avoid capital gains tax while claiming a deduction for the current market value of the stocks.
Long-Term Charitable Giving Strategies
If you're considering more intricate, longer-term estate planning, you can consider several other strategies that provide both estate and income tax benefits:
Donor-Advised Fund
A donor-advised fund or charitable lead trust can make sense if you intend to make philanthropic donations frequently over a long period. A DAF is a private fund where you deposit assets for charitable contributions. A third-party organization administers the account and legally takes control of the funds.
A DAF may enable you to take a tax deduction for funds donated to the account in the current year, even if the money isn't distributed to charities until later. The strategy can be helpful if you know your assets will be in the higher tax bracket in a given year.
Charitable Remainder Trusts
Florida estate planning lawyers can also help you create a CRT to enable you to donate assets to a trust while having an income stream from those assets in your lifetime. After your demise, the remaining assets will be distributed to your preferred charities. The strategy provides tax benefits and ongoing income for you and your beneficiaries.
Pooled Income Fund
This fund operates like a mutual fund but holds donations instead of investments. You can get an immediate tax deduction and earn annual income based on the performance of all contributed funds once you make cash or securities contributions. The remaining funds go toward supporting charitable causes upon your demise.
Charitable Lead Trust
A Charitable Lead Trust enables you to regularly donate to one or more charities from income generated by certain assets for a specific time. Once the period ends, the remaining assets are transferred back to you or your beneficiaries, helping reduce estate taxes while benefiting charitable organizations.
A Skilled Legal Expert Helping You Explore Your Charitable Options in Estate Planning
With so much to gain from charitable giving, you can account for it in your estate planning to maximize its impact and enjoy various tax benefits. Florida estate planning attorneys can help you draft an estate plan, ensuring your charitable giving fits your overall financial plan. They can also help you incorporate tax benefits and inflation into the strategy.
With so many charitable giving options available, settling for the strategy that suits you best can be challenging. Luckily, legal advocates at The Dellutri Law Group are here to help. We have helped clients make the best legal decisions for themselves and their loved ones over many years, and we can guide you, too. Call us at 800-391-4337 to schedule a complimentary strategy session.