By Bruce Helmer and Peg Webb, Financial Advisors at Wealth Enhancement Group and co-hosts of “Your Money” on News Radio 830 WCCO on Sunday mornings. Email Bruce and Peg at firstname.lastname@example.org. Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL
If you’re like many Americans, estate planning may be on the backburner. Perhaps you created a will after the kids were born, but now they’re grown, and your assets have grown, and you’re long overdue for an update.
You’re not alone. Less than half of Americans have a will, and fewer still have one that’s up-to-date.
Why Consider Charitable Giving?
Revisiting your estate plan is a good time to consider charitable giving. There are countless reasons to include charities in your estate plan. Beyond the tax advantages, you can provide for causes that are close to your heart and feel good about leaving a legacy of giving.
Charitable bequests are a meaningful reflection of your values and priorities. By establishing a legacy that lasts far beyond your lifetime, you can enrich your life today.
How to Go About It
The decision of whether to include charitable giving in your estate plan is an important one. How you go about leaving that legacy is equally important.
With the recent Tax Act’s increase in the estate tax threshold to the ballpark of $11 million ($22 million for couples), far fewer estates are subject to federal estate taxes. Still, the thresholds for most state-level estate taxes are much lower and charitable giving can provide other tax advantages if done strategically.
Here are some ways to consider incorporating charitable giving into your estate plan:Donate securities or certain other appreciated assets rather than cash. By doing so, you can avoid the capital gains tax and maximize the value of your gift.
- Donate securities or certain other appreciated assets rather than cash. By doing so, you can avoid the capital gains tax and maximize the value of your gift.
- Donate retirement assets. If you bequeath those to family members, they will have to pay income tax on withdrawals. Charities won't. So it often makes sense to donate other non-taxable assets to family members while using retirement assets for charitable deduction. You can also prepay bequests or pledges to take advantage of this deduction.
- Donate during your lifetime. By making significant contributions in a single year, you may be able to itemize, taking advantage of the charitable deduction. You can also prepay bequests or pledges to take advantage of this deduction.
- Ask loved ones to make donations on your behalf. If you trust them to do so, you can bequeath them assets directly and ask them to pass along those assets, in whole or in part, to charity. Your loved ones can then claim the charitable income tax deduction.
- Make charitable gifts from your estate's income. Your estate will be subject to income taxes, too. With this approach, it can benefit from the charitable income tax deduction, leaving more money for your heirs.
- Create a charitable remainder trust. This trust allows you to provide for non-charitable beneficiaries such as family members for a specified period. Then, the remaining assets go to charity. When carefully crafted, these trusts are tax-exempt. They're a win-win for your loved ones and charitable causes.
- Establish a donor-advised fund. Somewhat akin to foundations, these funds allow you to have a greater say in shaping your legacy. They also provide an opportunity for your loved ones—and even multiple generations—to remain involved in a meaningful way.
These are just a handful of the numerous ways you can structure charitable giving. By working with an advisor to pursue the right strategy, you can not only maximize tax advantages but also establish a plan that aligns with your wishes and priorities.
The opinions voiced in this material are for general information only, not intended to be a substitute for specific individualized tax or legal advice and doesn't provide specific advice or recommendations for any individual.
This article originally appeared in the Pioneer Press on 5/419. You may view the article here.