Estate planning is not just about providing for loved ones but can also include supporting meaningful causes. Incorporating charitable giving into an estate plan ensures contributions continue to benefit charities even after death. This blog explores how charitable giving can be part of an estate plan.
Using charitable trusts
Charitable trusts, such as a charitable remainder trust (CRT) or a charitable lead trust (CLT), allow for tax advantages while benefiting chosen charities. A CRT provides income to beneficiaries for a set period, with the remainder going to charity. A CLT directs the initial income to a charity, and the remaining assets eventually pass to heirs.
Donating through a will
Bequests in a will offer a simple way to support a charity. Specific assets or amounts of money can be designated to a charitable organization. This option allows the individual to retain control over their assets during their lifetime while securing a legacy of giving.
Naming a charity as a beneficiary
Another method is naming a charity as a beneficiary of retirement accounts, life insurance policies, or bank accounts. This can be a tax-efficient strategy since many retirement accounts are heavily taxed when inherited by individuals but not when given to charity.
Setting up donor-advised funds
A donor-advised fund (DAF) allows for flexible giving. Individuals can make contributions to the fund, receive tax benefits, and then recommend grants to charities over time. This approach allows for sustained giving while maintaining control over the timing and amount of donations.
Incorporating charitable giving into an estate plan can maximize tax benefits while supporting causes that matter. Carefully selecting the method that fits your needs ensures that the estate plan meets the goals of both family and charity.