Eckell Sparks Attorneys at Law
January 9th, 2025
A charitable legacy can be an integral part of estate planning, providing a meaningful way to support community initiatives, educational institutions, medical research, or other important causes. The process involves allocating a portion of your estate to benefit causes or organizations you care about, but how is this done?
Charitable contributions can be incorporated into an estate plan through several methods:
- Donor-advised funds offer another way to facilitate charitable giving. These funds allow individuals to contribute assets during their lifetime, receive immediate tax benefits, and designate specific charities to receive the funds after their death.
- A bequest in your will specifies that a particular asset, dollar amount, or percentage of your estate will be directed to a named charity.
- Establishing a charitable trust, such as a charitable remainder trust or a charitable lead trust, provides tax advantages while supporting a cause.
- Some individuals also choose to name charities as beneficiaries of retirement accounts, life insurance policies, or other financial instruments.
Charitable contributions made through an estate plan can provide significant tax advantages. Assets donated to charities are generally exempt from federal estate taxes, which can reduce the overall taxable value of an estate.
Establishing a charitable trust can also provide income tax benefits for the donor during their lifetime, as well as ongoing tax advantages for their estate. Naming a charity as a beneficiary of a retirement account can avoid income taxes on the distributions the charity receives.
