Estate planning is an important aspect of ensuring the well-being of your loved ones. Incorporating charitable giving into your estate plan adds a philanthropic dimension to the legacy you leave behind.
Three Types of Charitable Giving Vehicles
Let’s move into three charitable giving vehicles you can incorporate into your estate plan. Each offers unique opportunities to make a difference.
Including specific provisions in your will or living trust allows you to allocate a predetermined amount or percentage of your estate. Donation of this portion to charitable organizations is possible upon your passing.
This type of charitable giving offers the following advantages:
Flexibility: You can adjust the amount or beneficiaries of your bequests throughout your lifetime.
Simplicity: Charitable bequests are relatively simple to include in your will or living trust.
Lasting Impact: Your chosen charities benefit from your generosity and dedication to their missions.
Charitable Remainder Trusts (CRTs)
With a CRT, you can set up a trust that provides income to you or your chosen beneficiaries for a specified period, typically for life or a term of years. The residual assets of the trust are given to the charity of your choice when this term expires. The key benefits of this type of charitable giving are:
Income Generation: CRTs provide a reliable income stream to you or your beneficiaries during the trust’s term.
Tax Advantages: Depending on the structure, CRTs may offer tax benefits during the donation process. Reduction or elimination of capital gains tax on the sale of highly appreciated assets.
Philanthropic Legacy: By establishing a CRT, you create a legacy of support for the causes that matter most to you.
Charitable Lead Trusts (CLTs)
Charitable Lead Trusts (CLTs) offer a unique twist on charitable giving by prioritizing immediate support for charitable organizations. A CLT allocates the trust’s income for a predefined amount of time to designated charities. The assets that are left over after this time are given to the beneficiaries you have chosen. CLTs have the following advantages:
Immediate Impact: CLTs allow you to witness the positive effects of your philanthropy during your lifetime.
Estate Tax Planning: Depending on the structure, CLTs can effectively reduce estate taxes.
Asset Transfer: Your beneficiaries ultimately receive the remaining assets after supporting charitable causes.
The Benefits of Incorporating Charitable Giving in Your Estate Planning
Let’s examine the two compelling reasons to integrate charitable giving into your estate planning.
Incorporating charitable giving into your estate plan extends your legacy beyond material wealth, positively impacting the community and causes you hold dear.
Charitable giving can be a strategic way to minimize the tax burden on your estate while positively impacting the causes you care about. Donations made to qualifying charitable organizations are often deductible from your taxable income.