3 Ways to Benefit by Incorporating Charitable Giving Into Your Estate Plan

Many people know about the tax benefits of donating to charity during their lifetime, but fewer realize the advantages of including charitable giving in their estate plan. Not only can this reduce the taxable value of your estate, but it can also provide significant tax savings when designating a charity as the beneficiary of your retirement accounts. Additionally, a properly structured charitable trust can help you avoid income and estate taxes while creating a lifetime income stream for yourself or your family.

As a life and legacy planning attorney at Cheever Law, APC, I can help you explore the best options for charitable giving within your estate plan. Below are three of the most effective ways to make a meaningful impact while maximizing financial benefits.

1 | Leave Money to Charity in Your Will or Trust

One of the easiest ways to donate to charity through your estate plan is by naming a charity as a beneficiary in your will or revocable living trust. It’s essential to use the exact legal name of the charity to ensure the donation reaches the intended organization.

In your will or trust, you can specify how you’d like the funds to be used, or you can leave them for the charity’s general purpose. If you choose a specific purpose, confirm that the charity can fulfill your wishes before making the designation.

If you donate through a will, the funds must first go through probate, which can delay the transfer. However, donations made via a trust bypass probate and reach the charity more quickly. Additionally, leaving money to charity can reduce estate taxes, particularly in states with lower estate tax exemptions.

2 | Name a Charity as the Beneficiary of Your Retirement Account

Another tax-efficient way to give to charity is by naming a charitable organization as the beneficiary of your IRA, 401(k), or other tax-deferred retirement accounts. When individuals inherit retirement accounts, they must pay income taxes on distributions, but charities – being tax-exempt – receive the full amount tax-free.

Additionally, you receive an estate tax deduction for the charitable contribution, potentially reducing your estate’s overall tax liability. Given recent changes under the SECURE Act, most non-spouse beneficiaries must withdraw the entire account balance within 10 years, which can create a significant tax burden. Leaving retirement assets to a charity while passing non-retirement assets to loved ones may be a smarter financial strategy.

Since the SECURE Act includes exceptions for spouses, minor children, and certain disabled beneficiaries, I can help you determine the best way to structure your estate plan to benefit both your loved ones and charitable causes.

3 | Set Up a Charitable Remainder Trust (CRT)

If you own highly appreciated assets, such as stocks or real estate, a?Charitable Remainder Trust (CRT)?can be an excellent tool. This special type of trust allows you to:

• Sell appreciated assets without paying immediate capital gains taxes.
• Receive a charitable deduction for your donation.
• Generate lifetime income for yourself or your family.
• Reduce estate taxes.
• Support a charitable cause you care about.

A CRT is a?split-interest trust, meaning it benefits both a charity and a non-charitable beneficiary (such as yourself, a spouse, or a child). The trust provides annual income to the non-charitable beneficiary for a set period (up to 20 years or for their lifetime), and the remaining assets eventually go to the named charity.

Because CRTs have complex requirements, it’s crucial to work with an experienced estate planning attorney to ensure they are structured properly. If you’re interested in setting up a CRT, I can guide you through the process to maximize tax benefits while supporting a cause that matters to you.

Maximize Your Impact with Strategic Charitable Giving

While these are three of the most common ways to incorporate charitable giving into an estate plan, other strategies may be available depending on your goals. At?Cheever Law, APC, we can help you develop a plan that aligns with your values while maximizing financial benefits for both your estate and your chosen charity.

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.

To learn more about our one-of-a-kind systems and services,?contact us?or?schedule a no-obligation 15-minute introductory phone call?today.