If you are a person who cannot say no when asked to help someone else or contribute to a worthy cause, you are not alone. Fortunately, for society, some of us are compelled to give to charity and to help others. While true giving should not focus on getting someone in return, you do not need to ignore potential benefits or adverse consequences when you plan your charitable gifting. To help you plan wisely, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain five ways to incorporate charitable gifts into your estate plan.
Gifting in Your Last Will and Testament
While it’s possible to include charitable gifts in your Will, there are several reasons why this might not be the most advantageous option. Opting for charitable gifts in your Will may result in missing out on potential tax benefits associated with charitable contributions. Moreover, when making a direct gift through your Will, you relinquish control over how the donation is utilized once the transfer is finalized. Lastly, if you aim to engage your children or other younger relatives in your philanthropic pursuits, a more intricate approach is required to sustain and involve them in your charitable endeavors.
Charitable IRA Rollover
You have the option to designate a charity as the beneficiary of your IRA, but you can also take advantage of a charitable tax benefit for IRAs while you’re alive. You can donate up to $100,000 annually directly from your IRA to charities, and this contribution can fulfill any required minimum distributions (RMDs). This direct contribution to charity from your IRA qualifies as a qualified charitable distribution (QCD), enabling you to exclude the donated amount from your income, thereby avoiding taxes on it.
Charitable Lead or Charitable Remainder Trust
Charitable lead trusts (CLT) and charitable remainder trusts (CRT) are specialized trust arrangements that enable you to make contributions benefiting both charitable and non-charitable recipients. In a charitable lead trust, distributions are initially directed to a charitable beneficiary for a defined period. Once this timeframe concludes, the remaining assets are then allocated to the non-charitable beneficiary. Conversely, a charitable remainder trust operates in the opposite manner, with distributions initially benefiting the non-charitable beneficiary, and the remaining assets subsequently directed to the charitable beneficiary.
Charitable Gift Annuity
Similar to other forms of annuities, a charitable gift annuity initiates as a contractual agreement between the donor (you) and a qualified charitable organization. In this arrangement, the donor contributes cash or other assets to the charity (the “donee”), and in return, the charity commits to providing the annuitant (the donor) with a lifelong income. The maximum number of annuitants is two, and payments can be disbursed concurrently or sequentially. For instance, in the case of a married couple establishing a charitable gift annuity, payments could be designated for one spouse until their demise, after which the payments would transfer to the surviving spouse. Upon the passing of the donor(s), the charity retains the remaining cash or assets from the original gift.
Private Foundation
Establishing a private foundation represents a complex yet highly rewarding choice. This non-profit organization independently manages its funds and allows for charitable contributions to diverse causes. The viability of this option is contingent upon a substantial donation in your estate plan, considering the associated setup and operational costs. Beyond the various tax advantages, a key benefit of creating a private foundation lies in the opportunity it affords to actively involve future generations in hands-on philanthropy. As the foundation’s creator, you can set guidelines for the types of gifts and beneficiaries, enabling your descendants to experience charitable giving firsthand by participating in the foundation’s operations.
Are You ready to Include Charitable Gifts in Your Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you are ready to discuss including charitable gifts in your estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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