You may be aware that donations to charitable organizations are tax-deductible. However, there may be additional tax benefits that you can take advantage of when incorporating charitable giving as part of your estate plan.
By leaving a portion of your estate to a charitable cause, you may be able to reduce your estate’s taxable value. You could also benefit from tax savings by including a charity of your choice as a named beneficiary of your 401(k), IRA, or another retirement plan.
Additionally, you may have highly appreciated assets such as real estate or stock you want to sell. You could set up a specific charitable trust to avoid estate and income taxes while also creating an income stream for you and your family.
Below are some of the best ways Tampa trust lawyers can incorporate charitable giving into your estate plan.
Choose a Charity as Your Beneficiary While Creating a Will or Living Trust
An easy way to donate to your favorite charity is by naming them as a beneficiary of your revocable living trust or will. It’s critical to use the correct name on the document while creating your estate plan. If you use the wrong legal name, the charity could have challenges accessing the money you left behind.
You could outline your desired purpose of the funds in your living trust or will. That way, the charity will use the money you leave to them for a specific purpose that can benefit its cause. If you don’t include a preference on how the charity uses the funds, you can indicate it’s for general use.
Use a Charity as the Named Beneficiary for Your Retirement Account
You can choose a charity as the beneficiary of your retirement accounts, such as a 401(k), 403(b), or IRA to incorporate charitable donations in your estate plan. You help a cause you believe in and receive tax benefits.
When you name a person as a beneficiary on your retirement account, they end up paying income taxes on the distribution of funds. However, if you pick a charity to receive your assets from a retirement plan, they will receive the total amount without the need to pay taxes on it.
Create a Charitable Remainder Trust
A charitable remainder trust (CRT) can avoid estate and income taxes if you have highly appreciated assets, such as real estate or stock you want to sell. A CRT also creates an income stream that benefits yourself and your family for life.
Naming a charity as your beneficiary and an individual beneficiary, such as a spouse or child, provides financial benefits for both when you create a CRT. Your non-charitable beneficiary will receive an annual income from the trust account with remaining assets transferring to the charity of your choice at the end of your lifetime.
If charitable giving is something you are passionate about, speak with experienced Tampa trust lawyer today about incorporating any of these strategies into your overall estate plan. To schedule an appointment at our Brandon, FL, office, contact us today at (813) 438-8503