Charitable Giving as Part of Your Legacy

Including charitable giving in your estate plan is an amazing way to support your community and leave a legacy. Additionally, charitable giving can result in substantial tax savings. If you are involved with a charity or have a cause close to your heart, you should consider including charitable giving as part of your Naples estate plan.

How Do You Include Charitable Giving in Your Estate Plan?

There are various methods that you can use to include charitable giving in your Naples estate plan. James R. Nici is an experienced estate planning lawyer who can explain the available options and help you decide on the strategy that best fits your goals. Below is a list of eight common ways to structure charitable giving in your Naples estate plan.

1. Lifetime Gift. The simplest option is to make a lifetime gift to a charity. When you donate to a 501(c)(3) charity, you can take a charitable deduction immediately, reducing income tax liability. The IRS sets charitable giving tax deduction limits. In general, cash contributions can make up 60% of your annual gross income (AGI), and appreciated assets can make up 30% of your AGI. Contributions that exceed the limit can carry into the next tax year. Furthermore, making a lifetime gift decreases the size of your taxable estate, therefore reducing your estate tax liability when you die.

2. Leaving a Gift in a Will. Another relatively straightforward method is to leave a bequeath to a charity in your will. You can name the charity as a beneficiary for a specific gift or allocate a portion of your total estate to a charity. The donation will reduce the size of your taxable estate for federal estate tax purposes. In 2023, the federal estate tax exemption is $12.92 million for individuals and $25.84 million for a married couple.

3. Charitable Remainder Trust. You can transfer property into a charitable remainder trust (CRT). A CRT is a type of irrevocable trust where the donor receives an income stream from the trust for a term of years or life. At the end of this period, the property remaining in the trust is dispersed to your chosen charity. The initial contribution to the CRT results in a partial income tax deduction, and the assets grow tax-free. The trust property is not included in your taxable estate and can reduce or eliminate federal estate tax liability.

4. Charitable Lead Trust. A charitable lead trust (CLT) is a different type of irrevocable trust. The trust provides payments to a charity for a set number of years. At the end of the term, the remaining trust property is distributed to non-charitable beneficiaries (for example, your family members). Like a CRT, a CLT provides income tax deductions to the donor and can reduce or eliminate gift and federal estate taxes.

5. Gift Appreciated Stock. When you donate appreciated stock to charity, you generally take an income tax deduction equal to the stock’s fair market value at the time of the gift. Additionally, you avoid paying capital gains tax when the property is sold.

6. Charitable IRA Rollover. Individuals over 70 ½ years old can make tax-free charitable donations from their IRAs up to $100,000 per year. The property is paid directly from the IRA to the qualified charity, including colleges, universities, and independent schools. The transfer counts toward their required minimum distribution while also lowering the value of their taxable estate.

7. Name a Charity as the Beneficiary of an Individual Retirement Account. You can name a charity as a beneficiary of all or a percentage of your IRA. Any amount left to the charity results in an estate tax charitable deduction. After your death, the charity can remove assets from the account income tax-free. This method ensures that you can access your money during your lifetime if needed.

8. Donate a Life Insurance Policy. There are various ways that you can donate a life insurance policy to a charity, including naming the charity as a beneficiary of a policy, transferring ownership of a policy to the charity, and gifting dividends from a life insurance policy. Each method has its own pros and cons.

Call A Naples Estate Planning Lawyer

If you have questions about including charitable giving in your estate plan, you should contact an experienced Naples attorney James R. Nici is an experienced Naples attorney with over 25 years of experience. Contact our office today at (239) 449-6150 or use our web form to set up a free consultation.