Whether it is honoring a loved one or paying tribute to an important cause, people create trusts for various reasons. Despite its often noble goals, charitable giving also creates some substantial tax issues. While many people who decide to pass on assets to charities do not view tax implications as a high concern, it is still a good idea to reduce taxes so you can pass on the greatest amount of assets possible. The following reviews five powerful ways that you can incorporate charitable giving into your estate plan.
Utilize a Charitable Remainder Trust
Charitable remainder trusts are a great way to pass on your assets. Under the terms of this trust, an appointed party will receive annual payments from the trust for a period of time. When the beneficiary’s interest in the trust ends, the remaining amount is passed on to a designated charity. These trusts meet specific requirements. Among others, the charity must receive a percentage from the trust when it is initially funded. To make sure the trust meets requirements, the assistance of a skilled estate planning attorney is also often essential.
Pass on Assets Through Your Revocable Trust or Will
The direct and simple way to pass on assets to a charity is through a revocable trust or will. If you utilize this path, you should make sure to list the charity’s correct name. You should specify exactly what you would like to pass on to the charity. If you are not specific about these assets, confusion is a near certainty. You should also make certain that the charity can receive the asset.
Pass on Appreciated Stock
If you own any publicly traded stock that has increased in value, you should consider passing on these assets to a charity in your life. Remember, if you choose to sell this stock, you will be required to pay capital gains tax on the amount that the stock has appreciated. If you pass on the stock to charity, you can claim a charitable income tax deduction that is equivalent to the full market value of the stock at the time of the gift.
People who are over the age of 70 ½ can donate a maximum of $100,000 a year to charities directly from their IRA accounts. Referred to as a qualified charitable distribution, this amount counts towards any required minimum distribution that an account holder must take from an IRA. Following the SECURE Act, required minimum distributions must begin the April after an account holder turns 72. With a qualified charitable distribution, a person can also exclude the gifted amount from their income, which can be a powerful way to reduce taxes.
Contact a Skilled Estate Planning Lawyer
There are various ways that you can choose to make charitable giving part of your estate plan, and a knowledgeable estate planning attorney can help you decide what option works best for you. Contact attorney Jim A Lyon today to schedule a free case evaluation.