Planned giving allows you to express your personal values by integrating your charitable, family, and financial goals. If you wish to leave a gift to a charity, you must put it in writing. Charitable giving is another popular method to avoid estate taxes. Planned gifts can provide valuable tax benefits and/or lifetime income for you and your spouse or other loved one.
Below are some strategies to consider (please consult your estate planning attorney for details and also to learn about other strategies for charitable giving):
- Will or Trust – your gifts to qualified charities are exempt from estate taxes. Some people would rather give to a charity rather than the federal government.
- Life Insurance – you can either transfer your paid-up life insurance to a charity or name a charity as a beneficiary.
- Retirement Plans – by naming a charity as a beneficiary of your retirement plan, any residual left in your plan when you die passes to a charity tax-free (both income tax and estate tax).
- Charitable Trusts – you transfer assets to a charitable trust for the benefit of a charity.
- In a Remainder Trust, you receive a set amount until you pass away. When you pass away, the charity receives the remainder. You receive an immediate income tax deduction for a portion of your contribution to the trust.
- In a Lead Trust, the trust makes fixed annual payments to a charity for a specified term of years. When the trust ends, the remaining principal goes to your heirs. You qualify for a gift tax deduction for the present value of the annuity payments to the charity.
- Donor Advised Fund – A donor-advised fund is a charitable giving vehicle administered by a third party and created for the purpose of managing charitable donations on behalf of an organization, family, or individual. A donor-advised fund offers the opportunity to create an easy-to-establish, low cost, flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation.