How an Estate Planning Attorney Can Help With Charitable Planning
Charitable giving is one of the most meaningful parts of an estate plan. For anyone who wants to support local nonprofits, fund scholarships, or leave a legacy that reflects their values, strategic charitable planning can make a significant impact and ensure that their wishes will be met.
Working with an estate planning attorney can help you feel confident that your generosity is structured effectively both for your chosen causes and your loved ones.
What is Charitable Planning?
Charitable planning involves the use of financial and legal strategies to support charitable organizations, whether during your lifetime or through your estate. It is more than just a donation; it is a thoughtful, structured approach that aligns your philanthropic intentions with financial and tax planning.
Charitable planning is designed to benefit both donor and recipient. Donors may enjoy tax advantages and the gratification of knowing that they are supporting meaningful causes.
On the other hand, recipients gain reliable, long-term support that can make a genuine difference. By integrating charitable goals into your estate plan, you are creating a lasting impact while managing your financial affairs and ensuring family harmony.
Things to Consider
Before you choose a specific charitable giving strategy, there are key factors to consider. Each can influence the structure and timing of your gifts.
Financial resources
The amount and type of assets you intend to give will affect the planning process. Cash gifts may be straightforward, while more complex assets such as appreciated stock, business interests, and real estate may require further legal planning to ensure the maximum benefit.
Smart giving
Strategic giving can deliver the maximum impact. Donating appreciated assets such as stocks, bonds, and real estate can provide more favorable treatment from tax authorities than liquidating the assets first. A knowledgeable attorney can give effective advice on the optimal assets to bequeath, ensuring that you receive the maximum possible tax benefits.
Philanthropic goals
It is important to clarify your charitable intentions early. You can determine if you are interested in supporting a specific organization, funding a targeted program, or creating a family foundation. Your goals will inform whether it makes sense to make gifts during your lifetime, through a charitable trust, or via your estate.
Tax implications
Charitable planning should consider both current and eventual tax consequences. Timing, asset type, and the method used for giving can affect what is deducted in income tax, exposure to estate tax, and obligations with regard to capital gains tax. A skilled attorney will ensure that your plan delivers a minimum of liability while ensuring that your chosen causes are looked after.
Tax Implications
Charitable planning offers several potential advantages when it comes to tax, which can vary depending on the giving method and your financial situation.
Income tax benefits
In many cases, charitable contributions qualify for income tax deductions, reducing taxable income in the year the gift is given. Deductions may be subject to adjusted gross income (AGI) limitations, depending on whether the donation is in cash or appreciated assets, and proper structuring can help with maximizing such deductions.
Estate tax benefits
Charitable gifts made through your estate can reduce its overall taxable value, with the potential to lower or eliminate your estate tax liability entirely. For larger estates, this may be a beneficial tool in preserving wealth while also ensuring philanthropy is maximized.
Capital gains tax benefits
Gifting appreciated assets directly to a charitable recipient may allow you to avoid capital gains tax that would have applied had you directly sold the asset. This strategy can benefit both you and the charity, which can sell an asset tax-free to further fund its mission.
Methods of Charitable Giving
There are several ways to structure charitable gifts, each with unique advantages. These methods can be used separately or combined as elements of a comprehensive estate plan.
Charitable giving during your lifetime
Donor-advised funds: A DAF allows you to contribute charitably, resulting in an immediate tax deduction, and then recommend gifts to charitable organizations over a longer period. It is an effective means to support charitable causes without the need to establish a personal foundation.
Private foundations: Establishing your own foundation, meanwhile, does give you more control over the distribution of gifts, governance of the fund, and your legacy. Foundations do require a greater level of oversight, but can keep the familial link to philanthropy and give a greater likelihood that it will be administered in the way you would have done in life.
Charitable giving while generating income
Charitable remainder trusts (CRTs): A charitable remainder trust (CRT) allows you to transfer assets into a trust, which will generate an income stream for an agreed period (potentially for life), and then see that the remaining assets pass to a charity or charities. This can secure income tax deductions and defer capital gains tax while still supporting charitable goals.
Charitable lead trusts (CLTs): In contrast, a charitable lead trust (CLT) provides an income to a charity for a set term, with the remainder passing to your heirs. Such a structure can bring a reduction in gift and estate taxes, while benefiting both charitable formations and your loved ones.
Charitable legacy planning
Charitable legacy planning focuses on gifts that take effect after the benefactor has passed, such as bequests in wills or trusts. Donating long-term appreciated assets through your estate can be particularly tax-efficient.
You may also name charitable organizations as beneficiaries of accounts and insurance policies, with a potential result of your donations having a greater charitable impact than if you left those assets to individuals.
Charitable Planning at MKP Law
Here at MKP Law, charitable planning is integrated into an overall estate planning process. Our attorneys dedicate time to understanding your financial position, philanthropic goals, and family dynamics to structure a plan that reflects your values and priorities.
Strategic planning
We evaluate your assets and objectives to ensure the most effective structures are chosen to support them.
Charitable giving
Whether through trusts, funds, or gifts, we help you select methods that give the maximum impact and minimal tax exposure.
Experienced counsel
Our attorneys bring extensive experience in estate planning, tax law, and philanthropic structure, guaranteeing that your plan meets all legal requirements and is future-proofed.
Estate Planning Attorneys Near You
Thoughtful charitable giving can help you achieve a real impact while managing taxes and preserving wealth. Our experienced attorneys at Minor Keele Parke can help you deliver your philanthropic mission, choose the right mechanisms for giving, and execute a plan that benefits both the causes you care about and the people you love.
Contact our experts today to begin creating a charitable plan that reflects your values.