A charitable legacy can be an integral part of estate planning, providing a meaningful way to support community initiatives, educational institutions, medical research, or other important causes. The process involves allocating a portion of your estate to benefit causes or organizations you care about, but how is this done?
What Are the Common Ways to Include Charities in an Estate Plan?
Charitable contributions can be incorporated into an estate plan through several methods:
- A bequest in your will specifies that a particular asset, dollar amount, or percentage of your estate will be directed to a named charity.
- Establishing a charitable trust, such as a charitable remainder trust or a charitable lead trust, provides tax advantages while supporting a cause.
- Some individuals also choose to name charities as beneficiaries of retirement accounts, life insurance policies, or other financial instruments.
- Donor-advised funds offer another way to facilitate charitable giving. These funds allow individuals to contribute assets during their lifetime, receive immediate tax benefits, and designate specific charities to receive the funds after their death.
What Are the Tax Implications of Charitable Giving Through an Estate Plan?
Charitable contributions made through an estate plan can provide significant tax advantages. Assets donated to charities are generally exempt from federal estate taxes, which can reduce the overall taxable value of an estate.
Establishing a charitable trust can also provide income tax benefits for the donor during their lifetime, as well as ongoing tax advantages for their estate. Naming a charity as a beneficiary of a retirement account can avoid income taxes on the distributions the charity receives.
How Can I Select the Right Charities for My Estate Plan?
Choosing charities to include in your estate plan often involves reflecting on personal values and priorities. Some individuals focus on organizations with missions aligned with their interests, such as education, environmental conservation, or health care.
It is also helpful to research the financial health and governance of potential recipients. Publicly available information, such as annual reports and nonprofit ratings, can provide insight into how organizations use their funds.
Naming a charity with a long-standing reputation and clear accountability can provide confidence that your contribution will have a meaningful impact. It makes sense to reach out to the organizations you are considering to discuss your intentions and learn more about their work.
Can I Modify Charitable Contributions in My Estate Plan?
An estate plan is not static and can be adjusted to reflect changing circumstances, goals, or priorities. You can modify or revoke charitable provisions in a will or trust as long as you have the legal capacity to do so.
Updating an estate plan may become necessary if the intended charity ceases operations or shifts its mission. It is also possible to add or remove charities as your financial situation or philanthropic goals evolve. We recommend regularly reviewing your estate plan to keep it aligned with your current intentions.
What Is the Role of a Charitable Trust in Estate Planning?
Charitable trusts are financial tools that allow individuals to support causes while benefiting their estate or beneficiaries. A charitable remainder trust provides income to named beneficiaries for a specified period, with the remaining assets passing to a charity.
A charitable lead trust, on the other hand, provides income to a charity for a set time, after which the remaining assets are transferred to the donor’s beneficiaries. These trusts offer flexibility in how and when donations are made, allowing donors to balance philanthropic goals with personal financial needs.
The Trusted Media Wills and Estate Lawyers at Eckell Sparks Advise Clients on Charitable Legacies
If you are interested in including charitable giving in your estate plan, the trusted Media wills and estate lawyers at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. can help you create a plan tailored to your wishes. To schedule an appointment, call our Media or West Chester, Pennsylvania, office at 610-565-3701 or submit our online form. We proudly serve clients in Delaware County, Chester County, and Montgomery County.