ESTATE PLANNING – NOT JUST WILLS AND TRUSTS : PART VII

F. Charitable Giving

Charitable giving benefits the giver as well as the recipient by allowing the giver to improve the world in a manner of his or her own choosing— to community organizations, research institutions, religious organizations, medical foundations, or anything in between—it can also provide the donor a means of mitigating income taxes.

Charitable remainder trusts (“CRT”) provide a means of providing tax free income to a donor during life, with the balance of the trust assets going to a named charity at death. Conversely, a CRT can provide the donor with a tax deduction, provide the charity with a stream of income, and also provide named beneficiaries (such as children) with the remaining assets upon the donor’s death. CRTs therefore provide both the donor, and the charity, with financial benefit during the donor’s life.

For people with charitable inclinations, but who are hesitant to relinquish assets that they may need later in life, estate planning allows them to ensure their own well-being first, while still providing for charities. The desire to support a favorite foundation or charitable organization has to be balanced against not only our current ability for discretionary spending, but against possible future contingencies such as financial insecurity caused by significant medical problems, economic factors, business losses and/or as-yet unknown creditors. These future contingencies are impossible to predict, so most of us try to keep a healthy retirement portfolio to account for all possibilities. This may mean little or no charitable giving during life. However, it may be desirable to have some or all of the assets not used during your life pass to a charity or a foundation upon your death. Testamentary (upon death) giving can be planned for in the context of a will, a trust, or a pledge to a foundation.

The most desirable method for charitable giving should be determined on an individual, case by case basis, and the exact assets to gift should also be carefully examined. Highly appreciated assets that will ultimately be sold are generally a good choice, since you avoid the capital gains tax that would be owed if you sold or liquidated them yourself. But, as with all estate planning, the specifics of your charitable giving must be examined for your individual situation.