Charitable giving comes in many forms. Some people donate annually to their favourite charities, while others may volunteer their time or professional services.
One way many people choose to give to charity is to donate at the time of their death. Including charitable giving into an estate plan is a wonderful way to support a favourite cause. When researching this approach, it can be easy to become overwhelmed by references to tax codes, attorney fees and other items that can make it seem more complex than it needs to be. There are various ways to incorporate charitable giving into an estate plan.
- Dictate giving in your will. When reading about charitable giving and estate planning, many people might begin to feel intimidated by estate taxes, feeling their heirs won’t get as much of their money as they hoped. A charitable contribution in your estate plan will reduce your estate tax liabilities, which will help to maximize the final value of your estate for your heirs. Speak with your estate attorney and ensure your donation is spelled out in your will.
- Donate your retirement account. Another way to utilize an estate plan to donate to charity is to designate the charity of your choice as the beneficiary on your retirement account. Charities are exempt from both income and estate taxes, so choosing this option guarantees the charity will receive 100 per cent of the account’s value once it has been liquidated.
- Explore a charitable trust. Charitable trusts provide another way to give back through estate planning. For example, a split-interest trust allows men and women to donate their assets to a charity but retain some of the benefits of holding those assets. A split-interest trust funds a trust in the charity’s name and people who open one receive a tax deduction any time money is transferred into the trust. But the donors still control the assets in the trust, which is passed onto the charity at the time of their deaths. You have various options at your disposal in regard to charitable trusts, so speak to a financial adviser to help you pick the best one for you.
Charitable giving is a part of many people’s estate plan. Explore your options and choose the one that’s most beneficial to you, your heirs and the charities you want to support.