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Leaving a legacy by charitable giving in your estate plan

One of the benefits of acquiring wealth in your lifetime is the ability to help causes about which you have strong feelings. Whether this is your alma mater, your place of worship, the arts, or some other social or political cause, you likely appreciate the fact that your contribution makes a difference, whether in a small way or through major donations.

If you are creating or reviewing your estate plan, you might be looking for ways to remember your favorite charities. While you can certainly leave a specific bequest through a designation in your will, this action may result in complications for your estate and its heirs as well as tax ramifications for the charity. Instead, you would be wise to seek solid advice about the options that are most appropriate for your estate and for meeting your goals.

What are my options?

Ideally, you will work with a legal advisor to manage the charitable donations you make while you are still living. Perhaps you have already implemented a charitable rollover that contributes your required IRA withdrawals directly to your favorite charity. In this way, you may be able to maximize your tax advantages thereby protecting the value of your estate. However, your hopes may be to establish a legacy through your estate plan so you can continue to give even after your passing. There are several ways to do this, including:

  • Bequeathing your non-Roth retirement accounts to the charity of your choice since charities are exempt from taxes on such gifts.
  • Establishing a revocable trust in the name of the charity and funding assets to that trust.
  • Designating specific assets in your will, such real estate or vehicles, to be given directly to your favorite charities.
  • Creating a Charitable Remainder Trust, which provides payments to a loved one for a certain amount of time, after which the remaining assets go to your favorite charity.

Any of these options or others come with specific rules and complex steps in order to assure they meet state and federal laws as well as achieving your goals, so it is wise to seek legal guidance.

More important than simply donating your money or assets, you are passing along your ideals, the causes that were close to your heart in life. By doing this, you may also encourage others, including your heirs, to share their good fortune in a similar way. This is the kind of legacy anyone would be proud to leave behind.