Did you hear that Warren Buffett and Bill Gates made big news in July when Buffett pledged to donate $2.9 billion to the Bill and Melinda Gates Foundation? This is not the first time a charitable donation was committed by either one of these men who have made the wealthiest people list multiple times.  While not all of us are anywhere near Mr. Buffett and Mr. Gates, charitable giving in your estate planning could be mutually beneficial to the donor and the charities.

Supporting the cause you deem valuable is encouraged by the tax structure. Before you choose to donate, consider the needs of you and your family, and balance that with the tax benefits. You can also choose to give during your lifetime or to give in a will. For example, gifts made to charities are exempt from gift tax.  There is, however, a ceiling on how much you may deduct for your charitable contribution in your itemized deductions. On the other hand, you receive the full fair market value in deduction and avoid the capital gains tax that would be owed on a sale if you give highly appreciated securities or real estate to charity during your lifetime.

Other benefits of giving to charitable causes include reducing federal estate taxes and making sure the charities of your choice receive the gifts. To accomplish these goals, there are several options. You could donate to donor-advise funds or establish a private foundation. You could also name a charity as the beneficiary of a revocable trust or irrevocable trust.

Another option may be a charitable lead trust that allows you to provide a payout to a charitable cause during your lifetime while preserving assets for your beneficiaries. A retirement account could also be a good option to donate to a worthy cause. By gifting a retirement account, one of the highest taxed assets in any estate, the estate tax burden is reduced by the value that is held in the account. The charity that receives this gift does not have to pay income tax on this gift. 

For more information on the benefits of incorporating charitable giving in your estate plan, please contact our office today to schedule a meeting with attorney Alan Hougum.