In our last post, we spoke about the importance of considering all the options when setting up charitable gifts in one’s estate plan.
Here we want to suggest several specific gifting options available to donors.
The following are some techniques to keep in mind for your charitable giving planning.
•· Beneficiary on an IRA or 401k. In this approach, you name a charity as the beneficiary of your retirement plan. You can change your mind later, and it is simple to change the beneficiary designation. No taxes will be due when you die and the retirement fund goes to the recipient.
•· Beneficiary on life insurance policy. Naming a charity as the beneficiary of your life insurance plan is a simple process. Premiums paid by the donor are tax-deductible, as are other charitable gifts. No taxes are due when the proceeds go to a charity at your death.
•· Charitable remainder trust. In this approach, highly appreciated assets are placed in trust and the donor receives an annual income from the trust. The donor qualifies for a tax deduction when the trust is established, and is able to access the funds on an as-needed basis. At the donor’s death, the remaining funds are paid out to the charity. This is considered a good plan for donors looking to reduce their gross estate or who need additional income.
•· Charitable gift annuity. In this approach, the donor transfers money or property to a charity and receives a lifelong annual income in exchange. The donor will qualify for an immediate tax deduction when the transfer is made. This type of gift is irrevocable, so the donor loses control of the asset when the gift is made.
•· Bequests, wills, trusts and endowments. Naming a charity in a will or placing assets in trust for a charity allow the donor to change the gift during their lifetime if they need the funds or change their mind. One thing to keep in mind about this approach, though, is that while the donor’s estate may benefit from tax savings, the donor will not get any tax savings during their lifetime by placing the charity in a trust or will.
Again, it is important to consider all the options when forming a charitable gifting plan and to consult qualified experts. This will ensure that any steps taken will achieve your giving goals and work as efficiently as possible.
Source: Southeast Missourian, “Estate Planning Guide: An explanation of charitable giving plans,” Robyn Gautschy, 7 Mar 2011.