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How to Designate Charitable Donations in Your Estate Planning

Charitable Giving

Making one lasting contribution to charity can be a wonderful part of your legacy. You don’t have to be wealthy to leave a charitable donation to causes important to you when you pass. Designating charity gifts in your estate planning is easier than you may think and the world is a better place because of your generosity.

Basic designations of charitable donations in estate planning

It’s important to rely on a trusted financial advisor and your legal counsel to help you designate a portion or all of your estate for charitable donations. The easiest way to designation charitable donations in your estate is to include them in your will. Of course, the amount you designate will not decrease your income tax, but it will reduce your taxable estate, thus maximizing the amount you can give to your heirs.

You can also designate your retirement assets as charitable donations. Simply name your charity of choice as your beneficiary. The charity’s exemption from both income and estate taxes allows it to receive the full amount of your designation. This allows you to designate non-retirement assets for your heirs, which are then taxed at a much lower level. Read more here about designating a charity as your retirement beneficiary.

There are other options for alleviating much of the tax burden for you and your inheritors, the most popular form of which is a trust, specifically a charitable remainder trust.

The Value of Charitable Remainder Trusts in estate planning

AXA shares an excellent explanation of a Charitable Remainder Trust, or CRT,

“A CRT is an irrevocable, tax-exempt trust in which you place assets to provide income for yourself during a specific period of time (i.e., your lifetime or a period not to exceed 20 years). After that, the remaining assets will be turned over to the charity of your choice.” (AXA)

A CRT is an irrevocable, tax-exempt trust structured for a specific period of time. You can place assets in a trust to appreciate during that period and set fixed annual payments or set percentage annual payments to the donor (you or another beneficiary). This is what’s known as a split-interest gift designation. You as the donor can still retain ownership of the designated gifts while reducing the overall value of your estate for tax purposes.

Charitable Remainder Trusts are often more popular than other trust options, such as a Charitable Lead Trust (CLT) or a Pooled Income Fund (PIF). CLT and PIF trusts also qualify as split-interest charitable donations, but have varying benefits and disadvantages.

Whatever your estate planning designations may be, we highly recommend communicating your intentions with your potential heirs. Plan My Affairs is one of the easiest and most secure solutions for organizing your estate information. We can help you aggregate and designate your specific personal property details, including banking information (except account numbers), power of attorney, wills, collectibles, even information on where your pet goes to the veterinarian. Your Plan My Affairs Organizer is designed for your peace of mind. A few short hours can help you store vital information for every part of your life, including your last wishes.



Download Your Personal Planning Checklist. This checklist will outline some of the many elements you should consider in your Plan My Affairs Plan.