Charitable Gifts

According to the Giving USA Foundation, individual giving accounted for 73% of all contributions to charitable organizations in 2010. Giving USA Foundation – Giving USA 2011

Regardless of your reasons for giving, a careful review of the various ways to structure charitable gifts can help make your gifts more meaningful, both to you and to the charities you choose to support. You can transfer an unlimited amount of assets to qualifying charitable organizations during your lifetime or at death without paying any estate taxes.

While generally not the primary motivation behind charitable giving, it is important to understand how the tax savings generated by charitable gifts can fit into your overall financial and estate planning. Charitable gifts that you make directly to a charity during your lifetime will usually qualify for an income tax deduction. Irrevocable gifts to charity are not subject to federal gift taxation. A federal estate tax deduction is allowed for charitable gifts made at death, whether through a will, a trust or from a life insurance policy. There are no limits on the federal estate tax charitable deduction.

Charitable Remainder Trust

You can also create a charitable remainder trust (CRT) during your lifetime or at death. You can irrevocably transfer an asset to the CRT and retain the right to receive payments from the CRT for a certain period – perhaps for your lifetime and your spouse’s lifetime. At your death the assets remaining in the CRT will be transferred to one or more charities that you name in the trust.

A CRT may be particularly beneficial if you have any assets – such as stock or real estate – that have appreciated greatly since you acquired them. The benefits of a CRT may include:

  • Avoidance of capital gains tax.
  • Charitable income tax deduction.
  • Reduced estate taxes.
  • Increased income stream.
  • Substantial benefit to charity.

Wealth Replacement Trust

To replace assets going to charity, the CRT is often coupled with an irrevocable life insurance trust known as a wealth replacement trust. You can use a portion of the income stream from the CRT to make gifts to the wealth replacement trust.

The Role of Life Insurance

Life insurance is widely used in estate and business planning because it provides an important source of liquidity when it’s needed most – at the death of the insured. Death benefits are usually received free of income tax. And, with proper estate planning, insurance proceeds can be free of estate tax as well. Whether it is used for personal, business, or charitable reasons, life insurance can help you plan for the future.

I would be please to speak with you about the benefits of charitable giving. Please feel free to call me at 580-355-7273.