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Advanced Tax Planning for High-Net-Worth Individuals
High-net-worth individuals face complex tax challenges. Learn about advanced tax planning strategies for investments, estates, retirement, and...
Include charitable giving in your estate plan to support meaningful causes and potentially reduce estate taxes. Explore different strategies to integrate philanthropy into your estate plan.
Incorporating Charitable Goals into Your Estate Plan
For many people, supporting causes that matter deeply to them is a fundamental part of their financial philosophy. If there are organizations or initiatives you care about, incorporating charitable giving in your estate plan can be a meaningful way to continue that support for years to come.
Whether you want to leave a specific amount, set up a trust, or designate a percentage of your estate to charity, there are several ways to align your legacy with the values that have shaped your life. And as a possible bonus, strategic giving can potentially provide financial benefits for your estate and beneficiaries.
Charitable Gifting in Your Estate Plan
A charitable bequest is a straightforward way to allocate a portion of your estate to charity. There are several ways that you may be able to structure these gifts:
Specific Bequests
A specific bequest allows you to leave a fixed amount or a particular asset to a charity. This could include:
This approach is intended for a particular asset or sum to go directly to the organization you name.
Residuary Beneficiary
After any initial gifts are made in one’s estate plan, the residuary of the estate, including a portion thereof, may be distributed to other named parties, including charity. For example, you might leave 10% of your remaining estate to charity while prioritizing specific amounts for family members first.
Contingent Beneficiary
A contingent beneficiary only receives assets from your estate if the other named beneficiaries do not inherit those assets as designated. For instance, if your primary beneficiaries pass away before you, you may direct those assets to be distributed to charity instead. This allows your estate to support meaningful causes if your initial plans cannot be fulfilled.
Charitable Trusts
For those looking to integrate philanthropy into their estate plan while maintaining financial flexibility, charitable trusts can be a useful tool. These trusts can provide income to beneficiaries while also directing a portion of your estate to charities, all the while potentially achieving gift, estate and other tax benefits.
Charitable Remainder Trusts (CRTs)
A Charitable Remainder Trust allows you or designated beneficiaries to receive income from the trust for a defined period, with the remaining assets going to charity. When funding a CRT, you may receive an immediate tax deduction based on the present value of the charitable gift.
There are two common CRT structures:
Charitable Lead Trusts (CLTs)
A Charitable Lead Trust works in the reverse—charities receive regular payments for a set period, and then the remaining assets pass to the beneficiaries. This approach can help reduce gift and estate taxes on assets passed to beneficiaries while also supporting charitable causes.
CLTs also come in two main structures:
Several Considerations for Charitable Trusts
- The selection of assets is important, as donating appreciated assets can provide additional tax benefits.
- Trust terms are typically irrevocable, meaning changes cannot be made once established.
- Trusts have distribution requirements and administrative costs that need ongoing management.
- Professional oversight is often needed to maintain investment and tax compliance.
- Each situation is different, including whether a charitable trust would be appropriate, and should be carefully analyzed with your CPA, Attorney and Financial Advisor.
Integrating Charitable Giving with Financial Planning
Planning charitable giving as part of your estate strategy requires careful coordination. EP Wealth helps individuals align their financial plans with their philanthropic goals by assessing the tax and financial implications of charitable giving. To learn more about how charitable giving can be structured to fit into your overall estate strategy, contact the estate planning advisors at EP Wealth.
Contact us today to learn more.
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- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
- An estate plan is a helpful tool that can assist individuals in managing and arranging affairs in the event of death or incapacity. However, the scope and extent of the plan varies depending on the unique circumstances and desires of the individual client. It is for this reason, that the analysis encompassed herein is not intended to be comprehensive in nature nor should it be interpreted as legal advice. Please consult a legal professional to determine the extent, scope, and the drafting and creation of the appropriate estate documents. EP Wealth Advisors is not in the business of providing legal advice or preparing legal documents. Our review is limited to and in association with Financial Planning only.
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