Charitable giving is the lifeblood of many nonprofit organizations. The generosity of donors helps charities meet their missions and provide vital services to people facing disease, financial hardship and other situations they cannot overcome on their own.
Many donors make sacrifices to support their favorite causes and charities. Forgoing certain luxuries so money can be donated to charity illustrates the selfness nature of charitable giving, which can even continue after death. Estate planning is a complicated process that details exactly how a person wants their assets divvied up after death. But an estate plan also can go into effect while individuals are still alive.
Each year, millions of people across the globe choose to include charitable giving in their estate plans, and that can benefit charities and donors. The following are a handful of the many ways charitable men and women can incorporate giving into their estate plans.
· Bequest giving in a will or living trust. Perhaps the most widely known way to include charitable giving in an estate plan is to bequeath money in a will or living will. The Community Foundation Alliance notes that bequests typically allow donors to define how their donations will be spent or utilized. That benefits charitable organizations, but surviving family members also can benefit from such arrangements. According to LawDepot.com, individuals may be able to lower the estate taxes on their estates at their time of death if they bequeath money to an eligible charitable organization in their wills.
• Consider a charitable rollover. The Internal Revenue Service notes that individuals with an IRA, SEP IRA, Simple IRA, or retirement plan account generally must begin withdrawing money from these accounts when they reach age 72.
These withdrawals are called required minimum distributions and they are considered taxable income. However, individuals who want to give to charity can opt for a Qualified Charitable Distribution, or QCD. A QCD counts toward the minimum distribution from retirement accounts and individuals will not be taxed on the money they donate to charity. That’s a win-win for charities and individuals 72 and over who do not need to withdraw money from their IRAs to meet daily living expenses.
· Donate via a charitable remainder trust. A charitable remainder trust, or CRT, allows individuals to set up a trust that benefits both a designated beneficiary and a charity or charities of their choosing. When a CRT is set up, a beneficiary will receive annual payments from the trust until it terminates, at which time the remaining funds in the trust are donated to charity. The philanthropy experts at Fidelity Charitable note that individuals can name themselves as the beneficiaries of the trust, which ensures they will have an income during retirement and that their favorite charities will be supported when the trust expires.
Individuals who want to make charitable giving part of their estate plan can do so in various ways.