Common Strategies for Making a Charitable Gift Part of an Estate Plan

When most people leave a substantial amount of their assets to loved ones, they also may wish to support their preferred charitable organizations.  While it is possible to simply gift money to a non-profit organization, there are many other ways to support a charity that may provide additional benefits beyond those that result from just writing a check.  We have provided a few examples of types of gift giving that can be part of your estate plan along with a general description of some of the advantages associated with the particular method of providing a charitable gift.

Charitable Gift Annuities:

This form of gift involves transferring assets like money, real estate or other property to a charity.  The charity pays the trust maker (and up to one other party e.g. a spouse) income payments over the lifetime of the parties who are designated to receive income payments under the trust.  When the party or parties receiving income payments from the trust pass away, the charity keeps the assets placed in the trust.  This form of charitable gift device results in an immediate income deduction for a portion of the gift while the income payments (i.e. annuity payments) will have a portion that is taxed as ordinary income and another portion that is exempt from tax liability.  The selection of the type of assets gifted also needs to be evaluated with this type of gift because appreciated property will result in a portion of your lifetime payments being taxed as capital gain rates.

Life Estates:

If you have real property that you wish to gift to a charity, you might consider a life estate.  This approach allows you and some other person you designate (typically a spouse or child) to live on the property until the death of those who hold the life estate.  After those with the life estate die, the charity keeps the real estate.  This strategy often is used for making a charitable gift of a personal residence.  While there are multiple methods to accomplish this goal, an experienced Santa Fe Estate Planning Attorney can advise you regarding the best way to maximize the estate tax and income tax benefits of this approach given your unique situation.

Use of a Will, Trust or Beneficiary Designation:

Another approach to making such a gift is to use your will or living trust to provide the gift to the charitable organization.  If you wish to make a gift of your retirement account or life insurance proceeds, you can list the charity as a beneficiary on the account or policy.  If this strategy is used, the decedent may reduce or avoid estate tax liability.

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The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.

These are only a few examples of estate planning strategies that involve charitable gifts.  If you have questions about the best approach to make a charitable gift as part of your estate planning strategy, our New Mexico Estate Planning Attorneys at Life Leaf Legal Group, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation.  Call us today to schedule your free consultation at (505) 856-3591 to learn about your rights and options.

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