The Law Office of Paul Black has tips on how to handle your charitable giving. If you need help, give us a call today. We are ready to help.
Author: Paul Black
Paul’s experience as the son of two parents with big health challenges is what led him to the work he does today and gives him first-hand knowledge of the challenges that many caregivers and family members face. After graduation from GSU Law, Paul was chosen from dozens of applicants nationwide as one of three 2010-2011 Borchard Foundation Law & Aging Fellows. Paul has been named as a SuperLawyers “Rising Star” in the area of Estate Planning and as a member of Georgia’s “Legal Elite” by Georgia Trend magazine. Published on: September 14, 2023.
Charitable Donations and Estate Planning
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Do you have a large estate? Do you wish to achieve philanthropic goals? Would you like to reduce your taxable income? Incorporating charitable giving into your estate planning may be an excellent idea.
Charitable donations allow you to support a worthwhile cause while reducing your tax liability. However, it should be part of a well-thought-out estate planning strategy to achieve your goals.
You may be contemplating how to plan your estate with an emphasis on tax savings. However, you still want to be efficient and philanthropic. Would you like to learn more about charitable deductions and how they can benefit your estate? Getting in touch with a qualified, experienced, and capable estate planning attorney can help you determine whether charitable contributions will enhance your estate plan.
What Is Charitable Giving?
A donation to a nonprofit organization is considered to be charitable giving. A charitable contribution is not an investment. You don’t receive any payment from your donee. It’s a charitable gift intended to advance the organization’s goals.
A philanthropic donation can be advantageous to you and to your estate. Donations to a charity may qualify as a tax deduction, depending on the nature of the organization and the amount given. It is essential to research the charity to ensure that the money will be used for its intended purpose. Donations to certain charities may also be eligible for additional tax benefits.
For instance, if you had $1 million worth of stock with a $100,000 tax basis, you would have to pay taxes on the $900,000 gain if you sold the stock. However, you could sell the stock and reinvest the money without incurring capital gains tax if you gave the stock to a charitable trust. You would generate a more significant return than you otherwise would have done. Thanks to the assets’ tax-free reinvestment.
The Importance of Charitable Giving
Giving to charity is a meaningful way to express our gratitude for the numerous gifts we have received. It is also a compassionate gesture that has the power to transform lives.
Nonprofit organizations rely on our support to carry on this vital work.
Benefits of Charitable Giving
Charitable contributions can be advantageous to both the donor and the recipient.
Some of these benefits include:
- Ensuring that your legacy is continued
- Contributing meaningfully to assist the charities you believe in
- Assisting the charity to reach its goals
- Lowering the amount of your future estate tax liability
Giving to charity can help you reach both your financial and philanthropic objectives if you plan it well.
Types of Charitable Giving
Let’s examine the four most popular ways of giving.
Cash Donations
The most common form of charitable giving is a one-time donation of cash. Giving cash is one of the easiest ways to support a nonprofit or charity.
Stock and Security Donations
Stocks, bonds, mutual funds, and other securities are frequently donated to charity organizations. As a “transfer in kind,” you usually do this by transferring ownership of your shares to the organization.
Planned Giving And Charitable Trusts
Planned giving involves making a future charity donation. Planned giving can be done through various methods, including:
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Leaving a gift in your will to a nonprofit organization
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Naming a charitable organization as the beneficiary of your retirement plan or life insurance policy
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Including a charitable trust in your estate plan
A charitable lead trust (CLT) and a charitable remainder trust (CRT) are two popular forms of charity trust. Both involve the creation of trusts with assets.
With a CLT, you can give the cash flow from those assets to the charity of your choice. This is done for a predetermined amount of time. After that, the residual assets can be distributed to additional recipients.
The converse is true with a CRT. A CRT pays out annual distributions to you or other beneficiaries for some time. After this, the leftover assets are donated to a charity of your choice.
If you are considering a CLT or CRT, contacting a skilled revocable trust lawyer for legal advice and guidance would be great.
Gifting Specific Assets
You can also leave specific assets. Donations of property can include the following:
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Vehicles
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Real estate
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Artwork
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Jewelry
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Household appliances and other miscellaneous items
They are typically priced at fair market value.
Different Types of Charities
Three types of charities qualify for charitable giving. These are public charities, private foundations, and privately run foundations.
Public Charity
The IRS mandates public charities to be accountable to the public. This is because they receive government funding. These charities include religious institutions and healthcare facilities. They also include educational institutions, food banks, and housing help agencies.
Public charities seek donations and have lenient operating regulations. They also offer more significant tax deductions to contributors.
Private Foundation
A private foundation is a charitable organization that receives funding from a small number of sources. It earns money from investments and gives money to other nonprofits. Public charities are subject to less regulation than foundations. Assets cannot be in jeopardy, and money cannot be utilized for things other than charity causes, including politics.
Individuals and families with a high or ultra-high net worth may create a private foundation as part of a family office.
Private Operating Foundation
Private foundations use their assets to run programs and activities. Libraries, zoos, research centers, and museums are among the examples.
Tax Deductible Contributions
According to the IRS, donations to the following are tax deductible:
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Religious organizations
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Government entities
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Nonprofit schools
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Public parks
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War veterans groups
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Sponsored student living expenses
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Out-of-pocket expenses for volunteers
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Nonprofit organizations like the Salvation Army
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The Red Cross
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CARE
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Goodwill Industries
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United Way
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Boy Scouts
These donations cannot benefit any individual, or they will not be tax deductible.
Are These Nonprofit Organization Charities Regulated in Georgia?
Charitable organizations functioning in the state are subject to regulation by the Secretary of State.
Unless exempted by law, all charity organizations may register with the Secretary of State.
It is a good idea to research the charity you intend to donate to before finalizing your donation.
Can I Donate to International Organizations and Receive Tax Benefits?
The IRS prohibits tax deductions for contributions to foreign organizations. An exception is domestically founded international businesses—also, specific international organizations with registered Canadian addresses.
How Do I Know if a Charity Is Legitimate and Effective?
To verify the legitimacy of a new nonprofit, you can consult consumer protection agencies. You can also sound out professional organizations. Avoid giving to organizations with limited information. Contact local groups for donation requests.
Use online vetting tools like GuideStar and Charity Navigator. IRIS can also be used to ensure trustworthy organizations.
How We Can Help
You may be looking for ways to effect a tax deduction to reduce your estate taxes and make a difference to some worthy causes. You may require assistance with this or be looking at establishing estate planning trusts.
You may need an irrevocable trust amendment. Here at the Law Office of Paul Black, we strive to do our utmost to assist you with these and other estate planning matters.
We handle wills, estate planning, and the creation of trusts. We also deal with Medicare and Medicaid estate trusts and plan for your asset protection. We are here to help. Complicated issues can be simplified by real professionals. Contact us today.
