How Do I Include Charitable Giving in My Estate Plan?

If you are interested in helping charitable organizations through your estate plan, you have several options. You might have heard about charitable trusts, but many people do not realize that they can accomplish charitable goals through other means as well.

A Minnesota estate planning attorney can explain your options and help you decide which one is best for your situation. This article addresses the question, “How do I include charitable giving in my estate plan?”

The Advantages of a Charitable Trust

In nearly every form, charitable giving can involve complicated tax questions. A charitable trust can simplify the tax issues and provide an immediate tax benefit. When you have a charitable trust, you get a tax deduction whenever you transfer money or assets into the trust.

The charitable trust will hold the assets in the name of the charity, but the donor keeps control over the asset during his lifetime. When the donor passes away, the trust assets go to the charity. There are several different types of charitable trusts. Your estate planning attorney can help you choose which one might be appropriate for your goals.

How to Incorporate Charitable Giving Into Your Will

If you prefer to keep it simple, you can accomplish charitable giving by having the bequest written into your will. For example, your will could contain language that says that X charity will receive a certain number of dollars or a specific percentage of your estate. You would own the money or item throughout your lifetime, and you could change your will at any time.

Do not fret if you have a revocable living trust instead of a will. You could make a planned gift to a charity through your living trust merely by having that bequest written into your trust documents.

Be sure to talk to your estate planning lawyer, rather than taking a pen to your will or trust. Changing a term in your will or trust can have a ripple effect that you do not intend. For example, if your estate planning documents leave assets to your heirs and beneficiaries in certain proportions or percentages, a do-it-yourself line item change could cause problems down the road.

Using Life Insurance as Charitable Giving

Instead of naming a person or your estate as the beneficiary of your life insurance policy, you could designate one or more charitable organizations to receive the policy proceeds upon your demise. As with a will, this is an easy way to perform charitable giving, and you can change the beneficiary whenever you choose to do so.

How a Life Estate Can Provide Tax Benefits and Charitable Giving

Let’s say that you own your home and plan to stay there for the rest of your life. You could create a retained life estate for the benefit of the charitable organization. You could live on the property and use it for your lifetime. The charity would get title to the property when you die. You would get a deduction that you can use on your income taxes now.

Be sure to talk with an estate planning attorney before entering into a life estate arrangement. These documents can cause unforeseen consequences. For example, you lose the right to sell the property after you sign a life estate. If you do need to sell the property later because of medical bills or to move into assisted living or for some other reason, you would not be able to do so.

Retirement Accounts and Charitable Giving

Another alternative to creating a charitable trust is to select a charity as the beneficiary of your retirement account. There can be restrictions on doing so if you are married, but your estate planning lawyer can guide you on that issue.

Charitable giving is not a “one size fits all” proposition. A Minnesota estate planning attorney can provide guidance on the best strategies for accomplishing charitable giving in your situation. Contact our office today.