For most of us, planning for the end of our life isn’t something we look forward to. The topic can be so uncomfortable that many of us put it off for far too long. Though we all want to live a long and full life, sometimes death strikes unexpectedly, and failing to prepare could create a huge burden on your loved ones and end up with your Estate being dispersed differently than you would have wanted.
Not only does this mean that your family and loved ones may not get the benefit you intended, but the causes that you have supported throughout your life may not get the support you would want them to have from your Estate. Regularly updating a very specific plan for your Estate that involves charitable contributions can maximize the benefit that your Estate has on the world after you have passed.
Having A Will Is Important
Despite how crucial it is for any adult to have an updated and thorough Will, AARP found in a 2017 study that nearly 20% of those over 72 and 65% of generation Xers didn’t have an adequate Will in place. As the oldest of those in generation X approach their late 50s, it’s time to plan what happens after they are gone. Planning for your death though is important for people of all ages, and it’s not always as simple as just distributing your belongings and assets amongst family.
If there are charitable causes that you care about and have supported throughout your life, you may want to guarantee that your Estate continues to support those charities after you’re gone. Additionally, assets and holdings may sometimes present more of a burden than a boost to your loved ones when transferred to them due to the taxes associated with their value, but charities are often exempt from these expenses.
Incorporating charitable causes into your Estate Plan ensures that your last financial actions in this life get the most benefit to the loved ones you leave behind and make the most difference possible through the charities you believe in. It’s perfectly healthy to want the fruits of your life’s work to continue changing the world for the better after your death. If that legacy is important to you, there are a few ways that people regularly work charitable contributions into their Will.
Planned Charitable Giving
Planned charitable giving is a wide term that encompasses many ways to allot your legacy to charitable organizations. Planned Giving often happens during someone’s life as well, any time regular, sizable donations are given to charities.
In a Will or Estate Plan, it is often referred to as legacy planning or legacy gifting and functions much the same as it does normally. You section off a portion of your assets to give to the charity of your choice, and just as charitable giving does in life, your Estate gains tax benefits from these contributions. There are many ways to accomplish this and many types of assets that are regularly transferred.
Different Methods of Legacy Planning
Planned gifting is just a gift of significant value from a person or organization to a charity, and so can be accomplished in many ways. Each method of gift planning has circumstances in which they are often more useful or beneficial to either your Estate or the charitable organization. Choosing which method to use for your unique situation will help your legacy stretch further, giving more benefit to the causes you care about and allowing your loved ones to get more out of what you leave behind.
North Carolina’s tax on inheritance was repealed in 2013, but there are many other federal and state taxes that could apply to the wealth that you leave behind. Capital gains, income tax, and out-of-state inheritance taxes could still eat into your legacy, but charitable organizations are more impervious to tax liability and could benefit greatly from your gifts.
A bequest is the most typical type of legacy gift that people choose for their Last Will and Testament. It is a very straightforward transfer of property or assets to a charity written into your Will, along with the other distributions of your Estate.
Bequests can sometimes be based on a formula of total assets of the Estate, or a fixed dollar amount. Their straightforward nature often makes them an attractive option for people who want to incorporate charitable giving into their Will as simply as possible.
A Will can set up a Trust to allot money to charity more than just as a one-time bequest. There are many types of Trusts under federal and North Carolina law, but for the most part, Trusts are a vehicle to distribute money gradually or as an annuity over a term of many years. This provides a fixed income for a beneficiary, which can also be a charitable organization.
Appreciated Securities and Other Property
Leaving behind assets that have appreciated in value such as stocks or real estate could end up laying a significant capital gains burden on your loved ones. Capital gains tax is typically paid on the overall appreciation of an investment.
For long-term assets accumulated throughout your life, this could be a significant amount. Even though long-term capital gains are lower than their short-term counterparts, giving part of these assets to a charity could avoid forcing capital gains expenses onto a loved one, while nonprofit charities are typically not subject to capital gains expenses.
Throughout our life, many of us accumulate things that are monetarily valuable, but we hold onto for sentimental or ornamental value. Collectibles, art, or even commercial or industrial equipment can be donated to a charity upon your death as well. This enables the charity to choose whether to and when to sell your donation free of the burden that your estate would have suffered from in the form of capital gains or an IRS art audit.
This also will give your Estate a deduction on taxes at the fair market value of items donated. Rather than forcing your Estate to go through the work of liquidating this asset to distribute according to your Will, a charitable donation gives more insulation from estate taxes to those that you are distributing your more liquid wealth to.
Preserving Your Legacy Is Important
Charitable giving within your Will not only gives tax benefits to your family after you’re gone but also continues to direct your legacy towards the causes you believed in throughout your life. Being specific about what you want to be done with your finances and Estate after you are gone now ensures that your wishes will be respected, whenever the end may come. We all want to live a long life with the people we care about, but for the sake of those we love, it is your responsibility to plan ahead today.
At McCollum Law, we take pride in helping individuals and families just like yours navigate the Estate Planning process. To find out more, call us today at 919-861-4120 or fill out our contact form on our website (www.mccollumlawpc.com) to schedule a consultation with one of our Estate Planning professionals.