Estate planning and charitable giving are a natural fit. The golden years of life are about enjoying all you have worked for and preparing the legacy you will leave for future generations. For many, this means identifying causes they wish to support and organizations they hope to sustain. It also means maximizing assets to ensure beneficiaries receive the greatest possible benefit. By providing significant tax benefits, charitable giving achieves both.

With a little bit of advance planning, you can shield your assets from unnecessary tax while at once lending support to a worthy cause. What follows are four strategic ways to incorporate charitable giving into your estate plan.

1. Invest in a Charitable Remainder Trust (CRT)

A CRT is a great way to benefit a charity and a loved one. As a split-interest trust, a CRT allows a designated beneficiary to receive annual payments for a set period after which the remainder of the trust is distributed to a charity or charities of your choice.

CRTs are tax-exempt which means that no income tax will be paid on funds transferred into the trust from your IRA. This said, the beneficiary of the account will incur income tax on payments and a partial estate tax deduction may be charged at the time of the account holder’s death.

2. Set Up a Donor-Advised Fund

Because donor-advised funds grow tax-free, they are an excellent vehicle for maximizing your contribution to a given charity. The charity, itself, takes responsibility for the account and they alone are entitled to the funds invested but this is no issue if you are sure that theirs is a cause you wish to support. What is more, for each contribution to the fund, you receive a tax deduction, making the proposition a true win-win.

3. Designate a Charity as Beneficiary of Your Retirement Account

Except in the case of Roth-IRAs, designating a charity as a beneficiary a retirement is a simple process. All you need to do is include a bequest when filling out the beneficiary designation form stating the amount you would like to leave to the charity and any special stipulations you wish to include concerning usage of the funds.

Charitable bequests are eligible for an estate tax reduction with makes them popular with the very wealthy. The present federal estate tax exemption is $11.54 million but under the Biden administration, it may soon drop to $5 million or even lower which means that more folks may soon be eying up charitable bequests in order to preserve their assets.

4. Take Advantage of QCDs

Qualified charitable distributions (QCDs) are another way IRA savings can be strategically deployed to reduce taxes and benefit a worthy cause. Under the SECURE Act of 2019, individuals must begin receiving minimum distributions (RMDs) from their IRA upon turning 72. RMDs are subject to income tax while QCDs are not and because the latter fulfills the RMD requirement, they are a good move for individuals who do not yet need IRA savings to cover their cost of living. 

For more on designing a charitable gift-giving strategy that at once contributes to your legacy and saves you tax dollars, call the Deliberato Law Centre at (216) 341-3413 or reach us via the contact form on our website.


Contact the Estate Planning Attorneys at Deliberato Law Center