Charitable planning is a proactive approach to financial planning that enables individuals to make a meaningful difference through charitable giving. It involves creating a strategic plan that identifies charitable causes and organizations that align with an individual's philanthropic goals. Ultimately, charitable planning can be an effective way of ensuring your legacy lives on long after you're gone by helping those who need it most.
In this blog post, we'll cover the fundamentals of charitable planning, different strategies donors can undertake, and its benefits.
Understanding Charitable Planning
Charitable planning is a valuable estate planning tool for clients who wish to make a positive impact on the world or support causes important to them. With the help of an experienced charitable estate planning lawyer, clients can create a charitable plan that aligns with their values, provides tax benefits, and ensures their assets are distributed according to their wishes.
Strategies for Charitable Planning
Charitable trusts are a popular option for clients who want to donate a sizable amount while still maintaining some control over the assets. Charitable remainder trusts (CRTs) allow individuals to make a tax-deductible contribution to a trust that provides them with an income stream for life or a set period. The remaining assets then go to the designated charity or charities after the trust term ends. Charitable lead trusts (CLTs) work conversely; a charity receives the income stream, and the designated beneficiaries receive the remaining assets after the trust term ends.
Gifting appreciated assets is another effective strategy. Clients can donate appreciated securities, real estate, artwork, or other assets to a charity and receive a tax deduction based on the fair market value of the assets. This strategy enables clients to avoid paying capital gains taxes while also claiming a deduction on their income taxes.
Donor-advised funds (DAFs) are another charitable planning strategy, offering a way for clients to gain the tax benefits of charitable donations while still having some control over the distribution of the funds. The client contributes assets to the DAF, receives an immediate income tax deduction, and then recommends how the funds are to be distributed to the charities of their choice.
Lastly, clients can establish a private foundation, which serves as an entity to further charitable causes while also receiving some tax benefits. Private foundations can significantly reduce tax liabilities and offer a way for clients to build a lasting philanthropic legacy that will continue to benefit society long after their lifetimes.
What are the Benefits of Charitable Planning?
Charitable planning involves creating a strategic plan that identifies charitable causes and organizations that align with an individual's philanthropic goals. Charitable giving offers several benefits, including reducing tax liability, providing retirement income, and making a positive impact in the community.
Donations to charitable organizations can reduce tax liability significantly. For example, individuals who donate to qualified charitable organizations can claim a tax deduction for the donation on their income tax return. By donating appreciated assets such as stocks, mutual funds, or real estate, one can avoid paying capital gains taxes on the appreciation while still benefiting from the tax deduction. Charitable planning, therefore, presents a significant tax planning opportunity for individuals or corporations looking to reduce tax liabilities and maximize charitable contributions.
Another benefit of charitable planning is the opportunity to receive a retirement income stream. Charitable remainder trusts (CRTs) permit individuals to contribute assets to the trust and receive a tax deduction while also receiving a regular income stream from the trust. Additionally, with charitable lead trusts (CLTs), donors can set up trusts that make annual payments to a charity for a specific number of years. After the trust term ends, the assets are transferred to the designated beneficiaries, providing a unique way of giving back while creating a stream of income during retirement.
Investing in charitable planning can also help stimulate economic growth and benefit the greater community over time. For instance, local charitable giving supports jobs in the non-profit sector, creating a positive impact on the communities served by these organizations. In addition, local charitable giving can help promote economic development and provide essential goods and services that support the local community. By investing time and resources in charitable planning, individuals and corporations can play a part in building a better future for everyone.
Working with an Experienced Estate Planning Lawyer
Charitable planning can be a complex process, and it's crucial to work with an experienced estate planning lawyer who can walk clients through their options and ensure their wishes are carried out effectively. Estate planning attorneys can help clients choose the charitable planning options that align with their goals and provide guidance on tax implications and legal requirements.
A knowledgeable estate planning lawyer can help you create a customized charitable plan that is both effective and personalized to your values and goals. At Dorcey Law Firm, our goal is to help our clients create a plan that suits their philanthropic vision. We are also able to help ensure that your donations are made in the most tax-efficient way possible.
With the help of an experienced estate planning lawyer, you can ensure your legacy lives on long after you're gone by creating a charitable plan that makes a lasting impact. Charitable planning offers numerous benefits and strategies for donors looking to maximize their philanthropic efforts while gaining tax advantages as well. Working with an experienced attorney can help you determine the best approach for your unique situation and goals so that your donations have the greatest effect. Dorcey Law Firm is here to help you realize your vision of making a difference in the world.
Contact us online or call us at (239) 309-2870 to learn more about our services and how we can help make your dream a reality.