When you are planning your estate, you may want to consider your broader, sweeping legacy. You certainly want to make sure that you are leaving behind a suitable underpinning for the people that you love, and this is part of your financial legacy.
However, you may also be in a position to support charitable causes and institutions that are meaningful to you. When you give to charitable organizations you get a very profound reward on a personal level. You are giving something back, and you will be remembered for your generosity.
However, under certain circumstances, you can derive tax benefits from acts of charitable giving.
There are various different ways to contribute to worthy causes. Some people start private charitable foundations, and this can be an option, even if you are not a billionaire. At the same time, there are certain operating expenses that can be cost prohibitive for some people, and inefficient for others.
Donor advised funds are also widely utilized. After you contribute into one of these funds, you make recommendations with regard to how you want your contribution to be channeled. Through one contribution to the fund, you can ultimately support a number of different charities.
You get a tax deduction when you contribute money into the fund, and you can take the deduction during the year the contribution was made, even if no charitable donations are made during that year.
Charitable Remainder Trusts
In addition to the above options, you may want to consider the creation of a charitable remainder trust, especially if you have estate tax concerns. When you create a charitable remainder trust, you are the grantor of the trust.
When you create the trust agreement, you name a trustee to administer the trust, and you name a charitable beneficiary. The charitable beneficiary must ultimately receive at least 10 percent of the value of the trust.
The grantor of the trust would typically act as the non-charitable beneficiary. The non-charitable beneficiary receives annuity payments from the trust throughout its term. With the charitable remainder trust called a charitable remainder unitrust, the non-charitable beneficiary must receive at least five percent and no more than 50 percent of the value of the trust annually.
There is also a charitable remainder annuity trust. With this type of trust the non-charitable beneficiary receives a fixed annuity payment each year that is not based on a percentage of the whole.
When you fund the trust, you are removing those assets from your taxable estate. You get an income tax deduction, because you will be giving money to charity. There can also be capital gains advantages under certain circumstances.
Learn More About Charitable Giving
If you would like to learn more about how charitable giving can be part of your legacy plan, contact us through this link to request a free consultation: Hartford CT Estate Planning Attorney.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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