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Charitable Giving: Planned Giving

by | Nov 14, 2023

As discussed in our last article, there are plenty of ways to make charitable donations during your lifetime. But for those who prefer to leave funds to charity upon death as part of their estate plan (often referred to as planned giving), this can be accomplished through your will, beneficiary designations, or trust planning.

There are many reasons why some people choose to take the planned giving approach. Perhaps most importantly, planned giving can allow you to make significantly larger gifts than you otherwise would be able to. Suppose you wanted to support your favorite charity with a $100,000 donation but doing so would be a large financial imposition and may call into question your ability to fund your retirement or other financial goals. In this case, you could make this donation part of your estate plan, so that the charity receives a significant amount of your assets upon your death. It’s important to note that such gifts are not tax deductible during your life, except for some trust strategies that we’ll cover in our next article.

Bequests via will

Bequests made in your will offer a lot of flexibility in terms of the source of funds used, determining the order of priority, and distributing either a specific dollar amount or a percentage of your assets. These assets do go through probate, however, so there may be some additional costs and delay in reaching your charitable goals. There are also certain tax benefits that can be more easily attained by direct beneficiary designations.

Bequests via beneficiary designations

Bequests made via beneficiary designations enable your donations to bypass the probate process and go directly to the charities you choose. From a tax perspective, it can be particularly valuable to designate charities as beneficiaries of your IRA or other tax-deferred accounts. If your family members were to inherit these accounts, they would need to pay taxes on the funds as they withdraw them. But since charities are exempt from paying taxes, this money would come to them tax-free. Your family could then inherit other assets in your estate with a lower tax burden. One downside of giving via beneficiary designations is that account values fluctuate, so it can sometimes be tricky to establish exact dollar amounts. Since your will dictates the disposition of your entire estate, this can sometimes be a better avenue for dictating specific dollar amounts.

Next Steps

These are some of the key considerations, but a planned giving strategy should be discussed with your financial advisor and attorney while preparing your estate plan. In our next article on charitable giving, we’ll discuss some more complex ways of giving larger amounts via trusts and foundations.

If you have questions about your charitable giving strategy, please fill out our contact form and a team member will be in touch soon to schedule a consultation.

Odyssey Group Wealth Advisors does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.