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Charitable Contributions – Which Option is Right For You?

Charitable Contributions – Which Option is Right For You?
Categorized: Elder Law

While most people give to charitable institutions based on their belief system, many also take advantage of favorable tax rules that count these gifts as a deduction. Understanding your charitable contribution options is important, but you do not have to make these decisions alone. A dedicated elder law attorney could help you formulate a plan.

From direct gifts to long-term trusts, there are many different ways to contribute. It is important to consider not only the needs of the institution you have in mind but also how your decision might impact your life as well.

Cash Contributions

The most common type of contribution is a cash payment. There is nothing simpler than a person writing a check to a cause they believe in. In some situations, this is a one-off gift. In others, it might involve recurring charges that run each month.

This might be the easiest way to give to an important cause, but it is rarely the best option from an estate planning point of view. There are other ways to better maximize these resources, especially given the limits on how much an individual can deduct from their taxes based on these cash gifts.

Gifting Appreciated Property

One of the ways to help a charity while also securing the maximum available tax benefits is by gifting property that has appreciated in value. When property accumulates value over time, there are tax consequences for selling it at a higher price than what it was bought for. This is especially common with the purchase of stocks. Gifting these items avoids paying any taxes based on that appreciated value.

Retirement Account Disbursements

For some people with retirement accounts, it might make sense to disburse some of those savings to a charitable entity instead of leaving it in an IRA. It is possible to donate directly from these accounts up to a certain maximum set each year.

This approach does not qualify for a tax deduction. The major benefit here is that it reduces the taxable income available. This can have a significant impact on what that person owes at the end of the year.

Charitable Trust Options

Instead of simply gifting a thing of value to a public institution, there is also the option of funding a trust and providing ongoing support. These trusts—if set up correctly—can provide for a charity in perpetuity. In other situations, they are useful tools for providing resources for a fixed amount of time.

Two different options exist depending on the creator’s goals. A charitable remainder trust allows the creator to receive income from the estate assets during the course of their lifetime. After a specific event—usually the creator’s death—the remainder is gifted to a charity.

The other option is a charitable lead trust. With this device, a fixed amount or a percentage of the assets is paid to a charity until a certain point. Once this date is reached, the remainder is transferred to a different beneficiary or can revert to the creator of the trust.

Discuss Your Charitable Contribution Options With an Attorney

You have a lot of options to choose from when it comes to charitable contributions. You also have choices to make when selecting an attorney to help you manage your estate plan from start to finish. Working with Parks Ziegler, PLLC offers you the chance to receive guidance every step of the way. Call now to discuss your needs with our attorneys.

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