Charitable Donation Strategies For Your Estate Plan

May 23, 2024

When we consider the prospect of dying, often our concern is the legacy we will leave. A legacy can entail many considerations–it can include our families, or the work we leave behind, or the ideas and values that we have helped spread throughout the world. Your legacy might also include a cause that was important to you, and your support for that cause can be reflected in your estate plan. 

When you use your estate plan to donate to a charitable cause, there are benefits for you and your family! There are several different strategies you can use in order to help your charity of choice through your estate plan. Working with a qualified lawyer will ensure that your charitable stipulations are aligned with your overall estate planning goals. 

Benefits Of Charitable Donations In Your Estate Plan

When you leave assets to charity through your estate plan, you do more than just support the charity of your choice. You also benefit yourself and your family! Here are just a few of the ways that including a charity in your estate plan advantages you: 

  • Tax deductions: Giving to charity in your estate plan can lower the taxes for your estate in a number of ways. Donations to an eligible charity can lower the taxable amount of your estate, which means that your beneficiaries will have to pay less tax on what they stand to inherit. Charitable donations are also tax-deductible, and there are even options, such as charitable remainder trusts (CRTs), that allow you to donate to charity while also supporting your family. 
  • Honoring a loved one: If there is a charity that was special to a loved one, you can make charitable donations in their name in order to honor them and help extend their legacy. 
  • Improved emotional well being: When you act charitably, it helps improve your emotional outlook. For some people, it’s enough to know that they are potentially making a difference in the life of someone else.
  • Support a good cause: Finally, when you really believe in a cause, it’s beneficial to know that you’ve done what you can to offer your support. We all care about something in the world and, if you have the provisions to do so, it makes a difference when you donate.

What You Can Give To Charity In Your Estate Plan

Now that we’ve discussed the benefits of including charitable donations in your estate plan, let’s talk about some of the assets that you can designate for your foundations and organizations. The list below is not all-inclusive, but it does discuss some of the most common assets that you can leave to charity, including:

  • Money: Obviously the most straightforward approach! You can leave cash funds as part of a donation in your will. 
  • Real estate: Donating a piece of real estate can come with significant tax deductions in Texas. Real estate donations can include any deeded property, including your home, a vacation home, a rental property, a commercial property, or even undeveloped land. 
  • Retirement account: You can donate your IRAs, 401(k)s, and 403(b)s to charity! When you name the charity of your choice as the beneficiary on these accounts, your charity can gain access to funds without having to pay taxes, which would not be the case should you choose a friend or relative as your retirement account beneficiary. Since charities don’t have to pay taxes when they withdraw money, a solid charitable donation strategy is to bequeath your retirement accounts and designate other, non-taxable assets to your family members. 
  • Business donations: If you own a business, you can donate a part of it to charity via a direct transfer of ownership or a charitable remainder or lead trust. 
  • Appreciated stock: Stock that has appreciated in value is another charity-appropriate option. Much like the retirement accounts, this stock will allow the charity of your choice to access funds without having to pay tax on the appreciation, which would not be the case if you designated this asset for an heir. Additionally, giving the stock to charity means that you receive an income tax deduction equal to the value of the appreciated stock, which is a win-win!

To reiterate, these are just some of the options you have for including charitable donations in your estate plan, and they are by no means the only options you have for supporting your charity. If you have specific assets you wish to leave that are not listed here, you can speak with your estate planning lawyer about your options. 

Charitable Estate Planning Strategies

Just like the variety of options you have for which assets you can leave to charity, there are several estate planning tools and strategies you can use. Some options include, but are not limited to: 

  • Named beneficiary in a will or revocable trust: The most straightforward option is for you to name the charity and the amount of your donation in your will and/or set up a revocable trust so that the designated asset(s) reach your organizations according to your stipulations. 
  • Charitable Remainder Trusts (CRTs): CRTs are a great resource because they can be used to generate income for your family while still benefiting your charity. To set up a CRT, you name the CRT as the beneficiary of your IRA. When you do so, a designated heir will receive funds from the CRT, and when those funds are capped, the remaining balance will be forwarded to your charity. CRTs are very carefully structured and have strict rules, so you will need the help of your estate planning attorney in order to establish one. 
  • Private foundation: Creating a private foundation is a great way to give large amounts of assets to charity and potentially ensure that the spirit of charitable giving lives on! You can set up a private foundation that you fund, choose charities to support, and designate someone to run the foundation after you are gone. By creating fundraisers, you can help supplement further charitable donations for your cause.
  • Donor-Advised Funds (DAF): With a DAF, you can contribute all types of assets throughout your lifetime and receive tax deductions while you are still alive. This is a very flexible option for your charitable giving.

Again, these are only a few options for your charitable endeavors, so speak with your estate planning lawyer about these and further donation strategies.

Let Michelle E. Murphy Help With Your Estate Planning Options

Attorney Michelle E. Murphy has over 20 years of estate planning experience. She can help you establish your estate planning goals and make choices that will align with those goals, including the variety of charitable options you may want to pursue. Reach out to schedule a free initial consultation and learn how the Law Office of Michelle E. Murphy can help you prepare for the future.