By including charitable giving in your Carlsbad estate plan, you can continue your legacy by giving back to organizations close to your heart. Done correctly, it has the added benefit of lowering your tax liability. There are many good causes that rely on donations to enable them to do their work.
Ways to Give to Charities
There are various ways to include charitable giving in your estate plan in Carlsbad, California. An estate planning lawyer can help you find the best strategy for your unique situation. Below is a list of eight ways to structure estate planning into your Carlsbad estate plan.
- Lifetime Gift
Making a lifetime gift to a charity is the simplest way of charitable giving. After donating, you can take a charitable deduction, which immediately reduces your income tax liability. Furthermore, by giving away money, you are reducing the size of your estate, which lowers your estate tax liability when you die. California has no estate tax, so only federal estate tax needs to be considered. In 2023, the federal estate tax exemption is $12.92 million for individuals and $25.84 million for a married couple.
- Leaving a Donation in a Will
A second option is to leave a bequest to a charity in your will. You can designate a specific gift for charity or donate a portion of your total estate. This option is relatively straightforward and will reduce the size of your taxable estate for federal estate tax purposes.
- Charitable Remainder Trust
A charitable remainder trust (CRT) is an irrevocable trust that distributes trust income to a named beneficiary (you or someone else) for a set term of up to 20 years or the life of the beneficiary. At the end of the term, the property remaining in the trust is given to the charity of your choice. This option allows you to leave a charitable legacy while still receiving an income.
A CRT has several tax benefits. The initial contribution to the trust results in a partial income tax deduction, the trust funds grow tax-free, and the trust funds are not included in your taxable estate reducing estate tax liability.
- Charitable Lead Trust
A charitable lead trust (CLT) is an irrevocable trust that works the opposite way of a CRT. The trust distributes income to a named charity for a set period. At the end of the term, the property remaining in the trust is given to a non-charitable beneficiary (commonly a family member). Like a CRT, a CLT provides an income tax deduction and reduces or eliminates the donor’s estate taxes.
- Charitable IRA Rollover
Individuals over 70 ½ years old can gift up to $100,000 annually to a charity directly from their Individual Retirement Account (IRA). This type of donation is called a Qualified Charitable Distribution (QCD). The transfer is not taxable and counts toward an individual’s required minimum distribution.
- Appoint a Charity as the Beneficiary of a Retirement Account
You can name a charitable organization as a beneficiary of a non-Roth retirement account. You can designate that the charity only receives a percentage of your retirement account. The donation qualifies as an estate tax charitable deduction.
- Gift a Life Insurance Policy
Finally, you can designate a charity as the beneficiary of all or a percentage of your life insurance policy. The annual premium payment is tax deductible as a charitable donation.
Your Carlsbad Estate Planning Attorney
Andrew Fesler is an experienced Carlsbad estate planning attorney with over twenty years of experience. He understands the goal of his clients to leave the world a better place when they can with charitable giving as part of their estate plan.
A full estate planning experience is the earmark of his practice. His focus is on creating long-term quality relationships, individualized services, and a ‘meet-the-client-where-they-are-at’ attitude. As a sole practioner, he will be your primary advisor and will create an estate plan that fits your needs. Contact our office today at (760) 444-0943 for a free consultation.
