Most of us view our favorite charities as a way to give back. Rarely, if ever, do we consider any benefit to ourselves aside from the sense of doing good just for the sake of doing good. If you’re reviewing your estate plan, however, it’s an ideal time to explore the many benefits of charitable giving – both for your charity and your future.
The Internal Revenue Service allows taxpayers to deduct donations up to 50% of the adjusted gross income when making gifts to private foundations or public charities. In fact, many gifts – even to your family – can sometimes mean a deduction. The key is itemizing your deductions. It can lower the taxable income.
Charitable Giving and Donations
Consider this: you’re in the 28% federal income tax bracket and you make a $500 charitable donation. Your tax liability will drop by around $140. For those with more wealth and who face estate taxes, any assets given to charities allow them to bypass the tax. Remember, the top federal tax rate is 40 percent, so basically, $4 out of every $10 in assets subject to the tax will go to the government instead of to family members and other loved ones.
For some, charitable giving is about leaving an important legacy; to show others the importance of not putting themselves first. Sharing one’s philanthropic ideals allows for a golden teaching opportunity for younger family members. Indeed, it’s an effective way to pass core values on to younger generations.
Your Estate Plan
There are many ways to accomplish charitable giving; most use different trusts to fund their efforts. It can allow them to share their passion with other family members and hopefully inspire those younger members to follow suit and learn about the different charities that are important to the family as a whole. If a wealthy individual has wealth to pass along but faces a $5.43 million gift tax cap, a trust is the way to go.
A Family Affair
By setting up a family foundation, many use the opportunity to invite family members as members or directors to further cement the importance of charitable giving. Imagine grandma finally getting quality time with her granddaughter who’s been working towards her degree over the past several years. Can you think of any better way to bond?
Besides, seeing firsthand how a charitable trust or family foundation serves its purpose is priceless. We’ve had clients in the past see their foundation grow to the point that it hosts field trips for school age children to art museums, colleges or even important historical sites. It’s a great way to make a huge difference.
Those clients all agree: it’s a win-win and a priceless experience they’re happy to have been a part of.
To explore the various types of trusts that you and your estate could benefit from, contact our offices today. We’re happy to explore the many advantages and the pay-offs that have nothing to do with money in the bank.
- What You Need to Know about Planning for Elder Care - March 21, 2023
- Can a Trust Be Contested? - March 16, 2023
- Ohio Medicaid Limits for 2023 - March 14, 2023