Before income taxes, estate taxes, and gift taxes, some families were able to amass giant fortunes from generation to generation. When tax laws changed at the beginning of the 20th Century, keeping money in the family and general estate planning became a complicated process.
One loophole that was created that would benefit everyone and allow many people to keep some of their money in the family was charitable giving. Charitable donations are tax deductible up to a certain limit for everyone, but when an estate is grappling with the disposition of larger sums, other programs beyond cash donations have been made available.
Private Foundations
Private foundations aren’t for everyone. They are expensive to set up and operate, however if you are dealing with a sizeable sum of money it can protect your assets from estate taxes, income tax, and even be a tax deduction for any donations you make to it while still alive. A private foundation allows you to continue to support the charitable causes you choose, leaving a lasting legacy to your family.
Trusts
· Charitable Lead Trusts – a charitable lead trust is a vehicle that allows you to make charitable contributions to causes for a term of years while still preserving assets for your beneficiaries.
· Charitable Remainder Trusts – a charitable remainder trust allows you to receive set payments during your lifetime while giving a portion to charity at the same time. Upon your death, the remainder of the trust goes to the charity.
Retirement Accounts
Leaving your retirement assets to a charity has many benefits. Typically, retirement assets are among the highest taxed in your portfolio. When you donate your retirement assets, the charity would not have to pay income taxes when they receive the money from your retirement account. It also could have an effect on the estate tax burden for your family.
When planning your estate, don’t forget to explore the advantages of charitable giving as part of your overall strategy.
