Effective  ways to include charitable giving in an estate plan

On Behalf of | Feb 25, 2021 | Estate Planning

No matter the reasons people give to charities, most want to make their donations as powerful as possible. Estate planning has the potential to increase the effectiveness of charitable gifts through specific legal tools designed to maximize benefits. 

These measures deserve some consideration when a person considers his or her options for giving. 

A will bequest or revocable trust

Kiplingers describes this option as a simple and direct way to benefit a charity. A bequest directs a specified amount of money to a charity upon the death of the testator. The person leaving the money can choose to direct the funds for a specific purpose; it is important to make sure the charity can fulfill the request, otherwise the organization might need to return the money. 

A more flexible option gives the money to the charity to use as it sees fit. A general-purpose gift allows the charity to use the donation as needed. The creation of a will bequest or revocable trust requires precise language to ensure the money goes to the correct charity and for the desired purpose. 

A charitable rollover

Forbes emphasizes the benefits of a charitable rollover as a way to send money directly to a charity from a pretax retirement account. When set up in this manner, the donation never goes on the person’s tax form; this makes the donation tax-deductible. 

If the money comes out of the retirement account, and then is sent by check to the charity, several tax implications come into play. A charitable rollover eliminates these concerns by keeping the withdrawn amount off of the adjusted gross income line of a tax return.