Aside from the financial ramifications of planning your estate, you are of course thinking about your eventual death when you are engaged in legacy planning. There’s more to this than simply executing the necessary documents to enable asset transfers in a completely businesslike and unemotional manner.
Yes, you have to take care of practical matters. But most people are going to do some soul-searching when they are contemplating the end of their lives. It can lead you to the conclusion that you would like to include charitable giving in your estate plan.
When you think about noteworthy philanthropic charities private foundations such as the Bill and Melinda Gates Foundation may come to mind at first. However, few of us are multi-billionaires, and even those who can afford all the overhead associated with the creation of a private foundation often find it to be inefficient. As a result, donor advised funds have become extremely popular for their efficiency and for the tax advantages they provide.
These funds are housed within public charities, community foundations and some financial services companies. You make a single contribution into the fund, making your accounting extremely simple and efficient. But, you can advise the fund regarding how you would like grants to be made from your contribution. So you can make this one donation into the fund but request that multiple different charities benefit.
You’re entitled to an immediate charitable deduction for the original contribution into the fund. So, you can donate assets into the fund at the end of the year and take the deduction without making grant recommendations until you feel ready to do so. In addition to this, by making the initial contribution you are removing those funds from your estate for estate tax purposes. And, donations of appreciated securities into the fund are not subject to capital gains tax.
Larry Parman
Founding Attorney
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