Charitable Giving

Charitable giving can be a way to provide for charitable or philanthropic organizations after your death or even before you pass away. Charitable giving can also be used to reduce the amount of estate taxes your estate will have to pay. Charitable donations are 100% deductible from your estate. Since the rates for federal gift and estate taxes can be as high as 55% in some cases, charitable giving can be an important savings for your estate.

Charitable giving can be accomplished in a variety of ways. The most common way to provide for charities is to simply make a bequest or gift to that charity in your will or trust. You can gift cash, stocks, bonds, real property, or a specific percentage of your estate. For example, an outright bequest may be as simple as “I give and bequeath the sum of $5000 to the San Diego Humane Society, a non-profit charity. If you want to leave a specific asset such as real property, the language might be “I give and bequeath the real property located at 4321 Main St., San Diego, CA 92128 to the San Diego Zoological Society, a non-profit charity. A percentage gift might be worded: “I give and bequeath to the Alzheimer Association an amount equal to 10% of the net value of my estate”.

The most efficient way to put a charitable gift in place is with a trust. A revocable living trust can be set up to provide for these bequests and the remainder of the estate can be divided among the beneficiaries. Trusts enable the donors to maintain control over their assets during their lives. If circumstances change and they want to modify the charitable gifts or eliminate them entirely, the revocable living trust can easily be amended. A revocable living trust does not have to be probated so the gifts can usually be distributed more rapidly than if distributed via a will.

In addition to trusts, there are more complex charitable giving techniques that can be used as part of your estate plan. Several types of irrevocable trusts can be used to provide a deferred benefit for charities. A Charitable Remainder Trust (CRT) is a type of irrevocable trust in which you place assets to provide income for you during a specific period of time, typically your life. At the end of that period, the assets which were transferred into the trust will be given to the charity or charities you have chosen.. This type of trust is an irrevocable trust which means you as the donor give up any right to control the assets of the trust, however, depending on the type of asset(s) in the trust, this arrangement may have significant benefits to you in the form of a steady stream of income and reduced gift, estate, or capital gains taxes.

A Charitable Lead Trust (CLT) is sort of the reverse of a CRT. It is one set up to pay an income to a charity for a certain number of years or during your lifetime and upon your death, the asset is distributed to your beneficiaries. The basic difference between a CRT and a CLT is that in a CRT, the charity receives the trust assets at the end of the term, usually your life, whereas in a CLT the beneficiaries receive the trust assets.

Other ways you can remember a charity include designating a charity as a beneficiary of a life insurance policy or an IRA . A donor-advised fund is another way if you want to donate to a charitable fund administered by a public charity. A donor-advised fund is similar to setting up a foundation which would manage your charitable giving. You can also set up your own private foundation which can provide for periodic gifts, or can fund scholarships, grants, or other worthy causes.

The critical thing to remember is that without a will or a trust or one of the irrevocable charitable trusts, charities you may have wanted to benefit will not receive those gifts. If an estate goes through probate because there is no estate plan, the Court will not know about your charitable wishes and cannot make any gifts to charity.

The attorneys at the San Diego estate planning firm of Law Offices of Scott C. Soady, APC have extensive experience in estate planning including charitable giving. We welcome your inquiry and invite you to contact us by e-mail, or call us toll-free at (877) 435-7411 within California, or (858) 618-5510 outside of California to schedule a free in-house consultation.