How to Incorporate Charitable Giving in Your Estate Plan

For many Arkansans, establishing a legacy is an aspiration that goes far beyond leaving a bank account or family home to loved ones. No matter your reason or motivations, bequeathing a gift to charity can be an extraordinarily fulfilling way to leave the world a better place than you found it.

Reasons to Consider Charitable Estate Planning

An estate plan is, if nothing else, the foundation of an enduring legacy—a legacy that has the capacity to both provide for your loved ones and to improve your community in any multitude of ways. Of course, people have many reasons for including charitable gifts in their estate plans. Leaving assets for a charity could:

• Reduce your tax obligations. Arkansas doesn’t have a state-level estate tax, but the federal government does. In a great many ways, gifting assets to charity is a great alternative to letting the Internal Revenue Service profit off your life’s work. An estate planning attorney could help you establish a trust or otherwise structure your accounts in a way that not only reduces your tax obligations in life but also ensures that your gifts aren’t at increased risk of high-rate taxation after you have passed away. 
• Complement an existing estate plan. If you have already provided ample resources for your loved ones in an existing estate plan, including a charitable organization as a beneficiary could be an excellent way to put your assets to good use. Since many charitable donations can be written off or reduced for tax purposes—both by you and by the recipient group—gifting excess wealth could spare accounts that would otherwise be taxed at a very high rate.
• Save your estate from intestacy. Among the most critical purposes of any estate plan is keeping your assets safe from intestacy. Arkansans who don’t have families—or aren’t close to their relatives—may be inclined to neglect their estate, leaving the court to do with their earthly possessions as it sees it. However, our probate courts are bound to follow a strict legal formula when they administer estates that are not protected by a will or trust. Without the right preparation, your possessions could be given to relatives you’ve disowned or distanced yourself from. Including a charity in your estate plan is an optimal way to exercise your independence and prevent your assets from falling into the wrong hands.

Options for Charitable Estate Planning

You could include a charity in your estate plan by:

• Gifting to a charity during your lifetime. If you believe that your estate could be subject to federal estate taxes or inheritance taxes, gifting assets to charity when you’re still alive makes a great deal of sense. For one, the IRS will let you deduct such donations from your personal income tax returns—for most Americans, the deduction could range up to 60% of their adjusted gross income. Furthermore, taking advantage of the federal gift exemption lets you reduce the size of your taxable estate, which could enable you to not only minimize the chance that your heirs will run afoul of the IRS but also preserve your eligibility for federal benefits like Medicare.
• Restructuring your beneficiary designations. Retirement accounts are ideal candidates for charitable giving since they are typically among the highest-taxed assets in any estate. When charitable organizations receive retirement accounts as gifts, they do not have to pay any income tax from the assets. 
• Establishing a trust. Charities can be the beneficiaries of revocable trusts and irrevocable living trusts. Since trust-held assets are usually exempted from probate, transferring assets to a trust could spare your estate beneficiaries—be it a charity, your family, or friends—from being compelled to court for their inheritances. Certain trusts, such as charitable lead trusts, have additional benefits. Charitable lead trusts, for instance, let you disburse a payout to a favored organization during your lifetime; after you’ve passed away, the trust’s residual assets will be given to your other named heirs.

Contact an Estate Planning Attorney Today

Quraishi Law & Wealth has years of experience helping Arkansans of every background build legacies that complement their deeply-held values and aspirations. Please send us a message online or call us at 870-275-4304 to schedule your initial consultation.