Estate Planning and Charitable Giving: Know Your Options

Charitable giving is an important part in many people's lives. According to data provided by the National Philanthropic Trust (NPT), Americans collectively donated approximately $450 billion to charitable causes in 2019 alone. If you have causes that you care about, there are a number of different estate planning strategies that you can use to maximize the impact of your generosity.

At Arnold & Smith, PLLC, we want to make sure that you have the tools and knowledge you need to make the maximum impact for the causes you care about, while also protecting the best interests of your family. In this post, our Charlotte estate planning attorneys highlight some of the common strategies that you can use to leave money/property to charity while also limiting tax liability.

You Can Set Up a Charitable Rollover from Your Individual Retirement Account

In the old days, someone who wanted to use the proceeds of their Individual Retirement Account (IRA) for a charitable gift first had to recognize that money as “income.” In some cases, this resulted in the individual incurring tax liability. The good news is that the law has changed. If you are over the age of 70.5, you can donate up to $100,000 per year from your IRA directly to charity without incurring tax liability.

Use the Appreciated Stock Strategy

Do you own stock that has gained significant value since it was first purchased/obtained? If so, giving that appreciated stock to charity may be one of the most effective, tax-efficient ways to provide for a good cause. The primary reason is that you will earn a charitable tax deduction worth the fair market value of the stock on the date of donation. Since the stock was donated to charity and not sold, you will avoid capital gains tax liability. In some cases, the donation of appreciated stock allows for both a maximum charitable contribution and a reduction in tax liability.

You Can Name a Charity as a Beneficiary

If you are looking for a simple and straightforward approach to leave money/property to an organization, you can also name a charity as your beneficiary. You could list a charity in your will or you could make a charity a designation beneficiary on your retirement account or life insurance account. While there are some downsides to naming a charity in your will—mainly that the assets will be required to go through probate—it is a simple and straightforward estate planning strategy.

Set Up a Charitable Trust to Benefit a Good Cause

A charitable trust is one of the most efficient and effective ways to leave money or property to charity. Many people have concerns about using charitable trusts. There is a misconception that only very wealthy people are in a position to set up a charitable trust. In reality, that is several different types of charitable trusts. Some options include:

  • Charitable Remainder Trust (CRT): A charitable remainder trust is a specialized estate planning tool that allows you to put assets in a trust to pay yourself and/or your beneficiaries a fixed income for the rest of your life. At the end, the remaining assets will then be transferred to your selected charity. If you have questions about using a charitable remainder trust in North Carolina, our wealth and legacy planning attorneys can help.
  • Charitable Lead Trust (CLT): A charitable lead trust will provide ongoing financial support to one or more charitable organizations for a pre-defined period of time. After that, the remaining assets will then be distributed to the grantor’s selected heirs. If you want to know more about the benefits of using a charitable lead trust, contact an attorney for guidance.

Every estate plan is different. With a proper strategy that is personalized to meet your financial needs, you will be in the best position to maximize your contributions while protecting yourself and your family from an overwhelming tax burden. If you have any specific questions about charitable trusts, an experienced North Carolina estate planning attorney can help.

Call Our Charlotte, NC Estate Planning Lawyers Today

At Arnold & Smith, PLLC, our North Carolina estate planning attorneys are devoted to representing clients with the highest degree of professional skill and personal service. If you have questions about charitable giving, we are more than happy to help you understand your options. For a fully private initial consultation, please do not hesitate to contact us today. We provide legal services throughout the region, including in Mecklenburg County, Union County, and Iredell County.