Charitable Giving In Your Estate Plan
By Joan M. Smith
CFP, Maryland Estate Planning
I have found that many people who do not have children or heirs want to leave their assets to charity. I have also found many people who are charitable by nature and want to leave assets to a charity regardless of whether they have heirs. They want at least part of their assets to go to a worthy cause. Here are two ways that you can provide for charitable giving in your estate plan.
The first way would be to name a charity as a beneficiary of your Living Trust now; then, after you have passed away, the gift would be made. This choice is the least complicated. Your Successor Trustee will see that the charity receives the amount of money that you wanted to give. During your lifetime, you have the ability to change the charity beneficiary. Only when you pass away is the beneficiary designation irrevocable.
The second way would be to create a Charitable Remainder Trust while you are living. You would transfer some of your assets into the trust. Many times, the assets placed in this type of trust are highly appreciated or non-producing (for example, art, land or empty rental property.) The choice of assets you place in the trust is very important. You will be able to take an immediate tax deduction, but the assets, or the proceeds of the sale of these assets, remain in the trust until you pass away. The tax deduction is a percentage of the value of the property transferred and is calculated using the age of the donor. Once you place these assets in the trust, you will receive income from those assets. If those assets are sold by the CRT, you will not pay capital gains tax on the profit. When you pass away, the charity receives the corpus of the trust.
These two choices have been explained in a very simplified fashion. For a more detailed discussion of the benefits of each, please seek professional advice.