Charitable giving is a meaningful way to leave a lasting legacy while also benefiting causes that are important to you. Beyond the immediate impact on the organizations you support, charitable giving can also play a significant role in your estate planning. In this article, we'll explore how charitable giving can impact your estate plan and why it's an essential consideration for many individuals.

Understanding Charitable Giving

Charitable giving involves donating money, assets, or property to nonprofit organizations, charities, or other philanthropic causes. This generosity can take many forms, including one-time donations, regular contributions, and planned giving strategies. Regardless of the method, charitable giving allows individuals to support causes they are passionate about and make a positive difference in their communities and beyond.

Tax Benefits of Charitable Giving

One of the key benefits of charitable giving is the potential for tax savings. When you donate to qualified charitable organizations, you may be eligible to receive a tax deduction for the value of your contribution. This can result in lower taxable income and potentially reduce your overall tax liability. Additionally, certain types of charitable gifts, such as donations of appreciated assets or contributions to charitable trusts, may offer additional tax advantages.

Estate Planning Considerations

Charitable giving can also play a significant role in estate planning. By including charitable provisions in your estate plan, you can support causes you care about while also achieving your financial and philanthropic goals. Common estate planning strategies involving charitable giving include:

• Charitable Bequests: Including charitable organizations as beneficiaries in your will or trust, allowing you to leave a portion of your estate to support their work.
• Charitable Trusts: Establishing charitable trusts, such as charitable remainder trusts or charitable lead trusts, to provide ongoing support to charities while also benefiting your heirs or yourself during your lifetime.
• Donor-Advised Funds: Setting up donor-advised funds, which allow you to make contributions to a charitable fund and recommend grants to specific charities over time.

The Impact of Charitable Giving

Beyond the tax benefits and estate planning advantages, charitable giving offers the opportunity to make a meaningful impact on causes that matter to you. Whether you choose to support education, healthcare, environmental conservation, or other charitable endeavors, your generosity can help organizations thrive and make a difference in the lives of others.

In Conclusion

Incorporating charitable giving into your estate plan can have a profound impact on both your financial legacy and the causes you care about. By working with an experienced estate planning attorney, you can explore various charitable giving strategies and develop a plan that aligns with your values and goals. 

If you're interested in learning more about how charitable giving can impact your estate plan, we invite you to contact Donohue, O’Connell & Riley today to schedule a consultation. Our team is here to help you navigate the complexities of estate planning and create a plan that reflects your wishes while also supporting the causes you believe in.

Losing a spouse is devastating. To help reduce stress on the legal and financial front, we are sharing practical tips to consider for a surviving spouse. You can start by gathering important documents including your spouse’s death certificate, will, marriage certificate, property deeds, vehicle titles, tax returns, bank account and credit card statements and insurance policies. Having these documents ready will help make the most of your time with our attorneys.

1. File the Will

It’s always a good idea, and in some states a legal requirement, to file the will of the first spouse to pass away with the the local court. Even though the will might not be probated, having it on file with local court ensures its safe-keeping if assets are later discovered which require probate. Some examples might be an unanticipated income tax refund, an inheritance, or a life insurance policy or retirement account without a beneficiary designation.

2. Who’s in First?

It’s a good idea to update existing planning documents and remove a deceased spouse from first position on such documents as a will, healthcare proxy, and power of attorney. This can avoid the need to present a death certificate of the deceased spouse when these documents are used; and save time, hassle, and money. A fresh set of documents can also provide for a backup to the person who is now named first.

3. What is the Basis?

Adjustments to cost basis may be available for investment accounts, real estate, and business holdings owned by the decedent. It’s always good practice to obtain appraisals for any businesses or real estate assets, even if jointly owned, as this will provide clear documentation of cost basis adjustments due to the death of a spouse that may end up saving substantial amounts in capital gains taxes, whether that be from repositioning securities in a portfolio, or from the sale of a closely held business interest or real estate. IRS regulations require an appraisal of business or real estate interest to be done by a qualified appraiser; a broker valuation or property tax assessment are not sufficient.

Particular attention should be paid to LLCs and partnerships as a timely, section 754 election may need to be made to allow assets owned by the company to benefit from a step up in tax basis.

4. Change in Tax Status 

Surviving spouses should be able to file as a qualifying widow or widower in the year of their spouse’s death, but thereafter, may be looking at a very different set of tax brackets. Thought should be given as to whether or not assets can be sold, or retirement accounts converted to Roth IRAs in the year of the first spouse’s passing so as to avoid bracket creep when the surviving spouse files as a single taxpayer.

5. Spousal IRA

Spouses often name each other as beneficiaries on their retirement accounts, so the surviving spouse will need to roll over any such retirement accounts and designate new beneficiaries. The rules that govern required minimum distributions for surviving spouses can be complex. Your attorney, accountant, or financial advisor should be consulted to make sure that that minimum withdrawals are taken annually in a timely fashion.

Also, spouses often name each other as beneficiaries on their life insurance, annuities, and other accounts that may flow via beneficiary designation. These beneficiary designations should be updated to reflect the death of the first spouse, and consideration may be given to cashing in accounts and closing or consolidating them if the account is of relatively small value, for example, $10,000 or less.

6. Social Security Benefits 

Surviving spouses who receive a lower Social Security payment than their deceased spouse may be eligible to take the greater of the two benefits. Adjustments may be made, however, if the surviving spouse took his or her benefit prior to reaching full retirement age. You should consult with your regional Social Security representative to determine the substantial benefits to which you may be entitled.

7. Time to Simplify  

As attorneys, we often tell clients that whether an account has $5,000, $50,000, $500,000 or $5 million in it, the work needed to be done to close out the account is about the same. The reality is that each account requires interfacing with financial institutions, each of which have their own rules and forms, and then subsequently accounting for the funds in that account to beneficiaries and the tax authorities. 

We estimate that each account incurs somewhere between $1,000 and $2,000 in legal and accounting fees to close and report the account. Thus, if you have a number of accounts at different institutions, consider consolidating them to the greatest extent possible. 

Ideally, we like to see clients having one retirement account, one after -tax investment account, and a checking account. Other than insurance products, such as life insurance and annuities, this is all that is necessary for 99% of our clients. Having multiple accounts at multiple institutions only makes executor’s task more complex, and often unnecessarily so.

them. 8. Involve the Next Generation  

When your spouse dies, recruit help from the next generation to assist you with day-to-day tasks. Having a second set of eyes to help avoid senior scammers, keep tax records straight, and assist with paying bills can be a godsend in your golden years. It’s also a good idea to have paper statements mailed, even if there is a small fee, as this will help assist your family members if they need to step in on an emergency basis.

9. Avoid Risks and Potential Scams

Family members need to pay particular care when a senior remarries later in life, or brings in a live-in romantic partner, or hires more help around the house. Unfortunately, in our experience, seniors often fall prey to those who aim to exploit the elderly. It’s always a good idea to make sure that personal financial and electronic records are secured in a locked room; that finances are not discussed with people who are new in the senior’s life, and that easily movable valuables, such as the family silver or valuable jewelry, are placed under lock and key.

Similarly, if major work or renovations are to be undertaken, contractors should be carefully vetted, and insurance certificates obtained prior to any major work being commenced. Having a child nearby to check in on the senior, or having a trusted friend or neighbor stop by on a regular basis can be a great way to make sure that your newly single family member is not being victimized.