Rosalynn Carter's Good Works Live On: How You Can Donate to Charity After You Die
When First Lady Rosalynn Carter passed away this November, there were many tributes to her philanthropic endeavors. She was a leader for children and women's issues as well as an advocate for mental health. With her husband, Rosalynn also established The Carter Center, a nonprofit organization focusing on human rights and eradicating disease.
Charitable giving helps others and is also an effective estate planning tool to reduce your taxable estate. During your lifetime, you can make charitable contributions and reap tax benefits by taking tax deductions on your income tax return. However, you can also reduce your taxable estate by donating your assets to charities during your life or upon your death.
Your donations must go to a qualified charity or nonprofit organization for the IRS to recognize it for charitable deduction purposes. You can search for qualified charities online with sites such as Charity Navigator, Guide Star, or CharityWatch. Make sure it is a legitimate charitable organization with a designation that it is an approved nonprofit organization.
Reasons to Make Charitable Donations
Of course, the first reason to donate to your favorite charity is to help others with important philanthropic work. However, there are other tax advantages to giving charitable gifts: you may reduce your income tax burden or taxable estate through donations in a variety of ways.
Making Charitable Bequests in Your Will
Many choose to make charitable donations in their will. The advantage is that you do not have to part with your money or assets until you die. That way, you still have money if you have unexpected medical expenses or still need to support your family members or loved ones. And as long as you are alive, you can change your will to name other charities as a beneficiary.
It is easy to leave money in your will with a specific gift clause such as, “I leave $5,000 to XYZ Charity with an address of 123 Main Street, City, State, Zip." You may want to name a backup charitable organization in case your first choice no longer exists or let your personal representative or executor find a similar charity.
Alternate Ways to Donate to Charities
There are other methods to give your estate to charity. However, you should discuss any tax implications with your accountant or financial advisor.
Name a Charity as a Beneficiary of a Life Insurance Policy
You can take out a life insurance policy as the policy owner and name the charity of your choice as the designated beneficiary. When you die, the life insurance proceeds go to that charity. It may be a low-cost way to generate a large amount of money. The money you pay on premiums may be considerably less than the death amount on the policy, maximizing the charitable impact. As the policy owner, you can change the beneficiary anytime during your life.
Name a Charity as a Beneficiary of Your Retirement Plans
If you have a retirement account or IRA that you want to donate to a charity, you could make them the named beneficiary to receive your retirement assets. When you pass, the charitable organization receives the proceeds.
Create a Charitable Trust
A charitable trust is a trust where the beneficiary is a nonprofit organization, private foundation, or public charity. Charitable trusts are often used by people whose estates may exceed the federal estate tax limits. For 2024, the federal estate tax exemption is $13.61 million per person. Donations to charitable trusts can reduce the value of their estate and benefit their favorite charity. And the charities can receive some property without triggering a capital gains tax.
There are two ways to create charitable trusts:
- Charitable Lead Trust. A charitable lead trust receives the asset you give them, and you may be able to claim an income tax deduction. The charity benefits from the income on the asset, but upon your death, your beneficiaries, such as family members or other loved ones, inherit the asset. For example, you donate $100,000 to a charitable lead trust. The charity receives the income from that $100,000 during your lifetime (or a stipulated time), and the original $100,000 goes to your named beneficiaries after a period of time or your death, depending upon how you set it up.
- Charitable Remainder Trust. A charitable remainder trust is a more popular option. You give the charity an asset to manage, and they pay you interest or a dividend on that investment during your lifetime, acting like an annuity. Upon your death, the charity keeps the asset.
Because these are sophisticated estate planning tools, it is best to work with an estate planning attorney or financial advisor to understand the legal and tax implications.
You don't have to a global humanitarian like Rosalynn Carter to make a difference in the world. Charitable giving allows generous individuals to contribute to causes they care about while offering tax benefits. Estate planning tools such as charitable bequests in a will, life insurance policies, retirement plans, and charitable trusts can help you with your estate planning and gift-giving.
- Charitable Contributions (Learn About the Law)
- How To Leave Money to Beneficiaries Who Can't Manage It (Law and Daily Life)
- Do-It-Yourself Estate Planning Forms (FindLaw Legal Forms & Services)
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