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How Charitable Giving Works for Estate Plans Today

Philanthropically-minded families have long made charitable giving part of their estate plan. While the tax benefits were always a plus, giving was more about creating a legacy than getting a tax break.

As the discussion in Washington concerning repealing the federal estate tax heats up, some are wondering what the impact will be on charitable giving as part of estate plans. But according to an article in Financial Planning, “Charitable giving: It’s not just about taxes,” charitable giving has never been solely about tax planning. By donating highly appreciated assets or creating a charitable remainder trust or charitable lead trust, families are supporting institutions and causes that are important to them.

While planning a major gift in the past would be based in no small part on maximizing the income and estate tax benefits of the donation, today’s donors need to consider the effect of a major gift on their future financial security.

This change in focus should mean more comprehensive financial forecasting to help you in structuring large donations, and more complex gift structures may be required.

A donor may want to commit certain dollars now and in the future, but might want to make other commitments that are contingent on his or her future financial condition. He or she may pay some of a charitable pledge now, some at a later date, and the remainder based upon a future event. This gives the donor added financial security.

In some instances, a donor planning a large charitable gift, will want to consider his or her long-term care needs into the plan, and long-term care insurance can be purchased as part of the charitable planning to give the donor a safety net.

Some retiring baby boomers believe that charity is about making a difference—and often they want to be actively involved in that process. Talk with your attorney about the many ways you can tailor a donation to meet a wide range of personal objectives. This can also entail writing an agreement with the charity that specifies the way in which the donation will be used. You can also add milestones when more donations will be made, like when the charity attains specific program goals.

Aging boomers are advised to make sure that their charitable giving is realistic for their asset level and possible future costs of living, especially health care costs. Make sure that the gift you intend will not put you in a precarious financial position and discuss your giving goals with your estate planning attorney.

Reference: Financial Planning (April 11, 2017) “Charitable giving: It’s not just about taxes”

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