Americans are nothing if not generous. Each year, about 70 percent of the population makes charitable contributions. Most of these are done in the month of December. Gifts are often finalized in a hurry – we rarely consider the tax or financial implications when making charitable donations. Here are just a few of the most powerful estate planning tools you can use when considering your charitable giving this year and for years to come:
Individuals over the age of 70 may donate up to $100,000 a year to charities directly from the IRA. This is what is known as a Qualified Charitable Distribution, or QCD. The QCD will count towards any required minimum distributions, or RMDs, that account holders must make from their IRAs. Required minimum distributions must begin by the time the person turns 72. Qualified charitable distributions are a great way to meet RMD requirements while benefiting your favorite charity and excluding an amount from your income. This is an excellent idea for anyone who does not need their distribution to cover living expenses.
Bequest in your Will or Revocable Trust
One of the simplest and most direct ways to benefit a charity upon passing is to leave a bequest in your will or revocable trust. A bequest is a statement in your will or trust explaining how much you would like to leave to benefit your preferred charity. It is important to use the charity’s correct name and to explain the purpose for which you would like the organization to use your money. General-purpose funding is fine, too, if you do not have a specific way you prefer the donation to be used.
If you possess publicly traded stock that has appreciated in value, you can gift it to a charity. Normally, you are subjected to capital gains taxes on the appreciation when selling stock. By gifting the stock to charity, though, you will receive a charitable income tax deduction equal to the full value of the stock at the time of the gift. This is a great way to get around capital gains taxes while also giving back. If the charity decides to sell the stock, they can do so without worrying about the taxes, too, since charities are tax exempt.
If you need assistance in figuring out which method of charitable giving is best for you, call Hegwood Law Group at (281) 885-8826 or click here to schedule a meeting with our experienced elder law and estate planning team.