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Philanthropic giving allows you to make an impact by donating to organizations that reflect your values and support your causes. If you want to include philanthropic giving in your estate plan, there are many common ways. Let’s break down how you can do it. A financial advisor can help you incorporate charitable giving into your estate plan.
What Is philanthropic giving?
Philanthropic giving involves giving time or money to a cause that furthers the good of society. The concept dates all the way back to early Greece. Volunteering at your favorite local charity is one way to practice philanthropy. But when it comes to your estate plan, philanthropic giving refers to financial donations.
How to include philanthropic giving in your estate plan
There are several ways to include philanthropic giving in your estate plan. Five common options include:
Will. This legal document details your final wishes. Generally, it includes what to do with your possession when you are gone. Within your will, you can outline specific charitable donations.
Revocable living trust. A revocable living trust is a detailed document that outlines what will happen to your assets after you pass away. Within a living trust, you can indicate which assets you’d like to go to charity. The assets are placed into the trust while you are alive. You’ll set up beneficiaries for the trust to receive the assets when the time comes.
Distributions. Qualified charitable distributions are funds taken from an IRA and immediately given to an eligible charity. Although this move isn’t an option for everyone, QCD can lower your tax burden by lowering your taxable income for the year. If you have an IRA, this option is worth looking into.
Donations. You can make donations to charities that matter to you as a part of your estate plan. But you can also take action before you pass away. It might surprise you but it’s possible to donate a wide variety of assets. Everything from real estate to cryptocurrency is fair game for a donation.
Gifts. Gift planning involves mapping out the transition of a major asset to a charitable organization before or after the death of the donor. Depending on your situation, you can map out a gift plan with the recipient charity. If you hold off on the gift until after your death, it won’t contribute to the lifetime income tax deduction.
As a philanthropist, the most efficient giving strategy varies based on your goals. If you aren’t sure which is the best option, or combination of options, then talk through a plan with your financial advisor.
Best practices for giving
Giving assets to charity is an admirable goal. As you consider your philanthropic giving strategy, it’s also a good idea to explore best practices for giving. There are two common practices. One concerns the need to research organizations you’re considering giving to. Not all charities are created equally. Although we all wish that every charity made the world a better place, that’s not always the case. So, it’s important to research any organization before including it in your estate plan.
Unfortunately, there are plenty of charity scams out there. A few include the Cancer Fund of America, the International Union of Police Associations and the Kids Wish Network. Here’s where you can explore the worst charity scams.
Secondly, if you have a ton of items lying around your house, consider donating them to charity now. Why not eliminate clutter and do good at the same time?
If philanthropic giving is important to you, then it needs to find a place in your estate plan. While you can tackle estate planning on your own, a financial expert can be invaluable to navigate you through this complex process.
Tips on Philanthropy
- A financial advisor could help incorporate philanthropic giving to your estate plan in a variety of ways. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Charity tax deductions can be worthwhile. Consider taking a look at your charity tax deduction options when mapping out your estate plan with philanthropic giving components.
Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions.
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