Riverside Healthcare - Planned Living Newsletter
Find a Doctor Employees Healthcare Professionals Newsroom

3 Tips for Charitable Giving Through Your Estate Plan

Carrie Schwab-Pomerantz

Dear Carrie,

I want to leave most of my estate to my children, but I also want to make meaningful contributions to a few charities. How can I best incorporate the two?

—A Reader

Dear Reader,

Building charitable giving into your estate plan is a wonderful way to extend your generosity and leave a meaningful legacy. And it’s not just for the very wealthy. In fact, there are several good ways to provide for your family while also giving to your favorite causes.

1. Make an outright gift in your will

The simplest way to include a charitable contribution in your estate is through your will. The amount you give won't reduce your income taxes, but it could reduce your taxable estate, potentially increasing the amount you'll be able to leave to your heirs. 

2. Donate retirement assets

Donating a retirement account is another straightforward and tax-effective way to support a charity. You simply designate the charity as the beneficiary on your account. Because the charity is exempt from both income and estate taxes, it can receive 100% of the account's value. You can then leave non-retirement assets, which don't have the same income tax burden, to your children.

3. Make a split-interest gift

If you'd like to donate assets to a charity but retain some of the benefits of holding those assets, a gift of split interest might be a good option. With split-interest gifts, the donor opens and funds a trust in the charity's name and receives a charitable income tax deduction at the time of the transfer. Opening a trust allows the donor to retain some rights to the property and also reduces the value of his or her taxable estate. In addition, the donor may be able to avoid capital gains on the assets transferred to the trust.

This may sound like it's only for the ultra-wealthy, but it doesn't have to be. For example, I know a couple who have been affiliated with a university for most of their lives. They met there as undergraduate students and continued their graduate studies there, as well. Despite having fairly modest assets, this couple wanted to return something to their alma mater. After careful consideration, they decided to transfer a portion of their assets into a trust that would provide them with income during their retirement years but that would ultimately pass on to the university.  

Some ways to provide split-interest gifts include:

Talk to your kids

While including a charity in your estate plan is commendable, it's wise to share your intent with your kids ahead of time so they understand your reasoning. I always recommend openly discussing your estate plan with your family so there are no surprises when inheritances are distributed. In the case of giving to charity, you're not only talking about money, you're talking about creating a legacy. This may be something your kids will not only admire, but also want to carry on.