Planning for charity and a stronger estate

On Behalf of | Oct 13, 2021 | Uncategorized

Estate planning can take into account charitable giving if you want your estate to fund humanitarian work. There are financial benefits to gain when you include charities as the beneficiaries of your estate. Reducing income or estate tax in Indiana is sometimes as simple as using a charitable deduction to lower your tax status. Tax planning in such cases should be about making a charitable impact while being responsible for your estate’s dues.

Reducing capital gains on investments

Based on current laws, capital gains are taxed when you withdraw your investment profits. When done right, estate planning can reveal ways to keep your capital gains in the markets or away from the IRS. Charitable giving is one of the options you have. By giving a charity capital gains from an investment specifically, you avoid paying taxes on those gains.

Choosing your qualified charitable distribution

Though your taxable income from an IRA is based on how much you withdraw, your withdrawals aren’t counted taxable when used for charitable purposes. Whatever you withdraw from an IRA is considered a deductible if that money goes to a legal charity. This tax code enables you to withdraw funds from an IRA but not have it held as income against you. Here are a few other reasons estate owners use IRAs for charitable distributions:

  • Exclusive ownership
  • Tax avoidance
  • Simplicity in opening
  • Diverse assets that qualify

Making at-death bequests

A bequest, be it written in a will or trust, is a wish you make regarding how you want something to be managed or used. Charitable bequests are tax deductible. You must clearly state who the agency is, how much they get and for what purpose they’ll receive it. Though you don’t directly benefit from charity, your estate tax is altered, leaving your beneficiaries with a lower burden.

Reconsider beneficiaries as you plan ahead

Your estate beneficiary, though usually a person, can legally be a charitable group. No income taxes are incurred when the charity later withdraws your gift. This tax-exemption alters how your remaining estate is taxed, reducing the burden others will have.