When you’re taking stock of your legacy you may find that you have the ability to give something back to charitable causes. A lot of people don’t like to talk about it, but when you are engaged in the process of estate planning you are after all contemplating your death. Feeling as though you have done what you can to improve the human condition as one of your final acts can be a comforting feeling considering the soul-searching people generally do when they come face to face with their own mortality.
But how exactly do you go about giving to charitable causes? Many people immediately think of private foundations when they consider the answer to this question, and creation of a private foundation is an option that is available. However, it is expensive to create and maintain a charitable private foundation, which puts this choice out of the reach some people. And there are others who could afford to start such a foundation who simply find it difficult to justify paying the overhead.
An option that exists that is much less expensive and more efficient than the creation of a private foundation would be to make contributions into a donor advised fund. These funds are housed within public charities and some financial services concerns. You can make a single donation into the fund, but subsequently make recommendations requesting that grants be endowed to numerous different charities if you so choose. This greatly simplifies your accounting, allowing for truly efficient giving.
From a tax perspective, you are entitled to a charitable deduction for the year within which the original contribution was made. But you don’t have to make recommendations immediately with regard to grants. So you could make a contribution at the end of the year, take the deduction, and then take your time deciding how you would like funds to be distributed.
In addition to this, appreciated securities donated into the fund are not subject to capital gains taxation. And of course the donation reduces the taxable amount of your estate for estate tax purposes.
To explore your charitable giving options in-depth, simply arrange for a consultation with an experienced estate planning attorney.
Alan Augulis, Estate Planning Attorney
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