Charitable Giving Planning – New Jersey Business Magazine
What to consider when building an inheritance.
By John S. Niles on December 14, 2021
Each person has a different vision or aspiration for the legacy they create in their lifetime. Whether it is a simple bequest or an outright gift or more complex tax, trust or estate planning, a personal philanthropic strategy can be crafted to be the most beneficial to both the donor. and for the charities it supports. Strategies should reflect personal charitable goals, unique tax situations, legislative environments and patrimonial circumstances.
On the simpler side of charitable planning, there are bequests and beneficiary designations. A bequest is the act of naming a charity as beneficiary in your will. Likewise, individuals can name a charity as the beneficiary of a retirement account or life insurance policy. In both cases, you can indicate whether the charity receives a fixed dollar amount or a percentage of the total. These decisions require a minimum of outside advice and can be easily adjusted.
Qualified Charitable Distributions (QCDs) allow individuals to donate up to $ 100,000 in annual distribution of most types of IRAs directly to a charity if they are over 70 and a half. Depending on age and amount, these donations may be tax exempt and count as a Minimum Required Distribution (RMD). This strategy is advantageous for people with a substantial retirement capital or a high RMD. This is the most tax-efficient use of pension dollars because CDQs exclude the particular amount from taxable income, which could result in additional tax benefits.
More complex strategies that include creating and funding trusts can be exploited with the guidance of trusted advisors. A Charitable Lead Annuity Trust (CLAT) is a vehicle in which a fixed annual amount is paid to one or more charitable beneficiaries through a trust. At the end of the trust term, the remainder goes to non-charitable beneficiaries, such as family heirs. Using a CLAT can reduce inheritance and gift taxes while preserving assets for future generations. Conversely, a charitable residual trust (CRT) is a vehicle where, once funded, a fixed annuity amount or a fixed percentage of the trust’s assets valued on a specific date each year is returned to the donor or to an individual. other non-charitable beneficiary. At the end of the trust term, the remainder goes to the charities that were named in the trust deed. Using a CRT has the potential to reduce or eliminate capital gains or inheritance taxes, while providing income to the donor during their lifetime.
These are just a few examples of strategies that can be considered to maximize the impact of a donation to a charity while providing additional benefits to the donor. Individuals should discuss these concepts with their trusted advisors.ou to help select the charitable giving plan that best suits their unique circumstances in order to create a lasting legacy.
John S. Niles is Vice President, Trust and Estate Administration, at The Haverford Trust Company. He is also Chairman of the Trust Board of Directors for The Haverford Trust Company.
To access more business news, visit NJB News Now.