For many people, estate planning and charitable giving go hand in hand. The advantages include helping worthy causes, leaving assets to loved ones, and saving money on taxes. Top charitable giving strategies in Arlington Heights, IL, include a charitable remainder trust (charitable gift annuity), a charitable lead trust, a private foundation, a donor advised fund, and a charity beneficiary for retirement plans.
There’s no time like the present to secure your future, take care of loved ones, and support causes dear to your heart. Contact the Law Offices of Roger W. Stelk at (847) 506-7330 to discuss estate planning and charitable giving.
What Is Charitable Giving?
Charitable giving in Illinois can include many activities, such as donating money, services, or goods to nonprofit organizations or causes. For example, a family or an individual might set up a private foundation to give grants to nonprofits.
More than 25,000 charitable organizations operate in Illinois. They work in areas such as social services, the arts, environmental conservation, community development, education, and health care. These organizations must register with the state and file annual financial reports.
Donors can use that information to decide which charities to support. The data includes administration costs, income, and expenditures. Donors can get a tax deduction for their contributions, which is one incentive to give and keep giving.
Benefits of Charitable Giving in Estate Planning
Charitable gifts bring many benefits. For example, a gift is a chance for someone to leave a legacy that stands the test of time.
Legacy
It can be fulfilling to directly support the community and help people and causes in Arlington Heights, IL. With charitable giving, donors can fund special projects, establish scholarships, and do much more. They can leave a legacy and a long-lasting impact for years after their death.
Taxes
Donors can save on both federal and state taxes. For example, federal estate taxes apply to estates above a certain level. In 2023, it would apply to estates with values exceeding $13,610,000. A donation to a qualified charity could reduce the value of an estate so it falls under the taxable threshold or reduces the overall tax.
Illinois has an estate tax, too. The rates are graduated up to 16% and apply to estates with values that exceed $4 million. Charitable donations can also reduce state tax burdens, meaning heirs and beneficiaries get more of the estate’s value.
Donations can reduce income tax burdens, as well. If a donor makes charitable contributions during his or her lifetime, they can be deducted from federal income taxes. The donations do need to be to 501(c)(3) organizations that the IRS recognizes.
Estate Flexibility
Charitable giving is one way to meet estate planning goals while keeping estates flexible. A charitable remainder trust is a good example. It lets donors receive income from the trust during their lifetime, while the rest goes to a designated charity after their death. This flexibility couples tax benefits with asset control and financial security.
Estate Administration Simplification
Mistakes to avoid in estate planning include not understanding the plan created and how it works. However, estate planning and charitable giving together require planning and forethought.
There may be less conflict among heirs since this strategic planning reduces or eliminates ambiguity. The charity beneficiaries are also used to working with estates. They can ensure a donor’s wishes get fulfilled.
Incorporating Charitable Giving into Your Estate Plan
An estate planning and probate administration lawyer can help you incorporate charitable giving into your estate planning. Strategies your estate plan might contain include these:
Charitable Remainder Trust
CRTs let you transfer assets into a trust. Beneficiaries can use the property in the trust for a certain number of years with an annuity payment from the trust. After the term ends, the assets in the trust go to the charities you designate.
You get an immediate tax benefit based on the projected future value of the gift. This approach helps avoid capital gains taxes, and there are many variations on CRTs to fit virtually any situation. A donor could base the payments on a percentage of the assets, for example.
Charitable Lead Trust
CLTs are the opposite of CRTs in many ways. The charity is first to get income for a specific period. After that period ends, your beneficiaries get the assets. You do not get an immediate tax benefit, but can reduce gift and estate taxes.
Donor Advised Fund
You make an irrevocable contribution to a charity sponsoring a DAF program and enjoy immediate tax benefits. The funds can be invested and grow tax-free, and you have advisory privileges over their investment and distribution.
Other approaches for estate planning and charitable giving include setting up a private foundation and designating a charity as a beneficiary of your retirement plan, life insurance policy, or other assets.
Of course, charitable giving is just one aspect of estate plans. Trusts can be a valuable asset management tool for beneficiaries, with funds for specific purposes such as health care and education. Directives for end-of-life care are also part of many estate plans.
One decision to make may be using a living trust vs. will. A living trust can help with probate avoidance. It transfers assets into a trustee’s care, and the trustee is usually the person conducting estate planning. A will is helpful in special circumstances or if someone has minor children with guardianship needs. Many people have a combination of a living trust and a will.
What if the executor does not probate the will, though? It depends. Probate is not always required. A lawyer can help you determine if probate is necessary. If probate does not occur, and it should, assets may stay in the deceased person’s name and can complicate the estate, for example, by leaving some expenses unpaid. Beneficiaries, such as a charity, may not be able to get their inheritance.
Estate planning and charitable giving can serve many purposes. To find out more or get started, contact us today at The Law Offices of Roger W. Stelk.
