Making lifetime gifts to charitable organizations, including many educational institutions that are registered as charitable organizations, offers many tax advantages. Generally speaking, making these gifts permits one to take a deduction on one’s income tax return. Additionally, lifetime gifting removes assets from one’s taxable estate.
In addition to making lifetime gifts, one can make provision in one’s will or trust to leave money to charitable organizations, thus avoiding estate tax on those monies. Often, if a client has a taxable estate, it makes sense to leave some money to a charity instead of paying taxes to the federal and/or state government. Charities can certainly benefit from such bequests and depend on gifts and bequests to support their operations.
There are number of charitable trusts which can be created during one’s lifetime, and at death, that also provide beneficial tax treatment. One of the most common is a Charitable Remainder Trust, where one’s heirs receive income payments during their lifetimes and then at their death the remaining monies are paid to charities. Again, this type of trust usually provides an estate tax benefit. Another reason for creating charitable trusts is to save monies on income tax, especially where one owns highly appreciated assets.
Establishing charitable trusts can be somewhat complicated; therefore, it is imperative one seek the services of an estate planning attorney experienced in creating these trust.
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IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.