What is Charitable Planning?
Charitable giving is defined as the act of giving money, goods, or time to others, directly, or through a worthy cause like a charitable trust—essentially helping others with goals you care about. Charitable planning ensures the most tax-efficient outcomes for your beneficiaries and the charities you care about after you pass. When making contributions to charitable organizations, particularly after you are gone, having the best charitable giving plan in place is essential. A sound strategy for charitable giving provides support to the causes you care about while adding flexibility to future giving. Raleigh Charitable Planning Attorneys at NC Planning are here to help you!
Charitable planning helps you maximize the value of your contributions beyond simply making a donation and receiving a tax deduction. Having a sound plan in place that reflects your personal goals, income level, and tax situation can provide many benefits. As an example, the value of your contributions can grow significantly, and your tax benefits can be optimized when you have a sound charitable giving plan in place.
Since charitable planning can be complex, consider speaking to the Raleigh charitable planning attorneys at NC Planning. We will consider your overall goals, then provide charitable planning advice based on our experience and knowledge. NC Planning attorneys will help you emphasize your legacy as well as the public good through charitable planning.
Once your plan is decided upon and implemented, the NC Planning attorneys will continue to monitor the financial viability of your charitable planning. This ensures that the charities you choose are supported, while your loved ones are also taken care of. In short, charitable planning attorneys review planning tools, tax evaluation, and asset information, then assist you in designing a plan that works for you.
What Do Charitable Planning Attorneys Do?
There are many charitable planning options out there. You can choose a very specific charitable planning option such as a trust for orphans of veterans of the Gulf War or donate farmland you own to a charitable foundation in your home city. Your specific financial situation, along with your goals, will determine which path of charitable giving you will follow.
Discussing your thoughts and questions regarding charitable planning with your Raleigh charitable planning attorneys can make a significant difference in the outcome of your plan. The tax benefits of charitable planning are unique to your circumstances and tax situation.
Your charitable planning attorney from NC Planning will evaluate your current situation, discuss your investments, and identify which of your assets could be available for the planning options you have chosen. If you have no current assets that would fit your plan, your charitable planning attorney can review options that would convert assets into qualifying assets.
What Are the Benefits of Charitable Planning?
There are many benefits associated with charitable planning, including the following:
- Your gift can make a greater impact when you implement charitable planning structures.
- Estate taxes can be reduced whether you are gifting cash or non-cash assets. You may even decide to give from your IRA in a tax-wise way. Charitable planning can allow deductions on capital gains, estate, and income taxes. You and your family members can benefit from estate tax deductions to charitable planning and giving.
- Charitable planning can encourage your loved ones to give to charities as you provide for them while you also set an example regarding giving to others.
- Having a trust that implements charitable giving can allow your family members to avoid probate.
- Your giving is significantly simplified when you engage in charitable planning.
Planning for the Road Ahead
- Taxation Benefits—Your decision on how much to give in charitable contributions can be affected by how those contributions will affect your taxes. While most people know they can deduct charitable donations on their income taxes, it goes far beyond this. Long-term appreciated assets like stocks, bonds, and real estate can be exempt from capital gains tax and can provide an income tax deduction for full fair-market value (up to 30 percent of your adjusted gross income). You can receive tax benefits by “bunching” multiple years’ worth of charitable giving in one year to surpass the itemization threshold. You may also choose a donor-advised fund that makes you eligible for an immediate tax deduction. Donor-advised funds can provide many benefits for organizing and planning giving while offering income, capital gains, and estate tax benefits.
- Charitable planning can help prevent depletion, ensuring sustainability—When charitable planning is not implemented, funds left to charities can be depleted rather than continuing on as you hoped or expected. It is also important that the charities you choose are sustainable—that is, they will continue for a long time as you expect.
- Charitable planning can prevent the selection of the wrong charities—Choosing the right charities and the purpose of those funds should be considered as a part of your charitable estate plan. Charitable giving should always align with your own values. What areas would you like to see real changes in? What charities share your views and values? How does the charity you choose do business? You can check out charity watchdog organizations such as Charity Navigator, which analyze and rates nonprofits, assessing financial health, accountability, transparency, and governance. Do your homework to ensure the charities you choose are the “right” ones, that will use your money to do good things.
What Are Your Raleigh Charitable Planning Goals?
- One-time distribution vs. long-term distribution—A one-time distribution to the charities of your choice could have implications that may or may not affect you. It is wise to speak to your Raleigh charitable planning attorneys from NC Planning to determine whether one-time distributions or long-term distributions will give you the best tax benefits. You will also want to decide whether you choose to have significant control over the amount of money you give and what it is used for or leave those decisions up to the charity. Your attorney will help you determine the best tax benefits while still achieving your goals, including savings on income taxes, estate taxes, capital gains taxes, and more when deciding whether one-time or long-term distributions are appropriate.
- Foundations vs. Funding—When considering charitable giving, you will need to determine whether you prefer giving directly to charitable foundations or would rather put your money into a fund that determines which charities to give to—with your input. Generally speaking, you have more control over where your money goes when you donate to a private foundation—assuming you’ve done your research about the foundation. When you give your charitable dollars to a fund, you are technically only making recommendations—the firm managers actually determine how to distribute the money.
- Sustainability and Charitable Return on Investment—The charities you choose must be sustainable while providing a good charitable return on investment. In this context, sustainability means the charitable foundation can use its resources in a way that prevents depletion. A non-profit must be able to sustain itself over the long term in order to fulfill the underlying mission. There must also be measurable results from investments—does your money actually do the good things you intend it to do?
What Methods and Mechanisms are Used in Charitable Planning?
- Trusts—Charitable trusts can effectively accomplish charitable gift-giving while offering more benefits as well. A charitable trust has a donor—the person who creates the trust and funds it through a transfer of assets. A charitable organization is one of the named beneficiaries, as well as the donor and/or their family members. The donor will designate a trustee to manage the trust assets, with the income and principal from the trust distributed according to the trust terms.
- Foundations—A foundation is an entity that supports charitable activities. This is done through grants made to organizations or individuals for charitable purposes. Some foundations engage in their own charitable programs or activities. The IRS classifies 501(c)(3) organizations into private foundations and public charities. A private foundation might be financially supported by a small number of sources or one source, but is usually funded by an individual, a family, or a corporation.
- Donor-Advised Funds—Donor-advised funds (DAFs) are charitable investment accounts that support specific charitable organizations you care about. You can take an immediate tax deduction when you contribute cash or other assets to a DAF. These funds are then invested for tax-free growth, allowing you to recommend grants to any public charity that is IRS-qualified.
What Are Mandatory Distributions from Retirement Accounts and How Do They Affect Charitable Planning?
Some retirement accounts require minimum distributions each year once the individual turns 72—or in some cases 70 ½. These mandatory minimum distributions can become a part of your charitable planning strategy. The mandatory distributions can be used as Qualified Charitable Distributions. A Qualified Charitable Distribution is a direct transfer of funds from your retirement account, payable to a qualified charity of your choice. A Qualified Charitable Distribution is counted toward satisfying your mandatory minimum distributions, so long as you meet certain requirements. Along with the benefits to the charity, a Qualified Charitable Distribution excludes the amount donated from taxable income—unlike regular withdrawals from a retirement account.
How NC Planning Will Help You Plan for the Road Ahead
If you are thinking about adding charitable giving into your overall estate plan, an experienced NC Planning attorney is ready to help you do that. Our Raleigh charitable planning attorneys have a deep understanding of charitable giving. After we have made a thorough evaluation of your financial situation and understand your goals, we will make solid recommendations that benefit you now and in the future. With offices in Raleigh, NC, and Cary, NC, we are ready to assist you in putting together a comprehensive estate plan that includes charitable giving. Contact us today—it’s never too soon to begin planning for your future.