Are there financial benefits to charitable giving and bequests?

Estate planning questions often center on transfers to children, but a recent article reminds us that philanthropic giving is also a consideration for many Americans.

The rewards of including charitable transfers in one’s estate planning are typically not measured in quantitative terms. Nevertheless, there may also be financial advantages to charitable donations, especially for individuals nearing retirement. 

For starters, a charitable donation can reduce an individual’s tax burden in the form of a deduction on one’s tax return. With a reduced income, retirees may benefit from budgeting their liquidity, keeping an eye on the tax bracket that they will be in. A charitable donation may be one way to stay within a particular tax bracket.

Charitable giving may also be a strategy for avoiding some types of taxes. In the case of donating appreciated stocks or bonds, for example, a donor generally will not have to pay capital gains tax on the appreciation in value if he or she donates the securities to a non-profit organization or other approved charity. In addition, the tax deduction for appreciated assets may be around 30 percent. Thus, a charitable bequest may be a strategy for reducing the estate tax of high-income estates.

Anyone considering a charitable donation might benefit from a consultation with an attorney that focuses on estate planning. Our attorneys can help individuals plan the cash flow they will need in retirement and explain how any asset transfers, whether to a trust or a charitable organization, will impact that liquidity.

Source: Huffington Post, “Why Give Philanthropically? A Practical, Financial Viewpoint from Sharon Epperson,” Dr. Monique Y. Wells, June 2, 2015

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