Charitable giving can be a philanthropic and strategic move for high-asset families. While the majority of California families do not have the net worth required for estate tax, those that do will face reduction of the estate due to taxation. Effective estate planning allots for strategies for reducing estate taxes, and charitable giving is one way that families can do that.
When an estate’s worth exceeds $5.45 million, or $10.9 million per couple, they become subject to taxation. According to Time Magazine, this will not affect the lion’s share of Americans, as 99.8 percent of households do not have access to this kind of wealth. Some have argued for eliminating the tax altogether, but others argue that this could have an effect on planned giving. If the tax is eliminated, individuals have no incentive to contribute large sums to charities, which are then able to do good in the world.
Luckily, most of the time individuals decide to donate to charity for philanthropic reasons, but the incentive still has significant power. When an individual does choose to use charitable donations to reduce the value of the estate, it must be done in the proper way so that the estate does not lose money from taxes. One option is to give to a charity through an IRA.
Reducing estate taxes is one of the goals of estate planning. A person still deciding how to allot the estate to their family and charities may benefit from outside help. In California, an estate planning attorney can offer guidance in the creation of a plan.
Source: clevelandjewishnews.com, “Estate tax motivates large estate owners to give“, Becky Rapse, Sept. 20, 2017