What is Charitable Planning?
Charitable planning allows you to support a cause or charity that is meaningful to you by making periodic or annual gifts throughout your lifetime. You can even look ahead to a time in the future when you may not be able to make these gifts yourself, but still want to support the causes you care about. Charitable planning can be an important part of your estate planning efforts, ensuring your charities are supported even after your death or in the event you become incapacitated. You will choose your charity or charities, usually those you feel most passionately about. Charitable planning is an important component to consider as a part of your legacy as well as an example for your loved ones to follow. New York charitable planning attorneys from Davidov Law Group will help you set up your charitable giving as a part of your overall estate plan.
What Do Charitable Planning Attorneys Do?
New York charitable planning attorneys can help you make efficient, effective gifts to the charities of your choice after your death. This provides an opportunity to contribute to something that is important to you while continuing your legacy. Estate planning attorneys not only draft wills and trusts, but they can also help you research the charities you are interested in, then can set up these charitable contributions through your will or trust. Language can be placed in your will or trust, directing your personal representative or trustee to make the charitable gifts you have chosen.
Your charitable planning attorney can help you answer such questions as how the gift will be deducted from your estate in relation to other gifts or bequests. Your attorney will also factor in costs for probate, after ensuring your spouse is taken care of. Following this, the estate pays these charitable gifts in the order in which they are listed. If a charitable gift happens to be the last gift to be paid and there are no assets left in the estate, then the estate cannot make the gift.
What are Your Goals for Charitable Planning?
Philanthropic planning can provide significant emotional and financial advantages. Your goal may be to pass your values regarding helping others on to family members or to receive tax benefits while doing good. Your goal could be to support your philanthropic goals while providing an income stream at the same time. Finally, your goal could be to remain engaged and informed about issues that are important to you.
You may wonder whether you should make a one-time charitable distribution or long-term charitable distribution? Which of these is more advantageous for you and your legacy? Your New York charitable planning attorneys from Davidov Law Group will help you determine whether a one-time distribution or long-term distributions is right for you and your unique situation.
There may be tax advantages to donating money to causes you care about, but this is not always your top priority. You may be inspired to share your passion for giving with your children or grandchildren or perhaps you want to make a gift to a cause that has had an impact on your life. Determining how you will structure that gift is extremely important and can best be achieved with the help of New York charitable planning attorneys.
What are the Methods and Mechanisms for Charitable Planning?
There are many different methods and mechanisms you can choose for charitable giving, including the following:
- Trusts—A charitable remainder trust incorporates a gift of cash or other property made to an irrevocable trust. You will receive an income stream from the trust for either a specific term or for your life, with the named charity receiving the remaining trust assets when the term of the trust is over. You will receive an immediate income tax charitable deduction when the CRT is funded based on the current value of the assets. These assets will eventually go to the named charity. A CRT can convert assets into a lifetime income stream or a retirement income stream. You can reduce your taxes through the CRT if it is funded with cash or when appreciated assets are used to fund the trust. You can also defer capital gains tax by using a charitable remainder trust while reducing or eliminating estate taxes. When you create your charitable remainder trust or charitable limited trust, you can establish the term, frequency, and amount of the distributions, how the distributed assets will be used, and when those assets will transfer from the trust to another entity. You will also control the scenarios under which the assets might revert to the trust or to your heirs.
- Foundations—You might choose to establish a private charitable foundation. You do not need to be a famous billionaire to establish your own charitable foundation, rather you simply need vision, assets, and proper planning. As with any organization, you must engage in the due diligence that ensures the mission of the foundation is properly pursued. This means the documents must be drafted properly, the organization must be operated according to the law, and you must achieve and maintain non-profit status. This type of foundation continues after you have passed away and you can create the foundation now, while you are alive, or it could potentially be created once you have passed away. A certain percentage of the assets you place into the foundation must be given to charity on an annual basis. You might choose to run the foundation, naming a successor, or you might name a family member, trusted friend, or professional to handle the operations of the foundation. You are allowed to pay the person who runs the foundation a reasonable salary. You can either leave the choice of charities that are supported by the foundation to the trustee, or you can make those decisions. Assets given to the foundation are effectively removed from your taxable estate.
- Donor-Advised Funds—To establish a donor-advised fund, you will make a contribution of personal assets—cash, real estate, stocks, etc.—that is irrevocable. This contribution is then recorded as a donation to the National Philanthropic Trust and you are immediately eligible to claim an itemized tax deduction for federal and state income taxes. You can structure your donor-advised fund in a way that best meets your charitable goals. You can recommend an investment strategy for the assets in your donor-advised fund, then the assets will be invested on those recommendations. Once your donor-advised fund is established and funded, you can recommend grants to the charitable organizations you believe in.
What are the Risks of Failing to Speak to New York Charitable Planning Attorneys?
When you fail to speak to New York charitable planning attorneys, you risk making significant mistakes that could cost you and could even end up failing to provide for the charities close to your heart. Below are some of the issues you could encounter:
- Taxation—There is certainly a financial incentive for Americans to give generously to charity in the form of the IRS income tax charitable deduction. The purpose of charitable tax deductions is to reduce your taxable income while simultaneously improving our world. Remember, however, that charitable contributions only reduce your tax bill when you itemize your taxes, and those itemizations add up to more than your allowable standard deduction. When you donate cash to a public charity you can generally deduct up to 60 percent of your adjusted gross income. Unfortunately, many people are unaware that the charity must be a 501(c)(3) public charity or private foundation. You must keep careful records of your contributions and may need to obtain a qualified appraisal to substantiate the value of your deduction. Your New York charitable planning attorneys can help you ensure the strategies are in place to avoid tax pitfalls from your charitable giving.
- Depletion—New York charitable planning attorneys can help you ensure that the funds set aside for charitable giving are not depleted, right now, in the future, or following your death. This requires a dedicated level of planning that few individuals can handle on their own. You want to ensure that your charitable giving is sustainable and that you continue to receive a certain ROI for your investment in charitable giving.
- Ongoing effort—Deciding which charitable foundations to support is only half the battle. Your charitable efforts and giving must be properly documented, requiring a time commitment. Your New York charitable planning attorneys can guide you through the process in the best way possible, helping you consider any potential pitfalls and deal with them before they occur.
- Selecting the wrong beneficiaries—Since only specific types of charities are allowed in charitable giving, your attorney can make sure you choose the ones that provide the most benefits for you and for the charity.
Other potential disadvantages regarding charitable planning include:
- They usually require large contributions to provide income for yourself and value to the charity.
- Income received from a charitable trust could potentially reduce the contribution left to your charity.
- Charitable trusts are usually irrevocable, meaning you cannot change your mind once finalized.
- Once your funds are placed into a charitable trust you no longer have control over those funds.
- If you plan on receiving relatively high payments from the charitable trust while you are alive, you risk leaving little or nothing to your chosen charity.
How to Select the Best Charitable Planning Attorneys to Preserve Your Legacy
New York charitable planning attorneys from Davidov Law Group, are well-equipped to help you through the maze of charitable planning. We will ensure that the ultimate decisions are good for you, your family members, and the charities you choose. We have an in-house Certified Financial Planner with a depth of experience in financial matters. We provide a holistic view of planning to ensure effectiveness with the goal of building strong client relationships prior to making our recommendations. We have co-authored a book that can give you further insights into charitable planning, titled “Keeping it in Your Family—Protecting Your Family and Leaving a Lasting Legacy.”
How Davidov Law Group Will Effectively Lead Your Charitable Planning
At Davidov Law Group our emphasis for your charitable giving is your legacy, along with the public good accomplished. As a family-owned firm, we have offices on Long Island, serving Nassau County, NY, and Queens County, NY, and want to help other families plan for their future. We are against one-size-fits-all planning, believing your family—and every family—has its own unique goals and concerns. Contact Davidov Law Group today to discuss your philanthropic planning strategy.