You can look at estate planning in one of two ways. The bare-bones approach is to simply arrange for asset transfers to your loved ones after you are gone. However, you can take a more comprehensive approach and engage in the process of legacy planning.
Throughout your life, you have made an impact in many different ways. This influence can be felt even after you pass away if you carefully shape your legacy. Charitable giving can be one way to make a difference.
There are various different ways that you can set aside resources for the benefit of charitable causes. One possibility would be the creation of a private foundation.
We have all heard of private foundations that bear the names of some of the most wealthy families that we have in the United States, like the Rockefeller Foundation, the Ford Foundation, and the Bill and Melinda Gates Foundation. This can lead to the belief that you have to be a billionaire to start a private foundation.
In fact, this is not the case at all. There are thousands of private foundations in the United States, and the majority of them are funded with less than $1 million.
A foundation is just one way to leave behind a legacy of charitable giving. You can make direct contributions while you are alive, and a donor advised fund would be an option as well. With a donor advised fund, you make a single initial contribution, but you can ultimately support multiple different charities. This is an efficient way to support worthy causes and institutions.
Many people who want to give something back utilize charitable trusts, and there can be considerable tax advantages realized if you are exposed to the federal estate tax. This tax is applicable on asset transfers that exceed $5.43 million (this is the figure for 2015).
With a charitable lead trust, you name a charitable beneficiary, and you name a non-charitable beneficiary. You convey assets into the trust, and the IRS calculates the anticipated interest using the hurdle rate.
The charitable beneficiary receives distributions throughout the duration of the trust term. You could allow for the charitable beneficiary to receive the entire taxable value of the trust.
After the expiration of its term, the non-charitable beneficiary could potentially assume ownership of a remainder free of taxation.
There are also charitable remainder trusts that work in the reverse matter. You, or some other beneficiary, would receive income from the trust throughout the term of the trust, and a charitable beneficiary would ultimately assume ownership of the remainder.
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If you would like to learn more about charitable giving or any other legacy planning matter, send us a message through this page to set up a free consultation: Indianapolis IN Legacy Planning Attorneys.