Estate planning can on the surface seem like a rather straightforward and calculated financial matter. You inventory your assets, identify those who will be included in your inheritance plan, and consult with an estate planning attorney to find out how to transfer your assets in an optimal manner. Though the above is certainly necessary, there is another aspect to estate planning that looms like the proverbial 600 pound gorilla in the room.
In the Western Hemisphere people don’t like to talk about it much, but when you’re thinking about your estate plan you are thinking about your death. This is certainly profound on the deepest possible level, and when you engage in this type of thinking you may find yourself considering the broader part of your legacy for a number of different reasons. Many people who are looking death in the eye come to the conclusion that they would like to give something back as one of their final acts through philanthropic efforts.
Starting a private foundation is expensive and impractical for many people, even those with significant means. A very viable alternative would be to make contributions into a donor advised fund. These funds are housed within public charities and some for-profit financial companies. You can make a single donation into the fund and then advise the fund regarding grants that will be made from your contribution. In this manner you can direct resources to multiple charities through a single act of giving, and this efficiency is extremely appealing to many people.
As a reward for your generosity you gain tax advantages. You get a charitable deduction for the initial contribution into the fund for the year during which that contribution was made even if you make no grant recommendations during that year. In addition, appreciated securities contributed into the donor advised fund are not subject to capital gains tax. So by donating appreciated securities you are in essence choosing to give resources to a charitable cause that would have otherwise been absorbed by the taxman.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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