Charitable Giving Bequests | Dallas Texas Estate Planning LawyerYou want to leave something to a cause that matters to you after you are gone. No matter how big or small your donation will be, it is a good idea to incorporate your wishes into your estate plan. Relying on family members to follow your instructions to contribute to a charity is not usually a good idea. They may not agree with your choice of charity and refuse to follow through, or they might simply forget to do it in the aftermath of losing you. The good news is that there are ways to make sure your legacy is secured. Charitable donations can be included in even the most basic estate plan.

How to Support a Worthy Cause After You Are Gone

Leaving a donation to a charity could be as simple as including a statement in your will naming the organization and specifying how much you want to give. You could also provide details about how you want the funds to be used by the charity. For example, you could state that you want to leave $1,000 to your local humane society to purchase items from their wish list. If your assets are held in a revocable living trust, you would include your wishes for charitable giving in the trust documents. It’s a good idea to contact the organization when you make your estate plan to find out the best way to make a bequeath.

If you have significant resources and would like to leave a substantial legacy to an organization or several organizations, you might want to consider creating a charitable trust. There are two basic types of charitable trusts.

Charitable Remainder Trust (CRT)

A charitable remainder trust is a type of trust in which the donor contributes assets to the trust, retains an income stream from those assets for a specified period (usually the donor's lifetime or a set number of years), and designates a charitable organization as the ultimate beneficiary of the remaining assets after the income period ends. The income generated from the trust can either be a fixed annuity amount or a percentage of the trust's value.

Charitable Remainder Trusts offer several key advantages, including:

Income stream

CRTs provide the donor with a regular income stream during their lifetime or for a specific period of time. Whatever money is left in the trust when the donor dies is given to the charitable cause named in the trust, allowing the donor to leave a meaningful legacy.

Tax benefits

Donors can receive immediate income tax deductions based on the present value of the remainder interest that will eventually go to the charity.

Capital gains tax avoidance

When appreciated assets are donated to a CRT, the trust can sell them without incurring immediate capital gains tax.

The main disadvantage of CRTs is that they are a type of irrevocable trust, meaning once assets are placed in the trust, you can’t take them back out. They can also be expensive to set up and manage, and you will have to be comfortable with giving up control of the assets while you are still living. A CRT is suitable for individuals who want to support charitable causes while maintaining an income stream during their lifetime. It can be beneficial for individuals with appreciated assets who desire tax deductions and wish to avoid immediate capital gains tax.

Charitable Trusts

A charitable trust is a legal entity created to hold and manage assets for the benefit of one or more charitable organizations. Unlike a CRT, a charitable trust does not provide an income stream to the donor or their beneficiaries. The trust's assets are solely dedicated to the charitable cause specified in the trust document.

Advantages of charitable trusts include:

  • Worry-free charitable giving. Once you have established and funded the trust, you won’t have to worry about whether you will be able to support the cause or causes you care about. Upon your death and according to the terms of the trust, your donation will be made without going through probate or other heirs.
  • Flexibility. Charitable trusts can be tailored to support specific charitable purposes, such as education, health care, or the environment.
  • Tax benefits. Donors may receive income tax deductions for the value of their charitable contributions.

Charitable trusts do not provide an income stream to the donor or their beneficiaries, and once assets are transferred to the trust, the donor generally has limited control over their use and distribution. However, it could be the right tool for some people who want to establish a lasting charitable legacy and support specific causes.

An estate planning attorney can help you understand all of your charitable giving options in Texas.

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Lori Ashmore Peters
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Helping Dallas, Park Cities, Highland Park Texas Area Families with Estate Planning, Probate & Litigation