How to Minimize Estate Taxes Through Charitable Donations
If you would like to leave behind a positive legacy and reduce or eliminate the taxes your estate owes after you pass away, making a contribution to a charitable organization or cause is a great way to do just that.
The following are a few tips to help you minimize your estate taxes through charitable donations:
- Give while you’re still alive, as well: While leaving behind donations after your passing is admirable, you can further maximize the tax benefits by giving as much as you can every year. The income tax breaks you receive from lifetime donations can help you ultimately give more in charitable donations after your passing.
- Allow beneficiaries to disclaim some part of their inheritance: You may include provisions in your estate plan that give your children the option to disclaim part (or all) of their inheritance, passing it on to a charity instead. Any disclaimed inheritance that goes directly to charity will not be subject to taxation.
- Create a charitable trust: A charitable lead trust must donate a certain amount of money to charity every year during a specified period of time, with the rest ultimately going to your heirs. You may set up these trusts in a way that ensures there will be no estate or gift taxes on the remainder your beneficiaries receive. Charitable remainder trusts also allow you to put certain assets into the trust and then sell them to defer the tax that would impact them. Charities get a certain percentage of the value of the charitable remainder trust.
For further information and guidance on how you can use charitable donations to support important causes and reduce your estate tax obligations, meet with an experienced St. Petersburg estate planning lawyer at BaumannKangas Estate Law.