Timothy “TJ” Scott is an estate planning attorney whose practice aims to help families avoid court and conflict in their estate plan. TJ lives in Bloomington with his wife and five kids. He and his family are members at Holy Family Catholic Church in St. Louis Park. Below, TJ shares some things to consider when giving to charity, including what’s best to give now and what’s better to give as part of your estate plan.
Catholics are known for their generosity, both during their lifetimes and in their estate plans. We take the call to give seriously and share with those most in need. By planning your charitable giving, your gift can go farther and have an even bigger impact than you might think possible. Here are three tips:
01. Donate Appreciated Assets During Your Lifetime
This approach helps ensure your gift goes further than it might otherwise. By giving assets that have gained in value, you avoid adding the capital gain to your own tax return. Additionally, you can deduct the full fair market value of the appreciated asset as a charitable contribution.
02. Make Charity the Beneficiary of Tax-Qualified Retirement Accounts and Annuities
When an individual beneficiary inherits a tax-qualified retirement account, distributions from that account contribute to the individual’s adjusted gross income and are taxed accordingly. Also, under the SECURE Act, most beneficiaries must withdraw all funds within ten years This truncated window means that the effect on an individual beneficiary’s tax is magnified.
Unlike individual heirs, charities don’t pay income tax. If you leave part (or all) of a tax-qualified retirement account to a nonprofit, every dollar goes directly to the cause. This makes retirement accounts one of the most tax-efficient assets to donate.
03. Leave Real Estate and Vehicles to Charity
There are considerations beyond tax savings, too, such as ease of administration. For example, using a transfer on death deed to gift real estate to charity saves your executor the hassle of selling it. If the charity can use the space for itself, the donation becomes even more valuable.
A transfer on death designation on a vehicle works in a similar fashion. Your gift can be especially useful if the benefitting charity uses vehicles as part of its own operations.
Plan the Legacy You Want to Leave
Every estate plan is unique, and choosing the right assets to give can make a big difference. An estate planning attorney can help create a plan that reflects your values and maximizes your impact, reflecting the legacy you want to pass on.
The information presented above by the Catholic Community Foundation of Minnesota (CCF) is general and educational in nature. CCF and its staff do not provide individualized legal or tax advice. We recommend you consult with your attorney or tax professional regarding your unique personal situation.