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How to include charities in your estate plan

On Behalf of | Mar 19, 2022 | Estate Planning |

Including charities in your estate plan in New York could reduce how much you pay in taxes. Giving to causes you care about may be a satisfying use of your money and assets after your death.

Appreciated stocks

Estate planning allows you to transfer your appreciated stocks to charities. Charities won’t have to pay capital gains tax on them. If you were to sell the stocks, then you’d pay capital gains tax.

Qualified charitable distribution from your IRA

Through a QCD, you could rollover your IRA to charities. You must be at least 70.5 years old to do this. Estate planning law also sets a cap at $100,000 per year on how much of your IRA you can roll over to charities. A QCD counts toward your required minimum distribution. The required minimum distribution goes into effect once you turn 72 regardless of what you do with the money.

Set up a charitable remainder trust

You could set up a CRT to benefit both an individual and a charity. Once the individual’s interest in the CRT ends, the remainder goes to the assigned charity. The law stipulates that the charity must receive a certain percentage when you fund the trust.

During its existence, a charitable remainder trust is exempt from taxes. There are limitations on how long it can last and how much the individual can receive from it. Upon your death, the CRT has a partial estate tax deduction based on how much you’re giving to the charity. Individuals who receive annual payments from a CRT, however, must still pay income tax on them.

Assign a charity as one of your beneficiaries

If you name a charity as one of your beneficiaries for a non-Roth retirement account, the charity could withdraw money from it without taxation. It’s an easy way to give to a charity without paying taxes on your withdrawal.

You have several options in passing on part of your estate to charities. Following these methods could help reduce how much taxes you pay when passing on your wealth.