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What are the benefits of charitable giving via an estate plan?

On Behalf of | Oct 13, 2023 | Estate planning

One of the many reasons that people put together an estate plan is that they have wishes that extend beyond just passing assets to their closest family members. Leaving some of their personal resources to a charitable cause is a common motivator for testators. They may want to contribute to a scholarship fund or a facility that helps provide shelter for victims of domestic violence, for example. People also often choose to support causes ranging from environmental charities to whichever church they attended in their golden years.

Other people may question the motives behind someone’s decision to prioritize charitable causes over their closest relationships. Many people can leave resources both for the people they love and the causes that matter to them. It is possible to do both without negatively impacting those who expect to inherit from an estate. There are a variety of possible benefits people can derive from making charitable contributions through an estate plan, but the two below are arguably the most powerful incentives to do so.

Leaving a meaningful legacy

Providing resources for loved ones is a valuable legacy, but those who know the testator may sometimes take their inheritance for granted. Outside parties that receive resources from someone’s estate are more likely to be grateful and to memorialize the individual making the contribution posthumously. In some cases, a donation will lead to a scholarship named after someone or the installation of a new bench at a park with a plaque memorializing them. For many people, having an impact on the broader world that expands their personal legacy is the biggest reward for making a charitable contribution through an estate plan.

Diminishing tax liability

Larger estates could sometimes have tax obligations. Those leaving behind millions of dollars’ worth of property could end up triggering estate taxes. Such taxes can significantly diminish the value of someone’s estate, sometimes by as much as 40% or even more. The decision to make charitable contributions with personal resources can reduce the total value of the estate and potentially diminish or eliminate estate tax responsibilities.

Careful planning, possibly including the creation of a trust, may be necessary for those with very specific legacy goals, including charitable contributions. Evaluating the benefits of different estate planning choices and seeking legal guidance accordingly can help people establish the most meaningful and sizable legacy possible given their circumstances.