How To Reduce Your Estate Taxes With Charitable Donations

St. Helena, Sonoma, and Calistoga estate planning lawyer

If you have an interest in leaving behind a legacy that is positive and to eliminate or drastically reduce the taxes that your estate will owe once you have passed away, the act of making contributions to charitable causes or organizations is the ideal way in which to do this.

Estate planning is a highly valuable portion of your financial plan. For this reason, avoid neglecting this part of managing finances, and you should already have an idea of what you would like to leave as well as to whom. Carefully planned estate plans will prevent any misunderstandings between your chosen heirs as well as reduce the estate taxes which may come with it.

Here are a few important tips to assist you in reducing your estate taxes using charitable donations:

  1. Give While You Are Still Alive

While the act of leaving donations behind once you have passed is admirable, you can also maximize your tax benefits by giving what you can each year. Income tax-breaks that you receive over lifetime donations can assist you in giving more in regards to charitable donations once you have passed.

  1. Create A Charitable Trust

The Charitable Lead Trust is forced to donate a specific amount to charities or a charity each year over a particular period, while the rest will go to the heirs you have chosen. You can set up these types of trust in such a way that will make sure there is no gift or estate taxes on the left over funds that your beneficiaries will receive. The Charitable Remainder Trust allows for a way to place particular assets into a trust followed by selling these assets to defer taxes that would usually impact them. The charity or charities will receive a set percentage on the overall value in regards to the Charitable Remainder Trust.

  1. Charitable Gifts

Any of the assets that you decide to gift to a cause or charity is excluded in regards to your taxable-estate. Provided the recipient happens to be a qualified 501(c) 3 organization, there will be no payment of estate taxes on these donations. There are no limits in place on the amounts you would like to donate. If you have decided to leave the entire estate to a charity, you will not be liable for any estate taxes.

  1.  Annual Lifetime Gifts 

You are permitted to gift set-out amounts in regards to your assets to one other person every year without having to incur estate or gift taxes. By taking advantage of these provisions, you can significantly decrease the overall taxable amount of your estate over time. This is also a way to offer financial assistance to any of your “current” beneficiaries. Relatives and close friends are excellent candidates for this form of gifting method.

  1. Q-TIP Trusts

This trust type provides a way to bequest an income stream from a trust onto your spouse once you have passed, followed by having assets in this trust passed onto what is known as an irrevocable beneficiary that can be charitable cause or organization. This is the ideal way to still provide for a spouse as well as still make sure the assets within the trust will go to the beneficiary that you have chosen.

Schedule Your Consultation with Our Experienced California Estate Planning Attorney

Celaya Law is an estate planning law firm in Napa, California. Attorney Anthony Celaya helps families in Napa, Sonoma, St. Helena, Calistoga, and the surrounding areas with setting up wills and living trusts, special needs planning, asset protection, probate administration, business law, and retirement planning.

Schedule a planning session with our experienced Napa attorney today to learn how we can help you and your family: (707) 492-3112.