A Legacy of Generosity: How to Include Charitable Giving in Your Estate Plan

The estate planning process can be complex and overwhelming, from navigating beneficiary designation forms, to planning a will or trust, designating a health-care proxy and durable power of attorney and considering how to apportion your life’s earnings to the individuals and causes you care about.

Professionals often advise that you start with considering what you want to leave behind as your legacy. A gift in your will or estate plan can make a powerful difference to an organization or cause you wish to support and leave a legacy of generosity in your name. See below for some strategies to help you determine how best to include charitable giving into your estate plan.

1. Leave Money or Property in Your Will

Naming a charitable organization like Front Porch Communities Foundation as the beneficiary in your will or living trust is one of the simplest ways to make a gift through estate planning. Plus, it can lower the amount of your taxable estate and any estate taxes.

2. Designate a Charitable Organization as a Beneficiary of an IRA

You can name an organization like Front Porch Communities Foundation as the beneficiary of all or a percentage of your IRA. This provides the assets from the retirement account to a cause you care about free of income tax. (If you leave an IRA to an individual, they will have to pay taxes on the withdrawals.)

3. Use Life Insurance or a Charitable Gift Rider

You can name a charity as a beneficiary on your insurance policy. Charitable giving riders are another option. They pay a percentage of the policy’s face value to a qualified charity.

There are also ways to establish a legacy gift during your lifetime, often with financial benefits for you:

1. Gift Appreciated Stock

Donating appreciated stock is one of the easiest ways to make a significant gift. When you donate appreciated stock that you have held for more than one year (and thus qualifies for long-term capital gains treatment), you can avoid paying capital gains tax on your holdings.

2. Make a Qualified Charitable Distribution from Your IRA

You can give up to $100,000 per year to a charity straight from your IRA, and the amount can count toward your required minimum distributions (RMDs). This type of gift allows you to exclude the amount from your income so you don’t pay taxes on it.

3. Create a Charitable Gift Annuity

A charitable gift annuity (CGA) allows you to make a gift to your favorite charity and receive stable fixed payments for life in return. When you die, the remainder of the gift annuity goes to the cause you care about. New since 2023: you can create a CGA with funds from your IRA.

4. Create a Charitable Remainder Trust

Charitable remainder trusts are irrevocable trusts that let you donate assets to the Foundation and receive an annual income for life. Charitable trusts can help bypass capital gains taxes that will result from the sale of highly appreciated assets like real estate or securities. Charitable trusts can also continue to pay income to heirs after your death. When the charitable trust payment period ends, the remainder of the charitable trust goes to the cause you care about.

If you are interested in learning more about how you can incorporate charitable giving into your estate plan, please contact the Front Porch Communities Foundation at 818.254.4096 or fpcf@frontporch.net.