November 15, 2018
Whether or not you’ve begun the estate planning process, you may have thought about what you want your legacy to be after you’ve passed. For many people, this means setting and achieving philanthropic goals during their lifetime and for years to come.
Although philanthropy is often motivated by tax reasons, charitable giving benefits many individuals and families from a legacy, personal fulfillment and generational-connection perspective, and is frequently discussed during the wealth management and estate planning process. Regardless of why you choose to give, you can easily incorporate your philanthropic goals into your estate plan with the help of your wealth advisor or estate planning attorney.
Choose a charitable cause that is important to you. The first step is deciding which cause or set of causes is meaningful to you and your family—and how many causes you can continue to support year after year. If you have a history of charitable giving, reviewing your past donations can help you discover where your passions lie.
Regardless of your philanthropic experience, certain questions can help you narrow your focus to direct your efforts. For example, what issues in your community concern you? What do you worry about for future generations? And, how do you wish to be remembered? While these questions are not all-encompassing, they can serve as a helpful starting point in identifying your passions, values and priorities—all of which can help you determine what you want to achieve with your estate plan’s giving strategy.
Select the assets to give. Once you’ve identified your philanthropic goals, you can begin the more technical discussion of which assets you’ll donate, either now or in the future. While cash donations are typically universally accepted, some more-sophisticated charities can accept other financial and physical assets, such as privately-held securities, real estate and even artwork.
Donating highly appreciated assets to charity can be an effective way to realize significant tax savings. However, many charities—especially the smaller ones—don’t have the know-how to accept gifts other than cash and stock donations. In these cases, how you choose to make the gift matters. For example, donor-advised funds and community foundations often have the expertise to accept less-liquid assets and can guide you through the process of making more complex donations.
Determine how to make the gift. The final step is determining which vehicles to use to gift your assets. While you can make charitable gifts in your will, you may not realize all of the tax benefits that other methods potentially provide.
As mentioned above, donor-advised funds and community foundations allow many options in terms of the assets you can donate and the charities you can support. However, a drawback of these giving strategies is that you may give up some control as to how your gifts are directed.
Alternatively, charitable lead trusts, charitable remainder trusts and private foundations are all effective ways to give while minimizing transfer taxes. It’s important to discuss which giving method is most appropriate for your financial circumstances with a professional who specializes in estate and tax planning, as certain solutions can be far more advantageous than others.
If you have philanthropic goals and wish to incorporate them into your estate plan, begin by talking with a trusted advisor who can provide practical guidance. Additionally, if you plan to make philanthropy a multi-generational effort, you may wish to include your family in your discussions. No matter your motivations for giving, philanthropy can be simultaneously personally fulfilling and financially beneficial, while allowing you and your family to leave a legacy that reflects your passions, values and priorities.
Cathy Schnaubelt is a senior wealth strategist for CIBC Private Wealth Management's Houston office, with more than 35 years of industry experience. In this role, Cathy is responsible for the development of integrated wealth management solutions and provides comprehensive estate and financial planning services to high net worth clients.
This article originally appeared on Forbes.com on Oct. 11, 2018.
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