Developing A Strategy
There is far more to estate planning than simply completing a will. In fact, good planning means developing a strategy for protecting loved ones and heirs long after you are gone. Well strategized planning will also impact how one is remembered by future generations and how a legacy is perceived far into later generations. While not always ubiquitous, in truth charitable contributions and donations should comprise a key element of any long-term and far-reaching estate plan.
Investments In Charities
In fact, many experts are in agreement that there is indeed big value in carefully considered investments in charities. Perhaps most notable of all when discussing this subject is that of making a difference in the world. This along with leaving a memorable and positive mark on society and for family members is really priceless by any measure. In short, it comes down to leaving the world a much better place.
Several Preferred Causes
Improving tax efficiency and enjoying substantial tax credits are at the other end of the spectrum of the giving equation. Giving is a smart way to divert money (that would otherwise likely be taxed) to a good cause. In essence, this approach allows an individual to share with a favorite cause or several preferred causes rather then sending the funds into what some consider a bottomless tax coffer abyss. The numbers associated with giving often tell the story.
Modify Adjusted Gross Income
For example, charitable donations enable taxpayers under existing tax code to modify adjusted gross income by as much as 50%. The only stipulation is that contributions must be made to certain types of private foundations or public type charities. Consult with your financial advisor or tax advisor for more detailed specifics in this regard. As a bonus, many gifts that are given to other types of foundations or organizations may still entitle an individual to up to a 30% deduction.
Smart Charitable Contributing
When a high-net-worth individual is subject to either state or federal estate tax, any contributions made to qualified charities will typically not be subject to taxes. With a maximum federal tax rate of 40%, a large portion of financial wealth and assets would be consumed in the form of taxes. Smart charitable contributing can defer this to family members and future generations. The Bill and Melinda Gates Foundation is just one such example of a comprehensive giving strategy.
Philanthropy Is A Teachable Skill
In essence, reducing tax exposure and improving tax related efficiency can be as simple as giving. This approach to dynamic estate planning will also leave a lasting and (learnable) impression on family members and heirs as to the value of charitable contributions. Philanthropy is a teachable skill that benefits all involved. It provides for a more resourceful allocation of assets and wealth and helps those who may be less fortunate. In short, it is a win-win across the board.
Dividends Or Revenue
The importance of charitable contributions comes into particular focus when discussing the federal $5.434 million estate tax provisions. Positioning money in the right kind of trust will make funds more viable for a given number of years. Even other assets such as cash, real estate, bonds or stocks can be included in the right kind of trust. This is another case of where working with an experienced financial or tax advisor is key. As a note, “trust” residing assets that produce dividends or revenue can even be slated to contribute to a family foundation.
Insulated From Any Income Tax
Under the right conditions a trust can also pay an annuity to a family foundation. Also worth considering is that once a “trust” term has expired a tax-free contribution of assets can then be made to heirs or family members. This is an excellent situation because distributed assets are insulated from any income tax, estate tax or gift related taxes. The end result is that charities and families benefit when giving is designed to play a central role in smart and effective estate planning.
Disclaimer: Silver Rock Partners is a team of dedicated life insurance advisors who work closely with affluent families to secure the best possible life insurance product. The company also provides innovative tax efficient estate planning for those with a high net worth. Contact Silverrockpartners.com today to schedule a free initial consultation with an expert insurance advisor in New York. The firm works with licensed and experienced accountants and lawyers who have years of experience in the industry. Silver Rock does not offer tax advice or legal advice. The information contained here is for educational purposes only.