Charitable Giving and Charitable Legacy - Estate Planning Part 5 of 6

In this episode of Protecting and Preserving Wealth, we continue our estate and legacy planning series by focusing on charitable giving and charitable legacies. Charitable giving occurs during one’s lifetime, while a charitable legacy ensures that assets are left to charitable organizations after death. Understanding the right tools and strategies can maximize benefits for both the donor and the recipient.

We begin with Qualified Charitable Distributions (QCDs), which allow individuals over 70½ to donate directly from their IRA to a charity, up to $108,000 in 2025. This strategy provides a tax-free way to fulfill charitable goals while reducing taxable income. A new provision under SECURE Act 2.0 allows a one-time $54,000 QCD into a charitable remainder trust (CRT) or a charitable gift annuity, offering an income stream while ultimately benefiting a charity. This change provides flexibility for individuals seeking both income and charitable impact.

Next, we explain donor-advised funds (DAFs), a powerful tool for managing charitable giving. By contributing cash, securities, or other assets to a DAF, donors receive an immediate tax deduction while maintaining control over future distributions to charities. This approach allows individuals to donate highly appreciated assets without triggering capital gains taxes and can be used to engage family members in philanthropic decision-making. Importantly, DAFs do not require annual distributions, allowing funds to grow tax-free for future charitable giving.

When planning a charitable legacy, we emphasize the importance of proper beneficiary designations. IRAs and tax-deferred annuities are ideal for charitable bequests, as charities receive the full value tax-free. Naming a charity as a contingent beneficiary allows a surviving spouse to disclaim assets if they are financially secure, ensuring tax-efficient wealth transfer.

We also discuss common mistakes in charitable estate planning. Many attorneys simply include charitable gifts in a trust without considering tax-efficient alternatives. Instead, leaving tax-deferred accounts like IRAs to charities ensures maximum tax savings, while preserving tax-advantaged assets for heirs. Additionally, donating highly appreciated assets before death allows donors to secure a tax deduction and avoid capital gains taxes. Conversely, failing to sell depreciated assets before death results in a lost tax loss, underscoring the importance of strategic loss harvesting.

Finally, we stress the need for personalized planning. Charitable giving strategies vary based on individual circumstances, and tools like charitable remainder trusts (CRTs) and donor-advised funds can be tailored to meet both philanthropic and financial goals. Seeking professional advice ensures that charitable intentions are met in the most tax-efficient way.

In our next episode, we’ll explore the Two-Generation Tax-Free Legacy Plan, a strategy for preserving wealth across generations. To learn more or discuss your estate planning needs, visit Hosler Wealth Management or contact us directly.

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