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Optimize Charitable Giving through Estate Planning Services

03.02.2015 by Law Firm of Seglund Gabe Pawlak & Groth in Estate Planning

Estate planning services can help people structure donations to support an important charitable cause while optimizing tax deductions for themselves.

With the New Year ahead of us, many people take a moment to re-evaluate the way they are living and their goals for the future. Often, this is a time to refocus on health, family, and our interactions with others. The New Year is the perfect time for implementing new plans and taking steps to becoming a better person.

Do you want to become more involved with your community? Have you always wanted to support a greater cause? Many people feel the urge to help make a difference in the world but do not know where to start. However, with some careful estate planning, you can set up a charitable giving process for the program or project of your choice. Whether you want to help provide clean water to third world countries, fund medical research, or support a community center in your neighborhood, there are effective ways for structuring your donations so that everyone benefits.

Getting Started

Once you have identified the cause of your choice, you need to consider what your intended contribution will be. Do you plan to make ongoing monetary donations, are you considering funding a specific project, or do you have assets or services to donate? If you can, it is helpful to contact the charity or non-profit you have selected and ask what needs the program has that you can best support. By working together with the administration team and your financial planner or estate planning attorney, you can structure your donation so that you can optimize the available tax deductions and ensure the program you donate to is able to optimize your gift to meet their needs as well.

There are many ways you can give to a non-profit. While most people initially consider a one-time cash donation, there are many other creative ways to make a difference.   For example, you can provide:

  • Services – Do you own a company or are you capable of providing services that the program can use?   Maybe you can spend a few hours a week offering service or free labor associated with the cause. Perhaps you want to set up a service program for your employees or within your company that provides incentives for workers to donate time and service to an important cause.
  • Personal Property or Assets – When you provide a donation to charity, you are usually entitled to a federal income tax deduction equal to your gift. However, when you donate a long-term capital asset that has appreciated in value, you may be entitled to a tax bonus. You should speak with your estate planning lawyer to learn more about this process but basically you can pay a long-term capital gain on the sale of a long-term asset and then pay the remainder of the appreciated funds to the charity of your choice without owing additional taxes. Or, you may choose to donate the assets directly to the charity and receive the federal income tax deduction for the fair market value of the assets. Then, the charity has the option to sell the assets without having to pay additional capital gains taxes on them.
  • Real Estate – You may consider donating a piece of property, home, or other building to a charity of your choice. Just as with personal property, you have the option to take the federal income tax credit for the fair market value of the land/property if you donate it directly to the non-profit. In this case, you are not responsible for capital gain taxes on the past appreciation. This helps reduce the amount of your estate that is taxable and provides the charity of your choice with a substantial donation that can be used for a myriad of purposes.
  • Trust Funds – If you want to provide cash donations to a program, a trust fund may be the best way to go. Your estate planning lawyer can assist you with the details. Trusts provide flexibility over time and allow for continued donations even after your death. You will receive an income tax deduction when you place your donation in the trust. The amount is based on the charitable part and depends upon the type of funds/assets/income that the trust is tied to.

Speak with a professional estate planning attorney to learn more about creative ways to support charitable causes. The only limit is your imagination, and with careful planning, your generous gift will provide you with positive tax deductions while benefiting an important cause.

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Our experienced attorneys are committed to providing our clients with the guidance and support that they need to resolve their estate planning issues. With over five decades of serving clients in Southeastern Michigan, the attorneys of Michigan Legal Solutions (Seglund Gabe Quinn Elowsky & Pawlak, PLC) have the knowledge and resources to resolve your issues.

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