There are many ways to benefit charities, either during or after your lifetime. Which way you choose can have different tax implications. Taking into account taxes with your charitable giving can ultimately increase the amount received by the charity and your loved ones as well. Below are five ways to incorporate a charitable gift to Scooter's Pals in your estate plan.
Disclaimer: The suggestions below are only conceptual summaries. It would be wise to have an attorney, qualified financial advisor or estate planner review your objectives, advise you about the the options, and prepare your estate documents.
Give Appreciated Stock
If you donate stock that has appreciated in value to a charity (i.e. Scooter's Pals) donation during your life, you'll avoid capital gains tax and instead receive a tax deduction equal to the market value of the stock. Plus Scooter's Pals can sell the stock without paying capital gains taxes because charities are tax exempt.
Charitable Rollover (QCD)
If you're over age 70½ with an IRA, you may donate up to $100,000 per year to Scooter's Pals directly from an IRA. Known as a Qualified Charitable Distribution a QCD will count towards the annual minimum distribution the IRS requires from IRA accounts. This can be a good strategy for individuals who don't need to use their IRA distribution to cover living expenses.
Bequest in Your Will or Revocable Trust
A very simple and direct way to benefit Scooter's Pals is to leave a bequest in your will or revocable trust. A charitable bequest can help reduce any applicable state estate taxes.
It is very important that your bequest includes our legal name and EIN, and the purpose for which you want us to use the funds. It's wise to state if your gift is to be used for "general purposes" or for a specific purpose that you detail – please contact us to confirm we'll be able to fulfill your objective.
Name Scooter's Pals as a Retirement Account Beneficiary
It is relatively simple to name Scooter's Pals as a beneficiary of all or a percentage of your non-Roth retirement accounts (IRA, 401(k), 403(b), etc.). The same rules for naming charities in your will or trust apply when completing the beneficiary designation form.
Because Scooter's Pals is a tax-exempt 501(c)(3), when your estate is settled we'll be able to withdraw the funds that you leave to us from the retirement account without having to pay income taxes on the withdrawal. Ask your financial advisor or estate planner to set this up for you.
Consider a Charitable Remainder Trust (CRT)
You can benefit both a charity and an individual person (such as a family member) by creating a charitable remainder trust (CRT) and naming that CRT as the beneficiary of your IRA.
In a CRT, the n person you choose will receive annual payments from the CRT for a period of time. When that period ends, the remaining amount will be distributed to Scooter's Pals. The reason you may want to consider this option is that the CRT is that the CRT itself is tax-exempt during its existence
Due to the many complex rules surrounding the creation and operation of a CRT, an attorney is essential to create it properly.
Excerpted from the Kiplinger Newsletter, March 2, 2020: