When planning your estate, it’s likely that you have reflected on the legacy that you will leave behind after you pass away. While it’s likely that you will want to leave a large portion of the estate to immediate family members, you may also have a charity that is close to your heart.
Leaving a portion of your estate to a charity is a worthwhile act that will not only help you leave a meaningful legacy, but it may also benefit your estate from a tax perspective. The following is an overview of the tax benefits that commonly come with the creation of a charitable trust.
Income Tax Deductions
When you donate to a charitable trust, you are able to spread the value of this donation over five years and deduct it from your income. There will be a limit to the amount you can deduct if you expect to get a return on investment, however.
Estate Tax Benefits
If your estate is large enough to be subject to estate tax at the end of your life, you may want to try to reduce the value of your estate by setting up a trust. Doing this may help you to avoid estate tax altogether.
Avoid Capital Gains Tax
If you are going to be paying capital gains tax on an asset you are selling, you could avoid this tax by donating the asset to a charitable trust.
If you are starting to plan your estate and you want to make a charitable donation in a financially lucrative way, setting up a charitable trust could be a great strategy for you.