What is Planned Giving in a Houston Estate Plan?

For many, philanthropy and charitable giving is an important part of their life. For these philanthropic individuals, it is common to leave assets at the time of their death in order to continue the legacy. However, at the same time, it is still important to minimize their tax burden both during their life and for their family after their passing. Utilizing a planned gift is a great option. A Houston planned giving strategy allows individuals to make larger gifts to charitable organizations than they would be able to from their ordinary income.

By definition, a planned gift is any major donation to a non-profit made during a person’s lifetime or at their death as a part of the person’s estate planning. These gifts include life insurance, real estate, personal property, and cash.

Types of Charitable and Planned Giving

There are three types of planned gifts: outright gifts, gifts that return financial benefits, and gifts payable upon the donor’s death. First, outright gifts are those that use appreciated assets, such as real estate and personal property, as a substitute for cash. Second, there are gifts that return income or other financial benefits to the donor in return for the contribution. Examples of this would include life insurance policy proceeds or retirement, where the donor is able to avoid income and estate taxes in exchange for their donation. There are also gifts payable upon the donor’s death, which often are incorporated into a person’s estate plan. Here, a person will often incorporate into their will or estate plan a dollar amount or percentage of their estate they would like a non-profit to receive after they have died.

An individual can gift items such as artwork, collectibles, equipment, or other tangible property to a charitable organization. In return, the person will receive a charitable deduction, equivalent to the item’s market, with no capital gains liability. Similarly, a donor can designate a non-profit organization as their life insurance policy beneficiary, where at the time of their death, the non-profit will receive the proceeds. This is often more than a person would be able to otherwise donate outright. Additionally, the donor’s heirs benefit from this gift as the life insurance proceeds given to the charity are exempt from the estate tax.

On the other hand, annual gifts, or membership dues for charitable organizations, do not have the same financial incentives. These gifts must come from the donor’s discretionary income, and although they may be budgeted for, they are not planned in the same manner.

Planned gifts not only are extremely helpful to the non-profit organizations that need donations to continue their philanthropic mission, but also to the donor who receives tax benefits. Because planned gifts can often be complicated to incorporate into a person’s estate plan, interested donors should contact an experienced estate planning attorney who can help.

Are You Interested in Including a Planned Gift as Part of Your Estate Plan?

If you or a loved one is interested in adding a planned gift to your current estate plan, or are interested in creating a Houston estate plan, contact the attorneys at McCulloch & Miller, PLLC. With a team of experienced lawyers ready to assist you, we will help meet your specific needs and ensure your estate plan is up to date and complies with relevant laws. To speak to one of our dedicated attorneys, and to schedule a risk-consultation, call us at 713-333-8900 today.

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