Legacy Tax Strategies

Taxes can play an important role in when and how you fund your Legacy gift.

The way charity fund transfers are taxed is specific to each country.

If you live in the United States, the estate tax only impacts those who are leaving behind more than $5.6 million per person, or $11.2 million per couple. Because of this, most people are no longer going to be affected by the U.S. estate tax (although those who are may end up paying the 40% rate).

Bequest, which are funded through either through the donor’s will or living trust and take effect at the time of death, are still the most common funding vehicle. For most people, bequests remain the ideal choice for Legacy gifts. However, as with all funding options, the way bequests are taxed may not be best choice depending on the specific situations.

In specific situations, for example, it could make sense to incorporate individual retirement accounts (IRA) beneficiary designation together with a charitable remainder trust. Generally speaking, your withdrawals from traditional IRA accounts are subject to standard income-tax rates. In certain instances, since most other assets will transfer to heirs at the time of death are won’t be subject to income tax, there may be a substantial tax benefit received by funding your philanthropic gift through your IRA in place of a bequest.

It’s always recommended that that you always consult the advice of your attorney or advisor when determining the best approach to Legacy Planning.

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