Leaving Your Charitable Legacy Now and in the Future
We still have a few days left in 2019, and there a lot of ways that you can give to your favorite charity. This blog discusses several different ways to give to charity for year-end and also discusses different ways to give to charities in your estate plan.
Five State Tax Credits for Arizona Tax Payers
First, before I discuss them, I want to mention the 5 state tax credits that Arizona tax payers have to support their favorite schools and charities:
- Public School Tax Credit – Maximum Credit: $400 for married couples filing jointly; $200 for all other fliers.
- Qualifying Charitable Organizations – Maximum Credit: $800 for married couples filing jointly; $400 for all other fliers.
- Qualifying Foster Care Charitable Organizations – Maximum Credit: $1,000 for married couples filing jointly; $500 for all other fliers.
- Certified School Tuition Organizations
Two separate tax credits are available for contributions to Certified School Tuition Organizations (“STO’s”) for scholarships for students in Arizona private schools.
- “Original” Individual Income Tax Credit (Maximum Credit: $1,138 for married couples filing jointly; $569 singles, heads of household, or married couples filing separate).
- “Switcher” Individual Income Tax Credit. This tax credit is available to individual taxpayers who donate the maximum amount allowed under the “original” credit and make an additional donation to a STO (Maximum Credit: $1,131 for married couples filing jointly; $566 singles, heads of household, or married couples filing separate).
Five Ways to Give to Charity This Year
Second, here are 5 ways that you can give this year to charity outside of the state tax credit gifts:
- Outright. You can always give a check or make an online donation to your favorite church or charity.
- Gifts of Appreciated Stock. In addition, if you have highly appreciated stock, consider giving the stock to your favorite charity, as the charity will not have to incur any capital gains tax when the stock is sold.
- Charitable Annuities. Next, depending on your age, consider a charitable annuity. This allows you to make a donation this year, get an income tax deduction this year, and receive an income stream over your lifetime.
- Make a Qualified Charitable Distribution from Your IRA. If you are at least 70 ½, then you can make a donation out of your IRA directly to the qualified charity of your choice without paying any income taxes.
- Set Up a Donor-Advised Fund. Not sure where you want to donate, but want to get the income tax deduction in 2019? Consider opening a donor-advised fund in your name to receive the donation this year and figure which charity or charities to choose next year. Check with your local community foundation or with Charles Schwab or Fidelity for details.
Five Ways to Leave a Charitable Legacy in Your Estate Plan
Finally, you can also include a charitable gift in your estate plan. Here are 5 ways for you to leave a charitable legacy in your estate plan:
- Make an Outright Gift in Your Will or Trust. When you pass away, give a certain dollar amount or percentage of your estate to your favorite charity.
- Establish an Endowment for Your Favorite Charity. An endowment is a restricted fund established to invest the principal and allow the income only to be distributed to your favorite charity each year. Once established, this endowed gift will keep giving every year to that charity forever.
- Name Your Favorite Charity as the Beneficiary of Your IRA or Life Insurance Policy. Instead of naming your children, grandchildren, or another beneficiary, consider naming your favorite charity instead. For IRA’s, there is an added benefit, because the charity does not pay any income taxes on the distributions.
- Name Your Donor-Advised Fund as the Beneficiary of a Portion of Your Estate. Not sure which charity to choose after you are gone? Consider naming your donor-advised fund as the charitable beneficiary. After you are gone, the successor advisors of your donor-advised fund can make the decision based on your wishes.
- Charitable Remainder Trusts. There are several variations of these trusts, but generally these types of trusts allow the donor to donate the principal to a charity in trust, with an income stream distributed out to an individual for life, and the balance distributed to charity after the donor’s passing.
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