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Make Charitable Giving Part of Your Estate Plan

Published June 1, 2015

Charitable giving is a way to benefit a good cause while also earning tax advantages. However, there are ways to make charitable gifts even more advantageous, both during one’s lifetime and as part of one’s estate plan.

One method is to donate appreciated securities. If you own stock that has appreciated over time, you may owe a long-term capital gains tax if you were to sell it, so it is not actually worth the full amount to you. However, if you donate the stock to charity instead, the charity will receive the full value when they sell it, and you can deduct the full value when you file your taxes. If you wish to use this technique with multiple charities, you may wish to set up a donor-advised fund.

With regard to your estate plan, you can save on taxes by using money in your individual retirement account (IRA) for any charitable bequests you wish to make. IRA withdrawals to human heirs are usually taxable, but charities can receive the full value without paying income tax. Then you can leave other assets to your heirs without them owing income tax. If you leave appreciated assets to your heirs, they can avoid paying tax on gains made during your lifetime.

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