Charitable giving holds a special place in the hearts of many Iowans. When you plan to support causes and organizations that matter to you, it can create a lasting impact for years to come. Estate planning can help you make the most of your philanthropic gifts by aligning your financial legacy with your ideals and potentially gaining tax benefits.

The Importance of Including Charitable Giving in Your Estate Plan

Giving back to the community is important to many people in Iowa, and including charitable donations in your estate plan ensures that your generosity continues after you’re gone. It’s not just about giving, though. Using charitable donations to manage your assets can also bring financial benefits for you and your beneficiaries.

The charitable contributions you make through your estate can significantly reduce estate taxes and income taxes for your heirs. More importantly, it allows you to leave a lasting legacy, supporting causes and organizations that align with your beliefs and values.

Understanding Your Options for Charitable Donations

Estate planning offers a variety of methods for contributing to charities, each with its advantages. Whether you’re looking to make a sizable donation or simply leave a portion of your estate to a favorite cause, understanding your options is crucial.

Establishing Bequests in a Will or Trust

One of the simplest and most popular ways to leave a charitable donation is through a bequest in your will or trust. You can specify a certain amount of money, a percentage of your estate, or specific assets like real estate or stocks to go to a charity of your choice: an option that allows you to maintain control of your assets during your lifetime while ensuring that your chosen cause benefits after your passing.

Beneficiary Designations

Another option to maximize charitable donations is through beneficiary designations. Many Iowans have retirement accounts, life insurance policies, or annuities that allow you to designate a beneficiary. Instead of leaving these assets to family members, you can name a charity as the beneficiary, which can have the added advantage of bypassing probate, allowing the charity to receive the assets more quickly and without the court’s involvement.

In addition to speeding up the process, setting up beneficiaries can give you significant tax benefits. When you leave a retirement account, such as an IRA, to a loved one, any withdrawals may be liable to income tax. However, if the account is left to a charity, those taxes are generally completely avoided, increasing the value of your donation.

Gifting Appreciated Assets

If you hold highly appreciated assets, such as stocks, real estate, or artwork, donating these assets directly to a charity through your estate plan can have significant tax benefits. By gifting appreciated assets instead of selling them first, you can avoid paying capital gains taxes while still receiving a charitable deduction for the full fair market value of the asset. This strategy is particularly beneficial for Iowans who have seen substantial appreciation in their investments and want to maximize the impact of their donations.

The Tax Advantages of Charitable Giving

Maximizing the tax benefits of charitable giving is one of the main reasons people incorporate donations into their estate plans. Charitable donations made through your estate plan can help reduce the size of your taxable estate, potentially lowering or eliminating estate tax liability.

If you make charitable gifts throughout your life, you may be able to claim income tax deductions. These deductions can be especially beneficial if you’re in a high tax bracket, as they help offset income from other sources, such as retirement funds or investments.

Iowa also offers unique tax benefits for charitable giving. For example, the Endow Iowa Tax Credit program provides a 25% state tax credit for gifts made to qualified endowments in Iowa, which, when combined with federal income tax deductions, can substantially reduce the net cost of making a charitable gift.

Planning for Your Legacy

When creating an estate plan that includes charitable donations, it’s essential to think carefully about your legacy. Charitable giving is not just about the financial impact—it’s about passing on your values and ensuring that the causes you care about continue to thrive.

Working with an experienced estate planning attorney in Iowa can help you navigate the legal complexities and ensure that your charitable goals are met. They can help tailor your estate plan to include the right mix of giving strategies, whether through bequests, trusts, or beneficiary designations while keeping tax considerations in mind.

Additionally, you should review and update your estate plan often to reflect any changes in your charitable interests, personal circumstances, or financial situation. As new laws and tax rules come into effect, it’s essential to adjust your plan to take advantage of any new opportunities for maximizing your charitable contributions.

Seek Legal Guidance

Maximizing charitable donations through your Iowa estate plan is a powerful way to create a legacy that aligns with your values and supports the causes you care about most. Whether through bequests, trusts, or beneficiary designations, there are many strategies to explore, each with its unique benefits.

By working with professionals and keeping your estate plan up-to-date, you can make a lasting difference in the world while also securing financial benefits for yourself and your heirs. Call Scott Shoemaker & Associates at 319-379-2007 to schedule an initial case evaluation with our team. We’ll help you plan for your legacy and show you how you can use your estate to make a positive impact on the community and beyond.