holiday-charitable-giving-guide

7 minute read

The Holiday Charitable Giving Guide

Did you know that the majority of charitable giving happens over the holidays? Get your holiday charitable giving guide here.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

Nonprofit organizations rely heavily on charitable giving to execute their mission and vision. Whether it be providing food and shelter to those in need, rehoming animals, or building awareness around an important cause, there are so many options to choose from.

The holidays are also associated with the season of charitable giving, which is kicked off every year with Giving Tuesday. According to Donorbox.org, nonprofits raised a whopping $3.1 billion on Giving Tuesday last year. The majority of nonprofits generate 47% of their online revenue during the final week of December, with 20% specifically on December 31st.

If you're interested in this topic, keep reading. This is Trust & Will's ultimate guide to charitable giving, including for those who are interested in making charity a part of their legacy, this holiday season.

What are the benefits of giving back?

Charitable giving is an amazing cycle that benefits both the donor and the recipient. When we give back, we not only assist those in need, but we also experience a wonderful boost in our mental and emotional wellbeing. The power of giving back lies in its ability to promote empathy, foster a strong sense of community, and ignite a passion for helping others.

Here are a few benefits to giving back in the form of charitable giving:

  • Enhances personal growth: Charitable giving can enable you to step out of your comfort zone and develop a more expanded perspective of the world.

  • Promotes gratitude: It can help you appreciate what you have, boosting your sense of gratitude.

  • Boosts mental health: Giving back has been known to improve mental health by inducing feelings of happiness and satisfaction.

  • Strengthens community: Donating time or resources to local charities can help in strengthening the community. By interacting with like-minded people, it can also help you expand your personal network and sense of belonging.

  • Teaches compassion: Regular charitable giving can instill a sense of compassion and empathy, especially in young minds.

  • Tax deductions: Charitable donations can provide tax benefits, making it a financially sound decision as well.

You may be wondering why charitable giving is particularly synonymous with the holidays. Of course, it's a great thing to give back any type of year. The holidays are a special time of year when we all feel a little extra love, joy, and togetherness.  And what better way to extend those warm feelings than by helping those who are less fortunate? By giving back during the holidays, we can make a real difference in the lives of those who might otherwise feel isolated or neglected. It's all about reinforcing our community and creating a collective atmosphere of goodwill and compassion.

And let's not forget that the end of the year is a time for reflection. When we give during the holidays, we have a chance to think about our own privileges and express gratitude by giving back. It's so fulfilling to know that our act of kindness is bringing joy to someone else's life. There's also the added bonus of tax deductions! Donations made within the calendar year can be claimed on our year-end tax returns. So it's a win-win for everyone involved.

What is a charitable gift vs. planned giving?

Charitable gifts and planned giving are mechanisms that allow you to donate to non-profit organizations, not only during your lifetime but also after your demise, ensuring your generosity persists. But what's the difference?

A charitable gift can be made at any time. A planned gift is a charitable gift as well, but one that is arranged today but allocated to a future date. This predominantly takes place as a part of the donor's estate plan. Planned giving, also called charitable bequests, are often facilitated through various types of Trusts, can provide beneficial tax breaks, income streams, and the ability to establish a lasting legacy. We'll go over the numerous benefits of making charitable bequests through your estate plan in the next section.

Benefits of charitable bequests in an estate plan

Planning for the future can often involve complex decisions and considerations, particularly when it comes to your estate. Regardless, one question you should be asking yourself throughout is, "what kind of legacy do I want to leave?"

Many individuals wish to have a legacy of generosity, and the way that they do this is by incorporating charitable giving into their estate plan. In simpler terms, this means that you leave instructions in your estate plan to donate to an organization of your choice after you pass away. Your kindness and compassion can continue to make a difference after you're gone.

Here are a few benefits of including charitable bequests in your estate plan:

  • Extended philanthropy: Such bequests allow you to continue supporting causes and organizations you care about long after your lifetime.

  • Tax efficiency: Charitable contributions can reduce the taxable value of your estate, potentially resulting in significant tax savings.

  • Flexibility: You have the freedom to choose the type of gift (cash, securities, real estate), the recipient (individuals, charities), and the method of transfer (Will, Trust).

  • Simplicity: Charitable bequests are relatively easy to arrange. Most require only a simple modification to your Will or Trust.

  • Legacy creation: Through charitable bequests, you can create a lasting legacy that aligns with your values and passions.

  • Personal contentment: Knowing that your estate will contribute to a cause you care deeply about can provide a sense of fulfillment and peace of mind.

How to give back

Giving back doesn't have to be complex or overwhelming. All it requires is a clear intention and a trusted platform like Trust & Will to guide you through the process. Trust & Will simplifies the process of planned giving, making it easy for you to leave a charitable bequest—a gift given through your Will or Trust—to your chosen charity.

Here are the steps to successful charitable giving through Trust & Will:

1. Identify your cause: Decide on the non-profit organization or cause that aligns with your values and you'd like to support.

2. Determine the type of gift: This could range from a specific dollar amount, a percentage of your estate, or specific assets.

3. Create or update your estate plan: Use Trust & Will's online platform to create or modify your Will or Trust, specifying your charitable bequest.

4. Communicate your intentions: Let your chosen charity know about your bequest to ensure your wishes are honored.

5. Update as necessary: Review your Will or Trust regularly and update as your circumstances or priorities change.

Remember, charitable giving is not just an act of generosity, but also a vital part of effective estate planning. By incorporating charitable bequests into your plan, you can leave a legacy that reflects your values and benefits causes close to your heart. (The potential tax advantages don't hurt, either.)

4 key ways to incorporate charitable giving in your estate plan

Charitable giving can be an impactful component of estate planning, allowing you to contribute to the causes you hold dear even beyond your lifetime. With that said, you may be wondering how to go about incorporating a charitable gift in your estate plan.

There are three key ways you can integrate your philanthropic goals in your estate:

  1. Your Will

  2. Your Trust

  3. Beneficiary designations

  4. A Charitable Remainder Trust (CRT)

The following sections will delve into detail about these popular methods. By understanding and utilizing these strategies, you can create an estate plan that not only protects your assets but also makes a meaningful difference in the world.

1. Your Will

In your Will, you can designate specific assets, a specific dollar amount, or a percentage of your estate to a charity of your choice. This is typically done through a bequest. You would need to include the correct legal name of the charity, its location, and the charity registration number. It's advisable to also describe the purpose of the bequest, such as whether it's for the general purposes of the charity or for a specific project or area of work. Always consult with a legal advisor or use an online platform like Trust & Will to ensure that your bequest is legally sound and does what you intend. It's worth noting that charitable bequests made in a Will can also provide estate tax advantages.

2. Your Trust

A Living Trust, also known as a Revocable Trust, provides another effective avenue for charitable giving. In this scenario, you may opt to transfer certain assets into the trust during your lifetime, with a designated charity as the Trust's beneficiary. Upon your death, the assets in the trust would then be transferred to the charity, whilst avoiding probate. The advantage of a Living Trust is the control it offers - you can alter, modify, or even revoke the trust as long as you are alive and competent. Additionally, a charitable gift made via a trust can also provide tax advantages. Just like with a Will, it's crucial to consult with a legal advisor or use an online platform such as Trust & Will to ensure your trust is properly set up to achieve your charitable giving goals.

3. Beneficiary designations

Beneficiary designations offer another method of charitable giving, providing a straightforward way to include charities in your estate plan. For example, you might choose to designate a charity as the beneficiary of your retirement account, such as an IRA or 401(k), or your life insurance policy. This essentially means that, upon your death, the assets or policy proceeds would go directly to the charity. This method does not require a Will or a Trust, and can usually be completed with a simple form from your account provider or insurance company. However, it's important to remember that once you pass away, beneficiary designations are irrevocable. Therefore, careful consideration is necessary when deciding which assets to donate and to which charities. Learn more on how to name a charity as a beneficiary here.

4. A Charitable Remainder Trust (CRT)

In addition to a Living Trust, there are also special types of Trusts that you can incorporate into your estate plan. One of these is a Charitable Remainder Trust (CRT) that is specifically designed for planned giving.

A Charitable Remainder Trust is a type of irrevocable Trust that allows you, the donor, to benefit from a stream of income for a specified period, after which the remainder of the trust assets are given to a charity of your choice. You can fund a CRT with cash, securities, or tangible property. Once these assets are placed into the Trust, they are sold and the proceeds are reinvested into income-generating assets. The income generated is then distributed to you or your designated beneficiaries for a predetermined period, often your lifetime or a term of up to 20 years. When the term ends, the remaining assets in the Trust are transferred to your chosen charitable organization. A key advantage of a CRT is its tax efficiency. Not only do you get an immediate tax deduction when you fund the Trust, but the assets placed into the Trust are also removed from your estate, reducing potential estate taxes. Further, any profit from the sale of the Trust's assets is not subject to capital gains tax.

CRTs are certainly more of an advanced estate planning strategy, but if you're serious about making charity your legacy in a substantial way, then this is an option worth looking into.

Trust & Will partner organizations

If you know that you want to include charitable giving In your estate plan but don't have an organization in mind, you can also choose from one of Trust & Will's many partner nonprofit organizations. Click on the links to the respective organizations below to learn more about how the partnerships work:

Trust & Will: making planned charitable giving easy

The holidays are here, making it the perfect time to give back. This season, uplevel your charitable giving game by establishing or updating your estate plan and including a charitable gift!

This guide reviewed several different ways you can make charitable giving a part of your legacy, such as including a charitable bequest in your Will, Trust, a Charitable Remainder Trust, or designating a nonprofit as a beneficiary on your retirement account or life insurance policy.

Trust & Will is a reputable online platform for estate planning, offering a simplified process for planned giving. It provides a range of options for planned giving, such as bequests in a Will or Trust. You can select an organization of your own, or select one of our partner organizations. Whether you're considering a modest cash donation to your favorite charity or have grand philanthropic aspirations involving substantial assets, Trust & Will will expertly guide you through the process, ensuring your charitable vision becomes a reality. Wrap up this holiday season and year feeling great about the charitable legacy you've built. Learn more at Trust & Will today.

Is there a question here we didn’t answer? Reach out to us today or chat with a live member support representative!

Trust & Will is an online service providing legal forms and information. We are not a law firm and we do not provide legal advice.

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