Charitable Bequests: Something for Everyone

Many people would love to make substantial gifts to their favorite charities during their lifetimes. For some that is within reach, especially with good planning; for others a lifetime gift is beyond their comfort zones. Regardless of your personal circumstances, a bequest can be an excellent way to meet your philanthropic objectives.

The recently passed American Taxpayer Relief Act (ATRA) of 2012 brought a new level of certainty to the process of estate planning that had been missing for over a decade. ATRA delivered an element of long-awaited permanence to the tax law and created new incentives for high-net-worth individuals to consider a charitable bequest.

Under ATRA the tax rate on estate assets exceeding the exempt amount of $5,250,000 is taxed at 40%—up from 35% in 2012—generating greater tax savings for charitable bequests. For instance, a $100,000 bequest for an estate over the exempt amount will now produce an extra $5,000 in tax savings over 2012.

A charitable bequest may be the perfect way to meet your charitable goals whether or not you are among the small percentage of Americans whose estates will be subject to federal estate tax. A major lifetime gift may not fit well with your plans if, for example, you need the income generated by all your assets or you have concerns about unforeseen demands on your capital (such as significant medical expenses). Addressing your charitable goals through a bequest can make those concerns melt away.

BONUS: Many times a charitable bequest will reduce state death taxes even if an estate is not subject to federal estate tax.

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