How does charitable planning work in Pennsylvania? | What to know
To learn more about charitable planning in Pennsylvania, reach out to our dedicated and experienced Butler County estate planning & probate attorneys.
How does charitable planning work in Pennsylvania?
Charitable planning can be described in several different ways. This can include the assignment of beneficiaries within an estate plan, lifetime gifts, bequests in wills or trusts, and even lifetime gifts in trusts. Furthermore, the execution of a life insurance policy or retirement plan can also be employed to fund charitable gifts. A person’s life insurance policy can be used as a tool to provide a lifetime gift or bequest on death to certain charities or non-profit organizations. Usually, people have the choice of either gifting their insurance policy itself or a portion of the profits once they pass away. This is achieved through a “beneficiary designation.”
When going through the process of charitable planning, it is important to be aware of any tax provisions. Eligible charities are not required to pay income tax on gifts that are provided from a retirement account. This drives these funds to be useful to charities as opposed to other assets that may emanate from an estate. For people who would like to include charitable planning in their estate, it is important that they discuss various tax provisions on certain gifts. An estate planning attorney can be a benefit to have during this time in order to lead you through the process and ensure you are making an informed decision.
What is the goal of a charitable trust?
You will want to keep in mind the two main kinds of charitable trusts that people can make in Pennsylvania. These trusts include:
Charitable leads trust: This is when parts of the trust assets are allocated to charities over a period of time. After a specified period of time passes, the assets that remain in the trust are allocated to the deceased’s beneficiaries either tax-free or with significant tax savings.
Charitable remainder trusts: With this kind of trust, a portion of the individual’s income is distributed back to the creator of a trust, or the designated beneficiary of the trust. After the individual dies, their remaining assets will be offered to charity.
If you would like to learn more about charitable trusts or charitable planning in general, it is in your best interest to reach out to our firm today to speak with one of our dedicated estate planning attorneys.
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