Charitable Planning FAQs

When it comes to charitable planning in Tennessee, there are a variety of benefits to not only the charity of your choice but to your heirs. But determining the proper trust can be difficult and mistakes can happen. Take a look at these charitable planning frequently asked questions from Martin Heller Potempa & Sheppard, PLLC.

What is charitable planning?

Charitable planning is a type of estate planning which allows you to make contributions to a charity or cause you care about with the assets of your estate.

It allows you to make periodic or annual gifts throughout your lifetime as well after you pass away if you desire.

How do I make charitable gifts?

There are many different ways to make charitable gifts including:

• A charitable remainder trust gives you an immediate income tax deduction, a lifetime stream of income, and a waiver of capital gains taxes owed on property.
• A charitable lead trust creates an income stream to charity for a set term with the remainder of the trust going to your children without any tax consequences.
• A private foundation provides freedom by placing restrictions on how your gifts are used by charities.
• A donor-advised fund allows you to maximize your income tax savings on your contributions to church or charities.

Who should consider it?

This type of planning as a portion of your estate plans should be considered by anyone who is passionate about specific causes they wish to give to. In addition, if you are looking for tax advantages for both you and the beneficiaries of your estate, charitable planning is a great way to do so.

What is the incentive for charitable planning?

There are many incentives, the most common is the tax advantages you may receive. When you utilize charitable planning, you are eligible for tax deductions up to 50 percent of your adjusted gross income. However, you may be limited to 20 or 30 percent of your adjusted gross income depending on the type and amount of property you donate to charity and the type of organization you wish to give to.

What are the types of trusts?

There are a variety of charitable trusts you can create in Tennessee. They include:

• Charitable Remainder Trusts
• Charitable Lead Trusts
• Outright Distributions to Charity
• Private Family Foundation

In addition, you can name a charity as a beneficiary to your estate, retirement plan, etc.

What types of deductions are available?

The type of charitable trust you create or donation you give will determine the type of deduction you are eligible for. For example, if you make a charity a beneficiary of your retirement plan, this is not subject to income or estate taxes.

You will have to review your charitable trust plan with an estate planning lawyer to determine the trust and ensure you are eligible for deductions, the IRS will provide confirmation of the type of deduction which you will need to keep on record for filing your taxes.

What mistakes can happen in charitable planning?

When done with an estate planning lawyer, you should not run into mistakes when creating charitable trusts. However, when you do it alone, there are some common mistakes that occur.

• Failing to put the donor’s needs first
• Misappropriating funds
• Not having a proper trustee

If you have questions about charitable planning in Tennessee, contact the estate planning professionals of Martin Heller Potempa & Sheppard, PLLC. Our firm offers legal services to people in Nashville, Franklin, Green Hills, Bellevue, Hermitage, and West Meade, as well as other communities across Williamson and Davidson Counties. If you have questions regarding how to give a charitable gift most effectively, contact our legal professionals today.