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Charitable Donations & Estate Planning: Don’t Make This Often Overlooked Mistake

I like to think of myself as one of Cleveland’s more compassionate or empathetic estate planning attorneys, which is why I love when my clients factor philanthropy into their will or trust. What a lovely way for a person to make a difference in the world long after they’re gone!

However, allocating an individual’s assets between spouses, heirs and charitable organizations isn’t always straightforward. For the sake of your spouse, children, or other beneficiaries, it’s important to consider the value of these assets after taxes. Specifically, you need to look at the after tax value of retirement accounts versus those assets that pass through a will or a trust.

Many people leave their IRA assets to their spouse and heirs, and allocate dollars to charity through their will. However, IRA funds are income taxable assets—whether your beneficiaries take IRA distributions immediately or over time, they will be required to pay hefty taxes on those dollars.

When I help clients with estate planning, I recommend a different scenario: allocate IRA dollars to charity, and leave assets to your spouse or children through the will or trust. The charity will not pay any taxes on their funds, and your beneficiaries will receive more after taxes. It’s a win-win!

Coordinating your estate planning in this way does require two separate efforts. As an estate planning attorney, I handle the development of the will or trust to communicate your intentions. However, the distribution of your IRA would be dictated by a simple form filed with your brokerage form or employer. Making sure that both of these efforts are well coordinated is important to ensure the proper execution of your will and testament.

Estate planning serves one purpose: to make sure your assets—everything you have worked so hard for—are distributed the precise way that you want. Simple tweaks to your will or trust will allow you to pass the maximum amount of money on to the people and organizations who mean the world to you.

Contact Choudhury Law, LLC

At Choudhury Law, LLC our estate planing attorneys want the very best for your family. We will help make sure your will and trust are drafted appropriately for your desires, and that your assets are distributed as intended. Gain the peace of mind that comes with knowing your loved ones will be taken care of in the long run—contact us for more information about our estate planning services today.

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