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charitable giving

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By Nancy Burner, Esq.

Nancy Burner, Esq.

For the charitably inclined, there is always a question of how to be most efficiently leave money to charities in your estate plan. Charitable giving ranges from simple small monetary amounts to more complicated charitable trusts. No matter the option, there are potential income tax and estate tax implications to consider.

Leaving a specific bequest in your ill or Trust is one common type of charitable gift. You leave a set amount to a charity of your choosing at the time of your death. For those that want to cap the amount that given to charity, this is a good option. These specific bequests are paid out first, off the top of the estate. Thus, if you only have $100,000 in your estate and leave specific bequests totaling $100,000, there will not be any assets left to the residuary beneficiaries. Usually, the residuary portion of an estate is the largest. But not always and especially not if you do not correctly allocate your assets.

Residuary beneficiaries are those that receive a percentage or fractional distribution of the “rest, residue, and remainder” of your estate. Take the example above, if your total estate assets equal $300,000, then after the $100,000 charitable bequests, your residuary beneficiaries receive the remaining $200,000. A charity can also be one of your residuary beneficiaries, in which case the charity would receive a fractional share of your choosing. 

In certain circumstances, it is beneficial to include a “disclaimer to charity.” You would add a provision in your Will or Trust directing that any “disclaimed” amount of your estate goes to charity. This is done for estate tax planning purposes. If your estate is more than 105% over the New York State estate tax exemption amount ($6.11 million in 2022), you then “fall off the cliff.” This means that your estate will receive no exemption and the entire estate taxed from dollar one. However, if your Will or Trust has a disclaimer provision, any amount that a beneficiary rejects goes to the charities that you listed.  That gift to charity serves to reduce your taxable estate, moving it back under “the cliff” and saving a great deal in taxes. This is an especially useful tactic for those with estates that are on the cusp of the exemption amount.

Another method of charitable giving is gifting tax-deferred retirement assets. While you are still living, you can gift from your retirement account up to $100,000 per year as a qualified charitable distribution. Making the gift directly to the charity removes the required minimum distribution from your taxable income. There are some pitfalls to avoid.  Not all plans qualify for this type of distribution, not all charities are considered “qualified,” you cannot receive a benefit in exchange for the distribution (ex. a ticket to a charity concert), and you must gift the funds directly from the retirement account to the charity.

In addition to charitable gifting from a retirement account during your lifetime, you can list charities as  after-death beneficiaries of your accounts. If you have a mixture of individuals and charities as beneficiaries, you may want to leave the retirement assets to the charities. This saves your individual beneficiaries from paying income tax on distributions. Especially in light of the SECURE Act, which requires that most beneficiaries of retirement account withdraw all the funds within ten years. The income tax consequences for such beneficiaries may be steep if there is a large retirement account. 

While there are several charitable giving options, each person will need to navigate a solution that suits them best. An experienced estate planning attorney will take into account the size of the estate, potential tax liabilities, how much you want to leave to charity, and your other beneficiaries. With proper planning, you can ensure your gifts go as far as possible to benefit the charities that you hold dear.

Nancy Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Trusts and Estates. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.

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As we forge ahead into 2018, there are a few charitable lessons from the holidays that we should carry with us through the year, especially this winter.

December is the single largest month of the year for giving, according to the 2016 Charitable Giving Report published by Blackbaud Institute for Philanthropic Impact. Based on information from thousands of nonprofits, the report found December is when more than 20 percent of all donations are made. It’s called the Season of Giving or The Most Wonderful Time of the Year in no small part because it’s when people are most likely to open their pockets or donate time to help others.

There are good Samaritans who have taken caring for others to heart. North Shore residents stopped to check in on an elderly or disabled neighbor during winter storm Grayson or even offered to help shovel out walkways and driveways.

Suffolk County Executive Steve Bellone (D) worked with one such individual, identified only as Ken from Ronkonkoma, who helped first responders dig out two motorists stranded on the side of the Long Island Expressway.

Last week, PSEG reported more than 16,500 of its customers lost power during the snowstorm. While more than 76 percent had it restored by 4:30 p.m. Jan. 4, according to PSEG, those individuals with electric heat were temporarily left in the cold.

Keeping the giving alive year-round can help make the cold, dreary winter brighter for less fortunate and needy families. It doesn’t cost anything but a few minutes to check in on neighbors to a make sure he or she is warm and OK. Better yet, lend a hand to help shovel a walkway or snow blow a path so he or she can safely get in and out of a home in case of an emergency.

Families struggling to make ends meet can get assistance in paying for electricity or home heating fuel. Suffolk County’s Home Energy Assistance Program started accepting applications Jan. 2 at 631-853-8820 for families in need of one-time assistance. The nonprofit United Way has opened applications for its Project Warmth, a program that offers a one-time grant for families struggling to pay heating bills. Project Warmth can be contacted by its 211 hotline or by calling 888-774-7633 seven days a week from 9 a.m. to 5 p.m.

Search through closets for gently used or new winter jackets, scarves, hats or gloves that can be donated to one of the many collection drives currently underway for residents in need of warm clothing. The Town of Brookhaven’s Youth Bureau is collecting donations starting Jan. 12 at town hall, the highway department and senior and recreation centers. Long Island Cares in Hauppauge also accepts donated coats. Many Salvation Army locations even accept appliance donations, like space heaters.

Just because the giving season is over does not mean that some of our neighbors are any less in need of assistance. Taking a few minutes to check in on others or point them to a service that offers assistance can help everyone get 2018 off to a positive start.