Making Charitable Gifts During Lifetime or at Death

“Is it better to make charitable gifts during lifetime or wait until after death?”

The answer to this question is different for each individual, as both options have distinct advantages.

When a gift is made during lifetime, you may receive an income tax charitable deduction today, and still retain the right to use your property for life. Why would the government allow an income tax deduction today, if a charity cannot use the property until your death?

Tax law allows you to deduct the present value of your future gift, because the gift is guaranteed through an Irrevocable Agreement.

You Can Avoid Capital Gains Tax

When you own property that has increased substantially in value, selling that property results in a tax on the appreciation, or capital gain. The cost is not limited to the actual tax. You also forfeit use of those tax dollars for your lifetime.

If it was possible to sell appreciated property, avoid the tax, and have use of the full value of the property for your lifetime, would that not be a significant advantage? Some charitable gift agreements allow you that advantage.

You Can Also Avoid Probate

Many individuals have established estate plans that include a Revocable Living Trust for the avoidance of probate. Consider that making a transfer of property to ministry during your lifetime will also avoid the costs or delays of probate, though you maintain the right to use the property.

Charitable gifts during lifetime may have some perceived disadvantages. For example:

1. Loss of control

Many individuals have established estate plans that include a Revocable Living Trust for the avoidance of probate. Consider that making a transfer of property to ministry during your lifetime will also avoid the costs or delays of probate, though you maintain the right to use the property.

Charitable gifts during lifetime may have some perceived disadvantages. For example:

2. Lack of ability to consume

If you would need consumable assets for nursing care or final medical expenses, a gift during lifetime might be perceived as a disadvantage or as an advantage. If extensive medical expenses are incurred and you survive that illness, then you will still need income for living expenses. The trust or charitable agreement will provide that income. However, the principal assets transferred to the agreement cannot be consumed.

3. Future inflation

Some charitable gift agreements may mean your income is fixed for life—with no increase over time. While many prefer knowing exactly what they will receive, others may perceive this to be a negative factor. 

An important question to consider: is it better to make charitable gifts during lifetime or wait until death? It is important to carefully consider the advantages and disadvantages, and the only right answer is the one that meets your planning needs and stewardship goals.

Qualified Charitable Distributions

As the end of the year approaches, do you still need to receive a Required Minimum Distribution (RMD) from your Individual Retirement Account or other retirement plan? If required distributions are creating additional taxable income for you, you may want to consider giving that income to ministry.

If you are at least 70.5 years old, you can make a gift from your retirement plan directly to ministry, avoiding additional taxable income. We have prepared a special eBook, A Guide to Charitable Giving Through Individual Retirement Accounts to show you how to turn a tax burden into a blessing.

Please download the Guide below. As always, the Guide is free and you are under no obligation.

© 2019 CDF Capital Foundation from the Lifestyle Giving Legacy files
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