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 advantages.
Here are some advantages to giving a gift during your lifetime.
1. You can receive income tax benefits.
When you make a gift of property during your lifetime, you may receive an income tax charitable deduction and still retain the right to use your property for life. Why would the government allow an income tax deduction today if the recipient of your gift 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.
2. 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. Some charitable gift agreements allow you to sell appreciated property, avoid the tax, and have use of the full value of the property for your lifetime.
3. You can also avoid probate.
Many individuals have established estate plans that include a Revocable Living Trust in order to avoid probate. Consider that making a transfer of property to a ministry during your lifetime will also avoid the costs or delays of probate, and you’ll maintain the right to use the property.
Here are some advantages to waiting to give a gift until after your death:
1. You can consume the asset.
If you end up needing to consume an asset for nursing care or final medical expenses, making a gift after death may be a better option. While a gift you’ve made during your lifetime through a trust or charitable agreement can provide regular income, the principal assets transferred to the charitable agreement cannot be consumed.
2. You can guard against future inflation.
When you make a gift during your lifetime through a charitable gift agreement, this may mean that your income from that agreement is fixed—with no increase over time. While some people prefer knowing exactly what they will receive, others may perceive this to be a negative factor due to inflation.
As you are evaluating how to be a good steward of your resources and how to maximize your giving, consider the advantages and disadvantages of giving a gift during your lifetime or setting a gift up to be disbursed after your death. The right answer is the one that meets your planning needs and stewardship goals.
If you’d like to talk to someone about these options, we can connect you with professionals to assist you. Just email us at contactcenter@cdfcapital.org. We are glad to be a resource as you navigate your planning options and opportunities.
