Reducing tax burden on your estate and your family is a key part of optimizing your legacy. Many tax planning methods focus on highly technical accounting strategies, but charitable giving allows you to gain the advantage you need while donating to causes you care about.
A Broader Look
The specifics of donating to reduce tax burden will not be precisely the same in all cases or locations, but it’s a good idea to start with a generalized understanding of this strategy. Broadly speaking, you can earn income tax credits or deductions on donations to charitable organizations provided that both the donations and the organizations meet the necessary criteria. These donations do not necessarily have to be cash. They can be property, securities, or other assets that appreciate in value. In fact, in Canada, the US, and the UK, donating appreciated assets to an eligible organization can spare you capital gains tax on those assets.
While there are commonalities between regions when it comes to tax-strategic donating, there are also important factors that will be specific to your government. For instance, eligible donations in Canada usually afford you non-refundable tax credits, whereas in the US they allow you to receive deductions to your taxable income. As another example, claiming tax credits or deductions for donated securities requires that that they meet certain requirements, and these are not the same in all regions. For instance, depending on your location and other circumstances, you may or may not be able to claim on donations of privately-traded shares.
How It Benefits Your Legacy
Capitalizing on the tax incentives of charitable donations can play an important part in planning the future of your estate. Donating assets in your will to eligible charities can reduce estate tax burden in the US and UK. If you want receive tax benefits immediately while having time to decide which organizations the donations are distributed to, you can set up and donate to a donor-advised fund. Your DAF will also accept donations of appreciable securities at fair market value without the worry of capital gains tax later. This can be advantageous in both retirement planning and in building a tax-effective philanthropic legacy for your family.From tax planning to business succession and more, the Trust and Estate Practitioners at MacMillan will ensure that your assets retain the utmost value for your descendants. Call 1 (833) 266-6464 or email us at firstname.lastname@example.org for a free consultation today.