Tuesday, October 4, 2011
There are a number of ways an individual can leave money to a charity while still receiving a tax break or generating income. Additionally, an individual can make a charitable donation either during life or at death.
If a donor chooses to make a donation at death, he or she does so by making a formal bequest. A bequest will reduce the size of the donor's estate which can benefit the estate by reducing the amount of money subject to estate tax. Individuals can bequeath an IRA to a charity which can save heirs from income taxes owed on the IRA's required minimum distributions. Additionally, an individual can change a bequest at anytime during his or her life.
By contrast, if a donor chooses to make a charitable donation during his or her lifetime, the donation is irrevocable. However, the donation can generate income tax deductions. Donors can even receive an income stream from their charitable donation by creating a charitable remainder trust or charitable gift annuity.
See Rachel Emma Silverman, The Quest for the Right Bequest, The Wall Street Journal, Oct. 1, 2011.