Doing Well by Doing Good: Philanthropy at the Heart of Estate Planning

FinanceWealth-Building

  • Author John Fraker
  • Published July 2, 2007
  • Word count 417

"Most people think that Americans are generous because we are rich. The truth is that we are rich, in significant part, because we are generous. We tend to see giving as something that is just good and nice to do, which it is. We do not, unfortunately, recognize it as a major contributing factor in our economic, social, and political achievements as a nation." ~ Claire Gaudiani, The Greater Good

Introduction to Charitable Giving One of the most rewarding moments in our law practice is when a client's eyes are opened to the fact that they can give money to their favorite charity that would otherwise go straight to the IRS.

As amazing as that sounds, it is even more astounding when they learn that, through carefully planning their philanthropy, it is often possible to leave MORE of their estate to their children than if they had done no planning at all!

"But I am not Charitably Inclined."

This is one of the most frequent responses we hear from our clients when we initially bring up the discussion of philanthropy. Our response is always the same: "Actually, EVERYONE is charitably inclined. The problem is, most people don't understand just how charitably inclined they are."

If you do no estate planning, your philanthropy of choice will be the Internal Revenue Service and the U.S. Treasury, which is currently the largest publicly-supported charity in the world!

Under the current tax law, once a person's Gross Estate exceeds the Unified Credit Amount, the Federal Government will tax the excess at a rate up to 46%!

But what about the so-called Repeal of the Estate Tax? In reality, the Estate Tax is only eliminated in the Year 2010. In 2011, the Estate Tax reverts to 2002 (!) numbers, meaning only $1,000,000 per person is sheltered from Estate Tax, and the excess is taxed up to a maximum rate of 50%.

You Only Have Two Choices

The truth is, everyone in the United States has the same two options when it comes to Charitable Planning:

  1. Do Nothing and the Federal Government will continue to tax you at your current Income and Estate Tax rates; or

  2. Carefully Plan Your Charitable Giving and you may be able to receive Income and Estate Tax deductions which will drastically reduce (if not eliminate) your tax liability to the Federal Government. In addition to benefiting charitable causes that are dear to your heart, you may be able to leave more money to your heirs than if you had paid your taxes without charitable planning!

John Erik Fraker, attorney and founding partner in the Law Firm of Ainer and Fraker, LLP, is committed to helping people fulfill their estate planning goals through education, research, and implementation. Mr. Fraker is a graduate of the University of California at Berkeley and of the University of Southern California Gould School of Law (J.D.). For additional information, visit http://www.estatesattorney.com

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