It’s 2021. Now what?
A wild ride in 2020 ended with the extension of tax provisions to encourage charitable giving in the midst of ongoing pandemic-related challenges facing nonprofits. Now, in 2021, with the possibility of another stimulus package in the mix, your clients may be hearing about potential tax reform under the Biden administration as well as dialogue on both sides of the debate over whether to restrict the benefits of certain types of giving to foundations and donor-advised funds.
Help your clients break through the noise by reviewing the many ways they can achieve their charitable giving goals, regardless of what happens with tax policy and legislation. This month, we’ll cover two tried-and-true techniques: retirement plan and life insurance bequests and gifts of real estate.
Back to basics: Retirement plans and life insurance can fuel meaningful bequests
Your client’s fund at YouthBridge Community Foundation can be an ideal recipient of estate gifts through a will or trust, or through a beneficiary designation on a qualified retirement plan or life insurance policy.
Bequests of qualified retirement plans can be extremely tax-efficient. This is because charitable organizations, such as YouthBridge, are tax-exempt. This means the funds flowing directly to a client’s fund at YouthBridge from a retirement plan after the client’s death will not be reduced by income tax. This also means the assets will not be subject to estate tax.
Don’t overlook life insurance, either. Not only is your client able to designate a fund at YouthBridge as the beneficiary of a life insurance policy, but your client also may elect to transfer actual ownership of certain types of policies. For example, when your client makes an irrevocable assignment of a whole life policy to their fund at YouthBridge, a tax-deductible gift of the cash value of the policy occurs at the time of the transfer. A gift like this can ease a client’s income tax burden, especially if the foundation continues to own the policy and the client makes annual tax deductible gifts to cover the premiums.
YouthBridge makes it easy for you to draft bequest terms in legal documents, including beneficiary designations of retirement plans and life insurance policies. Please contact our team of philanthropy advisors for the exact language that will ensure alignment with your client’s intentions.
Keep in mind that even after a client has executed estate planning documents or beneficiary designations, in many cases the client can update the terms of the fund designated to receive the bequest upon the client’s death. Clients love the ease and flexibility and certainly will appreciate your bringing this technique to their attention.
This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.