Originally published on 10/11’s Pure Nebraska Program
The use of a professional advisor is a smart way to be successful when it comes to charitable gift planning.
Many people are looking for ways to give back to the towns that mean so much to them. But, in today’s world, guidance on how to give in the best possible, and most efficient way is often needed. It’s important to speak with a professional advisor about your specific situation. Nebraska Community Foundation is always available to join the discussion and help discern how your most tax-laden assets might be used to leave your legacy.
Experts say that charitable gift planning is not that difficult. But depending on the asset and the heir, some inheritances can be more burdensome than others. Here are a few common assets and the implications they may have for the beneficiaries that receive them.
Residence
If the value of the home has increased, the beneficiary will receive a step-up in basis. They will not have to pay income or estate tax, however, there may be related expenses for things such as repairs, remodeling, realtor fees, and closing costs.
Farmland
Again, the beneficiary receives a step-up in basis. If they elect to keep the property, they will not have to pay income or estate tax. There are, however, potential risks and costs to the beneficiary such as property management fees, and, of course, fluctuations in profit from year to year.
Life Insurance
A gift of life insurance is an uncomplicated gift for children or charity. In most cases, the beneficiary does not have to pay income or estate tax and will receive the value of the policy in full.
Retirement Account
Inheriting a retirement account comes with heavy tax implications. A beneficiary may choose to withdraw the full sum or receive it in installments. Either way, they will pay state and federal income taxes, drastically reducing the value of the gift. Charities, on the other hand, are exempt from these taxes.
It’s important to remember that not all assets are created equal, and that using a professional advisor to determine the best way to leave a charitable gift is a good idea. For more information, be sure to contact Nebraska Community Foundation, at nebraskahometown.org.
