Yes, you can generally name a donor-advised fund (DAF) as the remainder beneficiary of your estate plan, such as a trust or will, though it requires careful consideration and adherence to IRS regulations and the DAF sponsor’s rules. This strategy can offer tax benefits and allow for continued charitable giving, but it’s not always straightforward and can have unintended consequences if not properly structured. It’s vital to consult with an experienced estate planning attorney, like Steve Bliss, to ensure your wishes are legally sound and align with your overall financial goals. Approximately 85% of high-net-worth individuals include charitable giving in their estate plans, demonstrating a strong desire to continue supporting causes they care about even after their passing.
What are the tax implications of naming a DAF as a remainder beneficiary?
Naming a DAF as a remainder beneficiary allows you to potentially reduce estate taxes. The estate receives an estate tax deduction for the present value of the remainder interest passing to the DAF. However, the IRS scrutinizes these arrangements, particularly if the present value of the remainder interest is substantial. There are limitations on the deduction if the DAF is not a publicly supported charity. Furthermore, while the estate may receive a tax deduction, distributions from the DAF itself are still subject to applicable tax rules. In 2023, over $50 billion was granted from donor-advised funds to various charities, highlighting the substantial philanthropic impact these funds can have.
Is it better to use a trust or a will to designate a DAF as a beneficiary?
Using a trust generally offers greater flexibility and control than a will when designating a DAF as a remainder beneficiary. A trust can be structured to provide for income to beneficiaries during their lifetimes, with the remainder passing to the DAF upon their death. This can be particularly beneficial if you have complex family circumstances or wish to retain some control over the timing and amount of the charitable gift. A will, while simpler to create, lacks the adaptability of a trust and may be subject to greater scrutiny by the IRS. It’s worth noting that approximately 60% of Americans do not have a will, increasing the risk of unintended consequences for their estates.
What happened when my neighbor tried to do this without proper planning?
Old Man Hemlock, bless his soul, was a fiercely independent sort. He decided, late in life, to leave the remainder of his estate to a DAF, thinking it would be a simple matter. He drafted a handwritten amendment to his will, stating exactly that, without consulting an attorney. After he passed, his family discovered the amendment, but it lacked the necessary legal formalities and was deemed invalid by the probate court. The estate ended up being distributed according to the original will, bypassing his charitable intentions and leaving his family rather upset with him, his wish for a lasting charitable legacy unfulfilled. His well-intentioned plan backfired due to a lack of professional guidance, and his estate paid unnecessary probate costs as a result.
How did we ensure a smooth transfer with proper estate planning?
Mrs. Abernathy, a long-time client, had a similar wish to leave a substantial portion of her estate to a donor-advised fund. We worked together to create a carefully crafted irrevocable trust, with provisions specifying the DAF as the remainder beneficiary. The trust included a ‘pour-over’ will, ensuring that any assets not already titled in the trust would automatically transfer into it upon her death. We meticulously documented the trust’s purpose and complied with all IRS regulations. When Mrs. Abernathy passed, the transfer was seamless and efficient. The DAF received the designated funds, allowing her to continue supporting her favorite charities for generations to come. It felt good to know we helped her achieve a lasting legacy and ensured her charitable intentions were fully realized.
“Proper estate planning is not about avoiding taxes; it’s about ensuring your wishes are carried out and protecting your loved ones.” – Steve Bliss
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How do trusts help avoid family disputes?” Or “What does it mean for an estate to be “intestate”?” or “Who should I name as the trustee of my living trust? and even: “What property is considered exempt in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.